The Housing Bubble

The Casper Journal reports from Wyoming. “If you’re looking for something to make you feel positive, you might consider Wyoming’s economy. And if you’re looking for a person with a good handle on Wyoming’s economy, you might just talk with Mark Zaback, CEO of Jonah Bank of Wyoming, and who serves on the Denver Branch of the Federal Reserve Board. ‘You don’t have as many foreclosures going on in Casper or the state,’ Zaback said. He said there are pockets; Teton County has been hit hard but it’s a county that experienced a lot of appreciation as a resort area. He thinks the resort areas have all been hit hard because so of many second homes.”

“‘People can’t afford it and have lost their places,’ which Zaback said may be more of a reflection of the economy in other places than in Teton County.”

From NBC Montana. “Housing prices in Bozeman have fallen to nearly six percent lower than the national average. President of the Gallatin Association of Realtors, Rich Mayo, explains, ‘I think probably the downward pressure from short sales and foreclosures has a dramatic affect on that.’”

“Mayo says that because unemployment rates in Montana are still fairly high, it causes the prices of homes to stay lower and more affordable. ‘As long as we have banks foreclosing on homes and people short-selling homes and doing that kind of things it’s gonna continue to drive the market down,’ he added.”

The Idaho Statesman. “Homes in foreclosure accounted for 30 percent of residential housing sales in Idaho during the second quarter, Realtytrac reported. They amounted to an 8 percent increase over the second quarter of 2010. Lance Churchill, who specializes in investing in foreclosures, said banks are slowly putting more distressed properties on the Valley market.”

“‘There are a couple of million homes (nationwide) in default, but are still not in foreclosure,’ Churchill says. ‘So you can expect the number of filings to start to go back up again.’”

The Spokesman Review on Idaho. “Parcels within Post Falls Landing, a project billed for years as a downtown-style community, are being sold at a trustee’s sale this December. The development, which includes a 142-slip marina and dozens of condos, is still largely unfinished. The troubled development is the latest in a string of ambitious North Idaho projects that were foiled when the economy collapsed in the fall of 2008.”

“It is considered ‘vital to the success’ of Post Falls’ City Center plan and viewed as a catalyst that will influence future development, according to the Post Falls Urban Renewal Agency.”

The Oregonian. “Oregon is one of 24 states that allow nonjudicial foreclosures, provided lenders give borrowers proper notice, publicize the sale and abide by other requirements. But late last year, federal judges began blocking them, ruling that lenders had failed to follow one of those requirements: filing the mortgage’s ownership history in county records.”

“No one can say how many of the estimated 26,000 foreclosures pending in Oregon will ultimately land in front of a judge. But attorneys and trustees involved in both processes say hundreds of files are being reviewed. Pam Laxson, a real estate agent whose home in Sandy is in foreclosure, said a Fidelity National Title Insurance Co. representative said her file was among 600 being transferred to attorneys for judicial foreclosure.”

“Laxson bought her three-bedroom home for $206,000 in 2005. Her husband died in 2007 after a 10-year bout with multiple sclerosis. She was laid off in 2008 and went to school to retrain as a certified nursing assistant. She now works as a certified medication aid at a rehab center in Clackamas while still trying to sell homes.”

“Laxson estimates her household income is now one-third what it was when she bought her home. She said Wells Fargo has repeatedly denied her requests for loan modifications, a short sale and a deed in lieu of foreclosure. ‘Sometimes I try to hate my house,’ Laxson said. ‘I need to hate it because I might have to leave. But I can’t find very much I hate.’”

From KOMO News in Washington. “All Vera Johnson wants to know is why she can’t get a modification of her home loan. She owns Village Green Perennial Nursery. Johnson and her two children also live on the property, where she sells plants, containers, art. But she may lose it all. ‘So I’m $15,000 behind right now,’ she said.”

“‘I’m trying in good faith to keep my home that I’ve been living in for eight years, a business that I’ve been running for eight years,’ Johnson said. ‘This business has been here for 32 years. I’m not trying to say, ‘Give me a home for free.’ I’m saying, ‘Come on, work with me.’”

The Bellingham Herald in Washington. “Trillium Corp. has lost control of millions of dollars’ worth of Whatcom County real estate in the past year due to defaults on loans. In an emailed statement, Trillium VP Chris Benner blamed the loan defaults and resulting losses of property on the vagaries of the global economy.”

