The Housing Bubble

Readers suggested a topic on trends in construction. “I’d like a thread from readers where the money is being spent/invested in your area. Our public television station just announced they were building a new spread downtown. The state is kicking in $5mm since they are renovating an existing building along w/new construction. Marriott just announced they were taking over some downtown buildings and renovating them w/M&T Bank backing. Our schools are still spending money on windows and grounds improvements. We have two hospitals w/new expansions. We have several new commercial retail building going up in our local villages. One is a center of businesses not just single business center. The money is flowing here from somewhere. And it isn’t just for meds, feds and eds.”

“But when you hear from say Colorado, it seems he’s looking at a totally different reality. I always felt commercial builders/contractors in this area had special ties to Albany and others that make things happen.”

“Is anyone else seeing this much new commercial construction being approved?”

“Maybe Blue Skye was right when he said upstate suffered their bottom in the 90s when everyone else was booming and now we’re on the way up? Not sure that feels right. I still think in the end no area will escape the overall reality when credit freezes up again. Sounds like our leaders are just still spending and lining pockets while it’s flowing.”

A reply, “It’s all public money funneled to private entities through the public/private partnership scams. Look no further than the “Global Foundry” scam in Malta, NY. Taxpayers are on the hook for all this kick the can down the road nonsense. It’s unsustainable.”

One added, “Here in metro Denver the new light-rail line connecting downtown Denver to the Jefferson County municipal complex is nearing completion. The line to the airport is scheduled to open in 2018.”

“The new IKEA opened on Wednesday to much hoo-ha. This is in an area already nearly built-out with retail and commercial office space, near I-25 and C-470. Throughout much of the metro, strip retail is peppered with vacancies.”

Another said, “The widening of I-75 from Cincinnati to Dayton recently started up the next phase (another 6 miles), the rebuild and expansion of the highest bridge in Ohio (on I-71 just north of Cincy) just started and should take a few years. New smaller commercial stores (tire stores, auto dealers, chain restaurants) continue to open up here. Casinos in Ohio’s biggest cities are about ready to break ground following the lifting of ban on such establishments. Cincinnati has a huge project under construction along the river, but it seems to get stalled for political reasons a lot.”

“Expansion in the Cincy/Dayton corridor has slowed from its torrid pace a few years ago, but road projects, commercial buildings, and houses are still going up.”

One observed, “On my stomping grounds, an old warehouse-thing was empty for about 10 years. A local said it had been a sort roller-rink for kids. After a year of renovations, it opened as an Asian supermarket last month.”

“An old Italian restaurant was half-torn down and renovated into a high-end pizza bistro. A store for kids bedrooms just opened next to the futon store. A 1-800 mattress store expanded from a strip mall into its own building. A one-story business building used to hold a Wachovia and a small piano store. When Wells Fargo bought Wachovia, they kicked out the piano store and are expanding into the space. After a little renovation they’ll turn rip down the Wachovia sign and raise the Wells Fargo flag. An old car dealership sat vacant for 5-6 years. There are signs out front that they are hiring and making it into a dealership for Mini.”

‘An old standalone Anthropologie store went down 5 years ago. The local Marlo furniture has a huge store, but they are moving the “tile kitchen bath” portion to the old Anthopologie. A cramped Whole Foods (used to be the old-school granola version) was in a high-end strip shopping center for decades, it seems. They finally moved down the road to larger and more yuppity digs. The old space was snapped up and is being renovated into a Fresh Market, which is almost the same thing.”

This is all private sector.

The Post & Courier. “In a break from the rest of the real estate industry, the apartment business in Charleston is busting out of the doldrums. Not all of the projects will spring from the ground anytime soon, but experts said the most financially feasible deals are likely to get done over the next two to four years. ‘The difference between now and five years ago is that the lenders are really going to control how much is developed,’ said Don Evans of Evans Rivers & Co., a Charleston-based real estate investment advisory firm. ‘It’s going to be lot more conservative.’”

The News Journal. “A vacant 505-acre tract here that had been approved for a large mixed-use, master planned community behind the planned Walmart Supercenter on Old Kings Road is now headed for the foreclosure auction block.”

“It’s a sign of the times, said Don Tobin, owner of GoToby.com Realty in Palm Coast. ‘There were a lot of developers that had big plans five years ago and did not make it,’ he said. ‘This was going to be pretty significant development with lots of homes, shopping centers, a school and fire station.’”

“Officials with JX Properties declined to comment on the loss of the property, which the Flagler County Property Appraiser says has a taxable value of about $2.8 million. The only work done on site was a narrow trail cut into the property’s northwest corner off Old Kings Road for some preliminary engineering work.”

From Financially Fit. “Here’s the dirty little secret about home renovations: Most of them don’t pay off. According to Remodeling Magazine’s annual survey, only steel entry-door replacements can be counted on to boost home value enough to recoup 100 percent of costs.”

“Homeowners can get a lot of value out of renovations before they even put the home on the market. “If you have a dated kitchen or the stove doesn’t work, you can invest money now to glean some enjoyment as well as make the home more appealing when you sell it,” says Kit Hale, general manager of MKB Realtors in Roanoke, Va.”