“Much of the land that Trillium no longer owns is in the Semiahmoo and Birch Point areas, including an undeveloped 231-acre tract near Birch Point as well as the Seagrass condominium properties and boat slip sites at the Semiahmoo marina. Dave Rodgers, manager of Wise Enterprises for Whatcom County, said Wise intends to sell the properties as quickly as possible. Rodgers acknowledged that Wise faced a substantial loss on the transaction, but he declined to say how much.”

“Real estate broker Mike Kent is the listing agent for Wise’s Semiahmoo holdings. Whatcom County real estate is attracting increasing interest from Canadian buyers, as well as some investors from mainland China, Kent said. ‘People are looking to invest in our relatively low real estate,’ Kent said. ‘There’s definitely a trend of Asian buyers looking at Whatcom County, no question.’”

The Vancouver Sun in Canada. “B.C. residents have high hopes of retiring debt-free, but for many, this reality show has an unhappy ending. While most B.C. residents believe they’ll be debt-free by age 58, fewer than one-third of B.C. residents aged 45 to 64 don’t owe any money, according to a Harris-Decima poll conducted for the Canadian Imperial Bank of Commerce.”

“Many homeowners who are mortgage-shopping still ask how much they can get instead of how much they can comfortably afford, pointed out Scott Hannah, CEO of B.C. Credit Counselling. ‘For a lot of people who put themselves into a tight spot, it makes it difficult to get ahead,’ he said .”

“It’s not only expensive real estate that has British Columbians cash-strapped. One in five B.C. residents who responded to an ING Direct survey said their biggest monthly expense — besides mortgage or rent payments — was loans and credit card payments, compared to 16 per cent nationally. Half of B.C. respondents reported that they could not afford to save $25 more per week.”

“It’s no secret that Vancouver has the highest cost of housing in Canada, so the release last week of Royal Bank of Canada’s affordability index only confirmed what we already know. It concluded that ownership costs for a standard bungalow in Vancouver amount to 92.5 per cent of median household income, prompting chief economist Craig Wright to say that owning a home in Vancouver ‘is a dream that only the area’s highest-earning households can contemplate.’”

“Not to take issue with such a renowned economist, but the dream is still realizable for median-income earners if buyers are willing to make compromises. The variety of properties available at different price points and flexibility in financing, including variable rate mortgages and extended amortization, along with a bit of luck, can help fulfil the dream of home ownership for agile buyers willing to keep their options open — even in Vancouver’s ‘unaffordable’ market.”

The Financial Post in Canada. “Two teachers in Alberta we’ll call Thomas and Georgia are in their mid-50s and face a disaster in their retirement plans caused by poor real estate investments that could eat up their retirement savings. If not fixed, the properties will leave them rich in real estate and poor in cash.”

“The problems begin with previous successes in real estate speculation. Figuring that property always goes up, they bought three rental condos for a total of $1.3-million at the peak of the Alberta property market and put $120,000 down on a property in Costa Rica. They supported this investment on $9,490 combined monthly take-home pay.”

“Two of the condos barely pay their way on a cash basis that does not even account for depreciation. A third property is a costly flop that costs them $931 a month more than its rental income. The $120,000 Latin American property, which was not completed, is in litigation and has been written off. Thomas and Georgia face the unpleasant task of cutting their losses to preserve their wealth.”

“‘When we retire, we would like to sell our home and downsize to something smaller on Vancouver Island,’ Thomas explains. The problem, of course, is the three cash-draining condos. ‘We would have liked to walk away from the deposits we had placed when the market turned, but the builders threatened legal action. So we went ahead with the purchases. Each is financed by a line of credit with a 25% down payment and secured by equity in our home.’”

“If Thomas and Georgia were to sell in today’s market, they would lose much of their equity, for prices are not as high as they were in 2007. They pay interest only on the lines of credit. As interest rates rise, they will have to add more cash and pay what amounts to higher subsidies. ‘On a good day, we are optimistic that things will work out well,’ Thomas says. ‘On a bad day, I feel that we are too exposed and must reduce risk.’”

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The Denver Post reports from Colorado. “Although Colorado avoided the worst of the housing bubble, banks in the state are failing at five times the expected pace. A possible explanation is that many of the failed banks were caught up in a ’stealth’ development bubble in fast-growing counties, such as Weld and Douglas. While a ’stealth’ housing bubble might explain why certain Colorado banks failed, it doesn’t necessarily justify the loose lending that went on. Larry Martin, a Denver banking consultant, said easy lending appears to have created an illusion of prosperity that might have blinded some regulators and managers to the dangers that lurked ahead.”

“‘There was robust development, especially up north,’ said Fred Joseph, the state’s acting bank commissioner. ‘Things are moving, and no one ever thinks it will end.’”

Northern Colorado Business Report. “Weld County’s residential market is picking up steam, albeit slowly, according to new statistics and industry professionals. Buyers are willing to pay more for a new house than an existing one, said John DeWitt, managing broker of Re/Max Alliance of Greeley, and following the recent wave of foreclosures, developers can build homes on vacant lots in a subdivision at lower cost than in previous years.”

“Rick Jablonski, developer of Firestone Villas, has found a good niche and price point, said town manager Wesley LaVanchy. Investors can purchase homes in the Firestone Villas development in groups of five for $995,000, which brings the cost of each home to $199,000, just above the median home price.”

The Salt Lake Tribune in Utah. “Federal regulators have ordered SunFirst Bank to raise additional capital or find a buyer for the struggling St. George bank. The bank is struggling with a mix of financial and legal problems arising from home-building and land-development loans it made before the Washington County housing bubble popped in 2007.”

“Bank of America stopped filing foreclosure default notices in Salt Lake County earlier this month, but its attorney argued in court Thursday that it still has the legal right to do so. Homeowner attorney, Christian Barlow of St. George, asked why ReconTrust had halted filing foreclosures under its name if it believes the practice is legal. ‘If ReconTrust can foreclose, why did they stop?’ he asked.”

“Another homeowner, Karolyn Michelsen, of Draper, also said she was frustrated trying to deal with a loan servicer on her house after it fell into foreclosure. She said the loan servicer even refused an offer to sell the house at full price. ‘I offered them a very fair solution,’ Michelsen said.”

From Inman News. “The days of the Harmon Hotel tower in Las Vegas may be numbered — even before the hotel welcomes a single guest. Begun during the Las Vegas high-rise condo boom, the hotel tower — first proposed as a 49-story mixed-use condo and hotel project — is an empty, if flashy, shell that its owner, MGM Resorts International, seeks to demolish.”

“Originally conceived as a 400-room nongaming tower with more than 200 residential condo units, the Harmon was part of the larger CityCenter development on the Las Vegas Strip. When MGM put the planned condo units on the market in early 2008, buyers — mostly owner-occupants — put down 20 percent deposits on nearly half of the units within a two-month period, said Robert Hamrick, who served from January 2006 to March 2011 as senior vice president and broker at CityCenter Realty Corp.”

The Arizona Daily Star. “The state housing market continues to search for a bottom, with new figures showing the average Arizona home now selling for only about half of what it did five years ago. Jay Butler, professor emeritus at the W.P. Carey School of Business at Arizona State University, said there are a variety of reasons for the continued plunge. But he put the situation in decidedly non-economist words. ‘Right now, it sucks,’ he said.”

“Marshall Vest, economist at the Eller College of Management at the University of Arizona, said there won’t be a turnaround in the trend until the ‘fundamentals’ of the housing market get better. That starts with trying to absorb the excess supply of homes. ‘We have enough vacant houses here in the state of Arizona to accommodate an entire decade worth of population growth,’ he said. ‘And that’s if the population were growing.’”

“But, he said, ‘Mobility is near zero,’ he said. ‘People are frozen in their houses,’ unable to sell them, at least at a price where they would be able to pack up and move to Arizona.”

The Atlanta Journal Constitution. “By 2008, Silverton Bank’s lavish annual soirees at the Ritz-Carlton’s Amelia Island resort were the place to be each summer for the Atlanta institution’s rapidly growing crowd of customers — hundreds of community bankers from across the nation. As a bank for banks, Silverton’s services included clearing checks, offering short-term investments for banks’ cash, financing new bank startups and divvying up and selling parts of loans — known as ‘participations’ — that were too large for any single bank to handle.”

“But it turned out that Atlanta-based Silverton was on an express trip that ended in oblivion. The fallout from its failure in May 2009 — Georgia’s largest bank failure ever — helped sink dozens of its customer banks as well.”

“The FDIC said Silverton was taking on bigger and bigger loans as far away as California and Arizona. Among the largest was a $100 million loan in late 2006 for Merrill Ranch. It was a massive residential, office and retail development that metro Atlanta businessman W. Harrison Merrill wanted to build on 6,100 acres of desert scrubland an hour’s drive from Phoenix. It’s ‘a total land play,’ objected Silverton director R. Rick Hart when the board of directors reviewed the planned loan, according to company records cited by the FDIC.”