“That’s what Erin Schaff and her boyfriend did when they decided to upgrade their two-bedroom condo in Victoria, Canada, several years ago. ‘It wasn’t in horrible shape, but we wanted to upgrade,” she says, so they spent about $10,000 replacing the baseboards, window trim, and floors. They also remodeled the bathrooms and upgraded the hardware. In addition, they put new cabinets, appliances, and granite countertops in the kitchen.”

“Schaff and her boyfriend enjoyed all those upgrades before deciding to sell their home earlier this year. She believes the renovations paid off, too. ‘Had we not renovated, we probably would have lost money as we had purchased the condo at the peak of the real estate boom. Instead, we turned a profit and covered most of the costs of purchasing the house we now live in,’ she says.”

From Vail Daily. “Mike Dantas had a big decision to make as the local real estate market started crumbling a couple of years ago: either keep making payments on vacant land or build something. For Dantas, co-owner of Dantas Building Co., the decision was fairly simple — build. ‘We’re builders — that’s what we do,’ he said.”

“But more specifically, Dantas and his brother, Dave, are in the business of building ’spec’ homes — homes built without a specific buyer in mind. What Dantas ended up building in Avon’s Wildwood neighborhood is a foundation and two fairly modest homes. The foundation was sold to another builder — something spec builders don’t usually do. The other two homes will sell for between $550,000 and $649,000. In 2007, those prices would have been much higher.”

“‘We believe we have the right product,’ he said. ‘Right now, our competition is foreclosures, banks sales and duplexes.’”

“Dantas believes he’s taken the right approach with his project in Avon. ‘These days you’re not going to make money on the land, and you’re going to give a lot of the labor away,’ he said. ‘You don’t make a profit like you used to, but we’ve tried to build what the valley doesn’t have right now.’”

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Readers suggested a topic on the housing market implications of the debt talks. “What are the housing market implications of slow growth coupled with a likely near-term reduction in federal expenditures in the wake of the debt ceiling negotiations? I still maintain the way out of this without raising taxes is to let housing prices go where the market dictates. Once home prices are sufficiently affordable, the U.S. labor force will adjust as young, capable workers go where their best opportunities lie. So long as housing prices are propped up on an unaffordably high plateau, this autonomous (self-funding) economic stimulus cannot happen.”

“I’m thinking there is a potential silver lining to the partisan wrangling over the debt ceiling, which is that the housing market is likely to crash faster than ever over the next twelve or so months.”

A reply, “This grand national theater is being played to the same script that small towns always use during budget talks….If we don’t get more money we will close the fire-hall and your children will…well something awful will happen to your children. We’re serious!”

One said, “The question is, would a second Great Depression and a huge cut in public benefits for people today be the worst scenario? Or would we be better off if it occurred and this was followed by a gradual recovery? The alternative may be those under 55 later having it as bad or worse than anybody would have it now if the collapse occurs, with higher debt levels.”

One asked, “What would REALLY happen if they eliminated or significantly changed the mortgage interest deduction?”

A reply, “There’s no reason taxpayers should be subsidizing any home loans…. let alone loans up to $1,000,000!!!”

One added, “The all-or-nothing mindset is hard to shake. It took 3-4 years before the sheeple realize that it’s possible to ‘raise taxes’ without raising taxes on everybody. It will take another 3-4 years for them to figure out that it’s possible to ‘eliminate the MID’ for some houses and not others or to institute an upper limit, or to understand what ‘MID will be less than the standard deduction anyway’ means.”

A reply, “It’s naive to think that the mortgage interest deduction (MID) will be entirely eliminated. If the MID is targeted, then I surmise that a more moderate formula would come to pass. My guess is that the MID would still be available for primary owner-occupied homes and capped at the median home value. Whether or not the median home value would be based on national or local median values (think San Francisco vs. Oil City) would have to be worked out.”

“One idea for discussion: MID only for the primary owner-occupied home up to the Fannie/Freddie $417k max.”

“A large number of politicians and business people who think that the solution to our economic problems is getting house prices to start going back up, instead of the belief around here that the problem is that house prices rose too high during the bubble. The combination means that eliminating the MID is pretty much a non-starter.”

To which was said, “Most other countries, including our culturally similar neighbor to the north, manage to do fine without a MID. Aside from the lobbying of entrenched interests, why is it naive to expect that we could completely eliminate ours? We managed to eliminate the credit card interest deduction in the 1980s.”

Finally, “If they eliminated the mortgage interest deduction, one ‘advantage’ of paying mortgages would be eliminated. This would mean less demand for housing. Lower demand would encourage house prices to drop. Therefore if they eliminated the mortgage interest deduction, house prices would fall. The mortgage interest deduction is nothing other than social engineering to subsidize housing.”

The Associated Press. “A new bipartisan plan to reduce government borrowing would target some of the most cherished tax breaks enjoyed by millions of families; those promoting health insurance, home ownership, charitable giving and retirement savings; in exchange for lowering overall tax rates for everyone.”

“Democrats have several proposals that would restrict wealthy families’ use of the breaks, while preserving them for most low- and middle-income taxpayers. Such a plan would offset rate cuts for high-income families by limiting their ability to take advantage of various tax breaks. For example, current law allows homeowners to deduct the interest they pay on home mortgages of up to $1 million. One proposal would lower the limit to $500,000 and exclude mortgage interest on second homes.”