“Despite his objections that the housing market was already depressed in Arizona and that the Merrill loan had other flaws, the board approved it. The project never materialized and Silverton’s 60 member banks that participated in the loan suffered heavy losses.”

ABC 15 in Arizona. “Fulton Homes executives are reporting an unusual rise in new homes in Gilbert, Tempe and Chandler. Vice President Dennis Webb said the company had to change their approach to selling new homes and become a customer-choice-driven seller over a home-builder-choice seller. For Allison and Barret Hartman that made buying a bit easier. The couple had their eye on the Fulton Ranch area for quite some time.”

“‘We heard the homes were selling fast. We came in and took a look and knew that, if we were going to jump the gun it was time to do it,’ said Barret Hartman.”

“The choice to buy new had to be tough with the increasing number of bank-owned homes available. Reuters reports Nevada with the most foreclosed homes, while California and Arizona share the second spot, holding 56 percent of the nation’s foreclosed homes. ‘It’s very difficult to compete with the homes that we built that are foreclosed homes that are $30,000 to $40,000 less than costs,’ said Webb.”

Nogales International in Arizona. “Local Realtors and landlords say there has never been a better time to rent a home in Santa Cruz County; the cost has dropped dramatically in the past year, landlords are more flexible with month-to month leases, and rental deposits have become negotiable.”

“In downtown Nogales, ‘For Rent’ signs seem to be everywhere – on houses, telephone poles and even scrawled in magic marker on boxes placed at street corners. ‘Right now, there is an oversupply of rentals,’ said John Sandler, realtor for Grant Properties Group in Rio Rico. ‘We’re getting calls, so obviously people are looking, but drive down any street and you’ve got rental signs on many lots in every neighborhood.’”

Sandler says he’s trying to stay optimistic, and he’s trying to make the best of a bad situation by urging people who have lost their home to foreclosure to consider renting instead of moving in with family and friends. ‘It’s still a great time to rent a property,’ Sandler said.”

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The Herald Tribune reports from Florida. “How do you end the condo death spiral? Hire an aggressive debt collector, renegotiate any payments going out the door and act diplomatically while you put in more hours than at your day job. ‘I gave up pretty much my life and my vacation,’ said Oded Neeman, who became president of the Village at Townpark Condominium Association last summer, a few months after buying a foreclosed unit there. Both he and Audrey Barrientos joined the board that August. Unlike him, Barrientos got sucked into the buying frenzy when the conversion was first announced in 2006.”

“‘Two of my girlfriends were in line waiting to buy at 11 o’clock at night,’ said Barrientos, who ended up paying a $5,000 deposit on a three-bedroom, two-bath unit priced at $256,900, for which she saw only a floor plan. Later, after the market fell apart, she averaged down by buying a second unit for $80,000.”

The Tampa Tribune. “From the outside, the two story house in a quiet Seffner subdivision looks like a good investment. The grass is tall, it needs to be painted, but it’s in foreclosure and the bank is willing to offer a discount to a buyer who will take it off their hands. But the inside is a different story. Someone, perhaps unhappy about losing the home, smashed holes in the walls, scribbled graffiti, piled trash in every room, and ripped out appliances.”

“The home was offered at auction early this month and someone put down a $4,200 down payment to purchase it, public records show. But no one came back with the balance. ‘It looks like someone took revenge,’ said Nick Davis, a real estate agent with Re-Max Premier Group. ‘Unfortunately, we’re seeing more of this. We’ve seen cement in the plumbing systems, the air conditioners ripped out from the outside, wiring being removed.’”

From TC Palm. “It was a development that had everything. Urged on by highway billboards, people flocked to this 8,200-acre community west of Interstate 95 from everywhere, including fast-paced, congested South Florida. Then the recession hit in 2007 and everything got turned upside down in Tradition.”

“With the recession, development stalled. Large swaths of land remain vacant. ‘The master plan that they had worked,’ Port St. Lucie Assistant City Manager Greg Oravec said. ‘They were going to make a ton of money. This was going to be the best thing ever. Everything was going to be sweet cream, but all of that fell apart.’”