“Lawmakers have proposed limiting the mortgage interest deduction as part of an agreement to raise the government’s borrowing limit to avoid a default after the Aug. 2 deadline. But that isn’t the only concern for homeowners and prospective buyers as the negotiations heat up in Washington. Even if lawmakers strike a deal by next week’s deadline, there’s still a chance the government’s credit rating could be downgraded. That raises the prospect of higher mortgage rates, meaning those who’ve been holding tight for home prices to fall further may feel that time is running out to take advantage of low rates.”

“Here’s what you should know: What will happen to mortgage terms if the government defaults on its debt? Some borrowers could find it more difficult to get approved for a mortgage. This might happen if banks become more cautious and slow their lending to each other, as they did during the height of the economic collapse in 2008, notes Greg McBride, a senior analyst with Bankrate.com.”

“‘Any increase on Uncle Sam’s borrowing would translate to higher costs for consumers,’ McBride said.”

The Oregonian. “Q: I work in the state of Wyoming where there is no state income tax however I own a home in Arizona. My drivers license was required to be changed to Wyoming for state law purposes but here’s the question: can I still deduct the interest on my home in Arizona if I work in Wyoming and does the state of Arizona expect AZ state income taxes to be paid?”

“A: I can only address federal income tax issues since I am not trained in state income tax law. I suggest that you contact the Arizona Department of Revenue for information on any state income tax obligations you may have.”

“Under federal tax law you can usually deduct qualifying mortgage interest on your main home and a second home. It is possible that you would be able to deduct the mortgage interest on your home in Arizona as paid on your second home (your main home being the one you live in most of the time).”

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It’s desk clearing time for this blogger. “From the Miami River to Midtown, downtown Miami condos are hot commodities among international buyers, brokers say, not least because renters are lining up to lease them. In new condo buildings, many of which still have developer units on offer, ’sales are very good,’ said Jeff Morr, founder and CEO of Majestic Properties. He said HSBC Bank recently took back 532 units at Midtown Miami. ‘They haven’t discussed what they are doing with them,’ Mr. Morr said, ‘but they are occupied by renters, and I imagine they will come to market in two or three years at about $300 a foot and will sell immediately.’”

“While prices are rising in some buildings, he said, they’re still only about half of preconstruction prices, ’so the values are tremendous. Besides South American buyers, we’re also seeing a lot of Europeans. Miami real estate is becoming a commodity like gold and stocks.’”

“While nobody knows how much distressed inventory banks may be holding, Realtors aren’t worried that they will dump large numbers of units on the market at one time. ‘It’s not to their benefit to flood the market, because that would drive prices down,’ said Carlos Villanueva, district sales manager for The Keyes Co.”

“The area has sprung to life thanks to ‘hip restaurants, great restaurants and clubs,’ said Rita Regev, broker associate at Optimar International Realty. Some developers are once again offering incentives to Realtors, she said, as they did pre-recession, she said, ‘and they’re starting to stage elaborate broker parties again.’ The shadow inventory of bank-held units ‘is all conjecture,’ said Regev. ‘The only reality is right now.’”

“The Petrinos are ready to move. There’s just one problem: Their house is still for sale. As many other homeowners in the St. Cloud area have experienced, selling a house is a waiting game that all comes down to money. ‘It’s not going as well as we hoped,’ Petrino said. She and her husband are moving to Montana. ‘It’s frustrating that it hasn’t sold yet.’”

“Before leaving for Montana, they cut the price of their home a second time, lowering the price $10,000 less than what they bought it for two years ago. Petrino said she hopes they won’t have to drop the price of her house again before it sells. ‘I don’t know if we’d go much lower,’ she said. ‘Fingers crossed, I guess.’”

“St. Cloud homeowner Doris Anderson said she doesn’t like the idea of selling her house for less than she bought it for a few years ago. So far, she and her husband have dropped the price 2.5 percent, but their house has been on the market for a year. ‘I’m not giving my house away,’ Anderson said.”

“Overall, said Minnesota Association of Realtors President Russ Portele, St. Cloud is fairly representative of trends across the state and country. ‘We’ll probably never get back to the ’04 and ’05 level of sales because that was a bubble,’ Portele said. ‘This is the market today. This is the real market.’”

“Andy Wiederhorn, the controversial executive whose mercurial business career made him a multimillionaire and landed him in prison, has put his sprawling West Hills mansion on the market. The 2008 recession brought a bitter new reality. Wiederhorn nearly lost the home to foreclosure in 2010 after defaulting on one of the multiple mortgages.”

“Wiederhorn figures he will take a beating on the sale. He’s asking $5.7 million for the property, barely half what he’s invested in the place. ‘The market really is that bad,’ Wiederhorn said. ‘It’s about half what it once was at the high-end.’”

“Mediation has been touted as a key strategy to stop foreclosures. But if Maryland is any indication, the programs are not working. As of May 31, just 56 homeowners have gotten a modification of their loan. Louis Boney lives in a small, white frame house on a quiet, grassy street in Clinton, Md. When his home fell into foreclosure, he thought the mediation process might help. But he hit unexpected pitfalls.”

“‘For me, the mediation process, I think, was a gimmick,’ Boney said. ‘In my opinion, they came there just to go through the formalities. They just want to foreclose.’”

“California cities and regions held seven of the nation’s top 10 slots for foreclosure activity in the first half of 2011, according to RealtyTrac. Norman Cox, a regional manager/broker with Coldwell Bank Town & Country in Covina, figures foreclosures will be around for a while. ‘We’ll continue to see them because there are more properties that have yet to be foreclosed and there is no one to buy them,’ he said. ‘People have to have jobs to support a mortgage. I think we’ll see a larger number of units sold, but at lower prices.’”

“One of the most unusually unique property auctions is coming to Port Townsend this Friday: A million dollar property available for $300,000. ‘We are selling it at the request of the lender but the borrower still owns it, and by doing that we are able to save the lender from taking it back from the borrower,’ said Paul Thomas of Northwest Auctions, who is also president of the Washington Auctioneer’s Association. ‘It reduces the size of their haircut by 18 percent, but they are still going to take a haircut.’ The borrower, meanwhile, gets to walk away from the project ‘done and finished and exhausted,’ but avoiding a protracted foreclosure case.”

“Thomas got into the real estate auction business about six years ago. The marketplace has turned entirely, he said, because now there are so few bidders for the prices some owners still want. ‘These days were are turning down probably 19 out of 20 auction candidates because sellers can’t afford to sell at the auction prices. If the seller is not realistic and not willing to accept a low reserve, it makes no sense going ahead with a sale,’ Thomas noted.”

“Foreclosures have tainted the marketplace, and Thomas does not see any end in sight. ‘We’re seeing a lot of banks basically dumping houses onto the market and getting very, very steep discounts and that affects everyone,’ Thomas said. ‘It is a downward spiral with no end because the more banks foreclose and sell property below market value, the lower everyone’s values are and the more foreclosures happen because more people are under water.’”

“There was a time when putting 20 percent down on a house was the accepted norm for most buyers. A proposal to move back toward that standard in the wake of the housing meltdown, however, has produced an odd-bedfellow coalition of Democrats and Republicans, consumer advocates and bankers who fear that would leave homebuyers unable to afford loans and sellers unable to find buyers. ‘It will put the final nail in the housing market,’ predicted U.S. Sen. Johnny Isakson, R-Ga.”

“Others, however, note that 10 to 20 percent down payments and conservative debt-to-income ratios once were widely accepted, and the housing market grew. ‘If we had kept 20 or even 10 percent down as a standard, I don’t think any of this would have happened in the market,’ said Jim Grissett, adjunct real estate professor at Emory University.”

“He admits to being a little old school — expecting as earlier generations did that people who buy a house should save for it, and that banks should retain some of the risk on loans they write. He also noted that falling home prices mean a 20 percent down payment is not as much as it was at the height of the boom. ‘If you can’t come up with that, maybe you shouldn’t be buying to begin with,’ he said.”

“Australian house prices have moved from being affordable to severely unaffordable in the past 10 years - and Sydney is still the least affordable capital city, a new study shows. The study found median house prices in Australia grew 147 per cent between 2001 and 2011 to $417,000, while median after-tax incomes only increased 50 per cent to $57,000.”

“This pushed the price-to-income ratio - the number of years’ worth of income needed to buy a typical dwelling outright - from an affordable 4.7 to a severely unaffordable 7.3. The report considers a dwelling just affordable if it costs no more than five times household income. A typical Sydney home with a price of $510,000 costs about 8.4 times the average annual household income. Even though Sydney experienced the least growth in housing prices through the past decade - a mere 83 per cent compared with 222 per cent in Perth - it is still suffering the effects of the late 1990s boom, the report shows.”

“Mr Phillips said it was no longer just capital cities that faced affordability issues with regional house prices in the Northern Territory, Tasmania, Victoria and NSW outstripping growth in the capital cities. He said home owners had experienced 10 years of increased housing value. ‘They’re sitting pretty. Those renting, or who have recently purchased, face very steep prices. It’s a story of the haves and the have-nots,’ he said.”

“More than 460,000 Arizona units were vacant in 2010, a 61 percent increase over the previous decade, according to the latest data from the U.S. Census Bureau. The vacancy rate — 16.3 percent of all housing in the state — comes after a decade that saw a recession, major job losses and home foreclosures. But the magnitude of the vacancies still caught some experts by surprise.”

“‘That’s staggering,’ said Paul Hickman, president and CEO of the Arizona Bankers Association. ‘It’s stark verification that we cannot emerge from this economic crisis until we move through this inventory.’”

“Maricopa County alone accounted for 49 percent of the vacancies in the state in 2010, according to the Census. Hickman said it’s largely because of ‘the one-dimensional’ housing economy that has dominated the state for the past decade. ‘This recession has hurt us more than the Great Depression,’ he said. ‘Our economy was young back then. We were just barely a state. But being centered on housing really hurt us.’”

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The Washingtonain reports on Delaware. “You might say that Tony Kornheiser, host of ESPN’s Pardon the Interruption, and wife Karril bought in Rehoboth Beach, Delaware, at the worst possible time. It was 2005, and the market was nearing its peak. Rehoboth’s walkable community reminded him of Long Beach, New York, where he lived after college. ‘It was familiar to me,’ he says. ‘I bought the house on impulse at the height of the market. The real-estate agent was thrilled.’”

“Ocean City grew rapidly between 2000 and 2006. Foreclosures still make up a significant portion of the inventory—294 homes sold in the first quarter of 2011, 15 percent of them foreclosures. Jennifer Cropper-Rines, president of the Coastal Association of Realtors, says Ocean City buyers can find a lot of good deals, particularly on condos with three or more bedrooms.”

“What $500,000 buys: A second-floor three-bedroom, two-bath condo on the bay at Hidden Harbor sold in January for $520,000, nine months after being listed for $599,000. What $1 million buys: At the Gateway Grand, at 48th Street and the beach, a four-bedroom, three-bath eighth-floor condo with ocean views sold in April for $899,900. It had been on the market 14 months and originally listed for $1.03 million.”

The Washington Times. “Most prospective homebuyers are aware of today’s stricter lending standards, but they also face another challenge when it comes to buying a home: the need for down-payment funds. Michael Devlin, a loan officer with George Mason Mortgage in Fairfax, said, ‘Each county in D.C. and the Maryland and Virginia suburbs offers low-interest loans for down-payment funds or a grant for moderate-income households.’”

“In Maryland, Tamika Johnson, a Realtor with Re/Max Specialists in Upper Marlboro said the tried-and-true method of borrowing from parents or getting a gift from them is an option for some buyers, but she also said some buyers sell items on eBay or Craigslist to build up funds. ‘The main thing is just to commit to it, to sacrifice for a year if you need to, eating out less, going out less and having a savings goal to meet every month,’ Ms. Johnson said.”

“Members of the military may qualify for a Veterans Affairs (VA) mortgage, which does not require a down payment, and zero-down-payment loans are available through the Department of Agriculture’s (USDA) Rural Development housing program.”

National Public Radio. “Five years ago, it seemed like the right time for the Bullards to buy, after renting for a decade. Thousands of military families did what the rest of the country was doing: They bought a home. It didn’t matter that they were moving every few years; home prices were only going up. ‘It was seen as an investment,’ Sarah Bullard says. ‘And we had many friends in this town, in particular, who bought and sold within two years, and did so very successfully.’”

“‘I mean, it’s to the point where we’re about to drown,’ says Mindy Nichols. She and her husband are desperately trying to sell the townhouse they bought back in 2005 before he enlisted in the Army. The house is in Pennsylvania. She and her husband and their three daughters live in Fort Campbell, Ky. They’re actually about to move again. For a couple of years now, they’ve been paying the mortgage on that empty house in Pennsylvania. They just decided to let the house go into default, though they are still hoping to sell it.”

“‘I don’t see us buying a home again anytime soon,’ Nichols says. ‘We’d just love to live on post and be tenants and not have the responsibility of property ownership anymore.’”

The Daily Local News in Pennsylvania. “Chester County real estate outpaced other counties in the Greater Philadelphia area in homes sales in the first half of 2011 an industry study reported — a dubious distinction considering the residential market’s lackluster performance. Chester County also lost the least amount of ground among all the other Pennsylvania counties in the region regarding the number of homes sold.”

“Steve Storti, senior VP of marketing at Prudential Fox & Roach Realtors in Easttown, advises that not only do home sellers need to be patient; most important, pricing has to be correct. ‘Where there is a tremendous amount of inventory to look at, in order to show a property, it has to be at the best price,’ Storti said. If the property is priced too high, ‘you are excluding yourself’ from the market.”

“Ryan Sweet, a senior economist with Moody’s Analytics of West Chester, agrees. The struggle started when the federal tax credit for home buyers ended in June 2010. Back then ‘we expected some pain,’ he said.”

“The housing marketing in the Greater Philadelphia area is at rock bottom pricing-wise, Sweet said. Once the market makes modest gains, and Sweet is forecasting that will happen in 2012, real estate will start to rally. ‘When people see prices going back up, they will dive back into the market,’ Sweet said, explaining buyers do not want to buy a house that will be worth less in a few months.”

The Patriot News in Pennsylvania. “The builders association’s recent Home-A-Rama event in Upper Allen Township featured a lineup of seven luxury homes brimming with every possible amenity — probably spurred more customers to renovate than to build. ‘People could look at the hardwood floors, the kitchens, the organized garages, the landscaping, and say, ‘Oh, we could do that,’ said Wendy David, executive officer of the Home Builders Association of Metro Harrisburg, who recently decided to remodel her own home after it languished for an agonizing 170 days in a moribund market.”

“‘I gave up,’ she said. ‘You can have a brand-new bathroom for $35,000, and you can be happy.’”

“Dave Ionni, owner of Ionni Properties in Lower Paxton Twp., never knew a down housing market. The first signs of trouble came in 2007. Reports of overheating housing markets and bursting bubbles wafted in from sun states such as Florida, Arizona and Nevada. But in Harrisburg, those places might as well have been foreign countries. Riding positive word of mouth from proud homeowners showing off their palaces, Ionni’s company zoomed from building three homes its first year to juggling as many as eight projects annually.”

“His homes rose in price from the $300,000 to low $400,000 range to larger, more elaborate luxuries costing $600,000 and up. ‘It was full steam ahead,’ Ionni said. ‘Those were the days I would tell people, ‘I can’t build your house right now,’ and they would wait.’ When the market started to go down, it was hard to swallow,’ he said.”

“Even with their crews busy and remodeling projects in the pipeline, there’s a sense of treading water among once high-flying homebuilders. The big question remains: When will the housing market get back to normal? At the builder’s association, Wendy David hears plenty of anecdotal evidence of activity, but it’s difficult to spot trends. ‘Would I say it’s coming back? I don’t know,’ she said.”

“A larger question might be: What will the so-called ‘new normal’ look like in terms of building volume? David insisted that bubble-inflated building levels of the mid-2000s should not be used as a realistic benchmark. ‘We’re never going back there,’ she said. ‘That was a boom.’”

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The Grand Rapids Press reports from Michigan. “Architects and home designers headed into a national convention at the Amway Grand Plaza Hotel on Tuesday predicted a ‘new normal’ for economic activity in their industry, rather than a return to the housing boom. Wayne Visbeen, of Visbeen Associates Inc., in Kentwood, said his business fell by as much as 50 percent but is climbing again slowly. He used to design million-dollar homes along Lake Michigan. He’s doing $300,000 homes now. ‘The level of luxury is definitely more conservative. Even people with money are more conservative,’ he said.”

The Detroit Free Press in Michigan. “In metro Detroit, short sales jumped 85% last year from 2009 and are up nearly 20% so far this year, according to Realcomp. Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services’ loss mitigation division in Birmingham. A growing reason short sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.”

“Unlike private mortgage insurance required for sellers who put less than 20% down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased. Premiums are paid by the lender or investor and the homeowner isn’t aware of it. When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.”

“‘That’s a mess. They are the worst,’ Mahoney said. ‘It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive.’”

“Evelyn Sokol has an offer on her 1,000-square-foot Shelby Township home, but will likely lose the home to foreclosure even though she never knew her lender had purchased mortgage insurance on her loan. The home is priced at $75,000. Sokol, who bought the home in 2001 for $146,000, put more than 20% down and did not need the mortgage insurance. At some point, her lender pooled her loan with others to sell to investors and purchased the mortgage insurance.”

“‘This is absolutely ridiculous, and expecting a woman who is surviving on Social Security and a small pension to pay this? I’ve never heard of this,’ McGuire said. ‘How do they make a homeowner responsible for something they didn’t even sign on to?’”

“The government’s Home Affordable Foreclosure Alternatives program was meant to give homeowners an alternative if they don’t qualify for a loan modification. But most banks are unwilling to go along with HAFA short sales, in part, because the program forgives the homeowner’s loan balance. Lenders, in some circumstances, would much rather try to recoup their money.”

“Laurie Maggiano, director of policy for U.S. Department of the Treasury’s Homeownership Preservation Office, said that while the first mortgage holder receives 65 to 80 cents on the dollar after the property is sold, the second and other lien holders get less than 6%, and they want to retain the rights to go after homeowners for more. But the change is not likely to happen, she said. ‘We don’t want taxpayer dollars going to a transaction where a borrower still has contingent liability,’ Maggiano said.”

“Celso Martinez would have been happy to benefit from a program like HAFA. The 44-year-old bought a Royal Oak bungalow in 2008 for $164,000, then lost his job and moved to Collierville, Tenn., for a new one last fall. He spent almost 10 years in Michigan, working at the General Motors Tech Center in Warren. Laid off, Martinez exhausted his savings and unemployment benefits trying to keep up with the mortgage, but he fell behind. He got a short sale offer of $80,000 this spring, but his bank rejected it. He got another offer in June for $104,500, but that didn’t go through, either.”

“The house is now for sale at $102,500, but as a foreclosure. ‘It was my first time buying a home, living the American dream,’ said the native of El Salvador. ‘But it isn’t as good as it sounds. Now I am kind of messed up with bad credit for seven years.’”

The Chicago Tribune in Illinois. “Minnesota-based TCF Financial said the Chicago area is its weakest market in terms of the quality of its loans and other assets on its books. It’s ‘even weaker than Michigan,’ the bank said. TCF, which has 201 TCF Bank branches in Illinois, partly blames the prolonged foreclosure process in the Chicago area, making it difficult to get bad loans tied to commercial and residential properties off of its books.”

“‘They think they are doing a good thing, but they’re not,’ Chief Executive William Cooper said of the legal process that banks must go through to dispose of foreclosed property in the Chicago area. ‘It takes us longer to get a house through the system (in Chicago), and to get it sold takes us longer there than anywhere else.’”

The Journal Star in Illinois. “Richard Canges can only think of the good old days when reminiscing about a nearby Central Peoria house he visited as a kid. The house was a nice, brick family-owned residence with a warming fireplace inside. ‘That is a shame,” Canges said, as he glanced across the street recently at the now vacated house, which one neighbor said is an attraction for raccoons and rodents. The two-story house is one of about 30 houses awaiting the wrecking ball, if the funding for city-wide demolitions exists by the end of the year.”

“The funds are being stretched to their limit. The city budgeted $300,000 for demolitions in 2011, and has spent $258,208 already to tear down 39 properties. Pending the results of court cases, the city could have 66 properties potentially scheduled for demolition - and no money to do them. ‘It does get overwhelming with the number of properties we see that are vacant and being abandoned and just neglected and are falling into disrepair,’ said John Kunski, the city’s director of code enforcement. ‘The numbers are on the rise.’”

Bloomberg on Ohio. “Bank of America Corp, faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer. The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are either conducting or considering their own programs.”

“‘There is way too much supply,’ said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. ‘The best thing we can do to stabilize the market is to get the garbage off.’”

The Plain Dealer in Ohio. “Foreclosed homes in Cuyahoga County are more likely to remain vacant up to five years after they’re sold compared with homes sold by traditional means, a new study by the Federal Reserve Bank of Cleveland has found. In one key finding, he looked at homes that were sold or foreclosed on in January 2006 and whether they were vacant in December 2010. His calculations involved 85,000 properties and 130,000 sales.”

“‘The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure,’ wrote Fed researcher Stephan Whitaker. Among foreclosed homes, 22 percent are vacant five years after their last sale, compared with 10 percent of homes sold not through foreclosure, the study found.”

The Des Moines Register in Iowa. “During the past year or so, nearly 300 new downtown apartments were completed by several developers. Most filled up almost immediately, and more than 300 additional units are now under construction or in the planning stage. It’s a much better situation than existed as recently as five years ago when downtown developers were building more for-sale than for-rent housing and occupancy rates were dismal.”

“Builders misjudged the market, said Rick Tollakson, chief executive of Hubbell Realty, which has proved to be one of downtown’s most persistent and most successful housing developers. ‘We thought the price point was $200 a square foot,’ which translates to $300,000 to $400,000 per unit, ‘but it’s really $125 a square foot,’ or $200,000 for a 1,600-square-foot unit, Tollakson said.”

The Wichita Business Journal in Kansas. “The former Real Development Corp. office condos in downtown Wichita are sinking to new lows in their prices. A unit at the Orpheum Office Building sold this month for $80,000, down from more than $400,000 five years ago. All of them are owned by US Bank after the investors — most of them from California — sank into foreclosure after purchasing them about five years ago.”

The Duluth News Tribune in Minnesota. “Pending home sales in Minnesota were up 41 percent in June compared to June 2010. Still, it would take 18 months to sell all of the approximately 2,750 Duluth area homes on the market at the current sales rate. That’s the longest stretch of time in more than seven years, the data shows. ‘There’s tons of foreclosures, abandoned, distressed house in the 13-county metro area, bringing the price down,’ said Christopher Galler, Duluth Area Association of Realtors CEO.”

“The region between North Branch and Forest Lake also is having inventory problems with foreclosures and multi-unit housing complexes sitting empty, he said. He likened those distressed properties to a winter coat on the store rack in June. ‘Is it priced higher than in November or lower?’ he asked. ‘Right now, the housing stock is like a winter coat in June.’”

The Star Tribune in Minnesota. “The most frustrating aspect of the state’s three-week government shutdown was that Minnesota’s future seemed to hinge on one of two choices: Cut spending or raise taxes. What we desperately needed was a third option, an ambitious, long-term vision to restore economic growth.”

“Minnesota’s job numbers are a stark example of how swiftly expectations can go from great to greatly diminished. Between January 1990 and December 1999, the state added 530,000 net jobs. In the following decade, we experienced a net loss of 22,000 jobs. Naturally, a lot of those jobs were lost during the Great Recession, so it’s inevitable that many of them will come back, right? Not necessarily.”

“First, many midsize and large American companies are doing most of their hiring abroad. Second, new research suggests that the country faces a far more fundamental employment challenge that predates the recession by many years: a decline in the number of jobs being created by new businesses.”

“The Kauffman Foundation research focuses on businesses that employ others besides the owners. Those businesses are hiring fewer people. In the 1990s new businesses opened their doors with about 7.5 jobs on average, compared with 4.9 jobs today. The paper’s authors don’t spend much time discussing the possible causes for these declines, such as financing, free trade or the consequences of shipping jobs overseas.”

“Dane Stangler, the Kauffman Foundation’s director of research, cites another possibility: How much the housing bubble influenced or distorted job creation during the first part of the decade. ‘On the whole, a lot of those housing-related categories create fewer jobs,’ he said.”

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The News Journal reports from Florida. “Several Volusia County beachside cities that saw their fortunes rise with the condominium construction boom are now finding themselves financially hamstrung by the same residential market because of crashing condo values. Condo values are more volatile than single-family homes because they are bought more often by investors, speculators and persons seeking vacation and second homes, said Jon Zolsky, a condo specialist with Fun Coast Realty in Daytona Beach.”

“‘When the market was crazy in 2005 and 2006, I would say 75 to 80 percent of the preconstruction buyers were investors,’ he said. ‘When we crossed that 50 percent mark we were in trouble because as soon as the market softened they walked away and left a lot of empty units and the market spiraled down as fast as it went up. We now have a glut with low prices.’”

“‘Too many people tried to capitalize on the boom times and prices went way up and way down,’ said Bill Roe, owner/broker of Ocean Properties in New Smyrna Beach. “We have steep discounts and as soon as the banks loosen lending again, sales will pick up. Any moment I expect to see the spiral start up with prices increasing as the demand from baby boomers and those retiring wanting a no-maintenance lifestyle and with no new condos being built to limit new supply.’”

From WINK News. “A new report from Florida Realtors shows hope on the horizon. Even though the number of sales dipped since last year, prices are on the rise for existing homes and condos in Lee County. ‘There are fewer toxic properties coming on the market, fewer foreclosures, and the ones that are coming on the market are typically higher-end,’ says Denny Grimes, with Royal Shell Real Estate in Fort Myers. ‘We’ve gone from a super-irrational market to, basically, an irrational market. Sellers aren’t necessarily clicking their heels when they’re walking out of closing, but they are being successful.’”

The News Press. “Fort Myers-Cape Coral is one of the most inexpensive places in the country to buy a house, but rents are far above average. Driving the high rents in Lee County is a continued influx of foreclosure refugees being kicked out of their homes, said Susan Lutter, broker for Fort Myers-based Gulf Waters Rentals and Management. ‘We still have renters saying, ‘Hey, I have to be out by Wednesday,’ she said.”

The Herald Tribune. “According to an analysis provided by Michael Saunders & Co. agent Robert S. Goldman, a 4.3-month supply of homes was for sale in North Port at the end of June — a ridiculously low number, considering that a six-month supply represents a healthy market and anything below that means sellers can begin pushing prices up. And there have been some early indicators that prices are rebounding.”

“But, in North Port, nothing is ever exactly what it seems. The drop in inventory had everything to do with the rob-signing crisis that broke out nearly a year ago. ‘The reality is that there is still a tremendous amount of inventory that is not yet for sale,’ said Dennis Black, a Port Charlotte real estate consultant. ‘You have people who are behind on their mortgages and the banks haven’t bothered to foreclose.’”

“Is it possible to steal a house? It’s a question residents in one Fort Myers neighborhood are asking after squatters moved into a foreclosed home on their street. After someone moved into a home that was vacant for two years, neighbors in one Fort Myers community took notice. ‘I was out of town and one of my neighbors told me someone moved in and sent me a picture with the power on,’ David McCarthy, a neighbor, told WINK.”

“Another neighbor said she went to welcome the new resident. ‘I said well we knew the previous owner and he said well they rented it to me. They saved it from foreclosure. They are renting it to me as long as I keep the house up,’ she recalled. But that was news to the previous owner, Daryl Moran. ‘One of my neighbors called me and said that someone had rented the old house and you had leased it to him. I said well I don’t even own it as far as I thought,’ Moran remembered.”

“He reluctantly left the home after declaring bankruptcy more than two years ago. ‘We should have stayed there but at the time I thought we were doing the right thing,’ he said.”

“Recent legal challenges caused many banks to halt their foreclosure processes leaving the houses in limbo. For instance, the bank has filed for foreclosure on Daryl’s home but it’s not finalized so it’s still in Daryl’s name. The owner on record has to file for eviction and the squatter is banking that the owner who walked away from the house won’t care enough to file. We tried to ask the people in Daryl’s former home if they were squatting. Even though there was a car in the driveway, no one would answer the door. As long as they’re still in this home, the neighbors say they’ll be on edge.”

The Philadelphia Inquirer. “John Aguiar is a veteran of the Gulf War. Aguiar and his wife, Syrena, built a house in Cape Coral, Fla., after relocating from Chicago to be nearer her parents. Using proceeds from the sale of their Chicago house, they bought a lot in a new subdivision in the Cape, a middle-class suburb across from Fort Myers in southwest Florida.”

“But the mortgage, like so many at the time, contained a ticking time bomb. Their bank had given them an adjustable-rate mortgage, and soon they were struggling when their monthly payments ballooned. Then Aguiar lost his job in a housing-materials firm when his division was shut down. He cashed out a pension plan from a former employer, drained his 401(k) account, and worked part time at a Home Depot. ‘We did everything we could to try to hold on to the house,’ he said.”

“You can hear their stories almost every day at the Veterans Foundation of Cape Coral. ‘We have guys coming in here as often as you can imagine who are losing their homes and not knowing what to do,’ said Ralph A. Santillo, president of the group, himself embroiled in a foreclosure case on his own house. ‘They’re living on a fixed income, usually just Social Security, sometimes a little pension. All their costs are going up - insurance, taxes. Most times when people refinanced, they used that money just to keep up with their bills and pay their mortgage. So there was no real benefit. It was not like people were going to get rich and live off the money.’”

“‘There was stuff out there like no-interest loans or loans where you paid 1 percent interest,’ he said. ‘Then all of a sudden you find out two years down the road you are paying $5,000 a month. Some of these were usurious. They would have put you in jail for that years ago.’”

“When their bank refused their appeal to adjust their mortgage payment, foreclosure began and the family soon lost the house. John, Syrena, and their two school-age children moved in with Syrena’s parents. When John still couldn’t find work in Florida, he took a job with a trucking company in Chicago and moved in with relatives, separated from his wife and children by 1,300 miles. ‘We had the American dream,’ said Syrena, ‘and it was taken from us.’”