“A total of 162 Martin County homes in some phase of foreclosure were purchased by third parties during the quarter at an average price of $147,832, or about 20 percent less than the average sales price of homes not in foreclosure, RealtyTrac said in its second-quarter foreclosure sales report. Of those sales, 73 were bank-owned repossessions (REOs), for which the average discount was 20 percent. The 128 pre-foreclosure sales, mostly short sales, had an average discount of 19 percent.”

“By contrast, the average discount for all foreclosure-related sales in Indian River County was 53 percent, the second-highest in the nation among metropolitan statistical areas with at least 100 foreclosure-related sales during the second quarter. Only Louisville, Ky., posted a higher foreclosure discount at 54 percent, said RealtyTrac.”

“W.D. ‘Chic’ Acosta, Seacoast National Bank’s executive VP for mortgage banking, said, ‘Indian River County was clearly the last of the three (Treasure Coast) counties where homeowners capitulated, but you’re seeing that process speed up now as part of the economic process we’re going through.’”

“Acosta said the average home price in Indian River County is higher, so struggling homeowners did not capitulate as quickly. ‘Martin and St. Lucie counties have been bouncing on the bottom, but maybe Indian River County is now finding that bottom,’ Acosta said. ‘Now they are finally capitulating, so there are bigger drops.’”

The News Press. “Concrete blocks, bulldozers and ’sale’ signs have become common sights at Catalina Isles this summer. More than 20 homes are under construction at the south Fort Myers community. Catalina Isles resident David Foster began looking at homes in the community in 2005. At the height of the market, though, residences were in the $500,000 range. He and wife Joy watched as the cost of homes slipped over time. ‘Prices kept going down and finally, it was affordable for us,’ he said.”

“In 2007, Foster and his wife purchased their three-bedroom, two-bath home for just under $283,000. Prices at the gated community range from $205,990 for homes with 1,827 square feet to 4,377 square feet for $377,990. Foster, a firefighter and real estate agent with Paradise Realty Network in Fort Myers, said D.R. Horton opened larger estate lots in the back of the community, which also helped spur sales. He has sold two homes at the community recently.”

“‘Instead of gambling on an abused foreclosure or short sale, clients prefer a brand-new house that’s competitively priced with a warranty,’ Foster said.”

“The activity at Catalina is a complete turnaround from a few years ago, and it’s a positive sign in a tough market. ‘For a while there, a lot of people moved out because they were upside down on their house,’ Foster said. ‘We’re getting a lot more neighbors now, so we’re happy.’”

“Now that Catalina’s almost sold out, D.R. Horton will be concentrating on sales at Banyan Bay, just down the road on Winkler Extension. Ryland Homes built about 25 homes there, and D.R. Horton is taking it over to develop the remainder of its approximately 80 lots.”

“As record numbers of foreclosures leave many with a need to find a place to live, apartment complexes are suddenly a hot commodity to buy or build here and around the nation. Still, no new complexes are under construction locally and they’re unlikely to be built here for the next couple years at least, experts say. Why?”

“The answer is simple, said Randy Mercer, a commercial real estate broker with CB Richard Ellis, Fort Myers-Naples: ‘You just don’t need to do it.’ It’s much faster and cheaper to take over an existing, partially completed condo project and turn it into rentals, he said.”

“The landscape of residential real estate has changed fundamentally in ways that will benefit apartment rentals for years to come, said Jack McCabe, a Deerfield Beach-based real estate consultant who tracks home markets on both coasts of Florida. Besides foreclosure refugees, he said, ‘You have a large group of people who want to rent by choice now who think the whole American dream of owning a home is a myth now.’”

The Miami Herald. “Seven years ago, while South Florida developers were still staging high-flying condo parties and speculators lined up to put down deposits on new units, housing analyst Jack McCabe saw dangerous signs and began to warn that a downturn was imminent.”

“Q: When did you know that the housing bubble was going to burst? A: April 2004. Q: Why do you think so many people missed the warning signs? A: Greed blinds people from the truth. No one with a vested interest in real estate wanted to see the gravy train end. Early in the decline, some developers and Realtors publicly blamed my analysis and predictions for causing the housing bust in South Florida.”

“Q: Has South Florida’s housing market hit the bottom yet? If not, when do you predict it will? A: The housing markets will not bottom out until foreclosures and short sales are less than 10 percent of total sales and inventory, and the unemployment rate is less than 6 percent. The earliest that will happen is the first quarter of 2013.”

“Q: You can have a conference call with any three living people. Who do you choose? A: If the call was today, I would pick Barack Obama, [U.S. Treasury Secretary] Tim Geithner, and [Federal Reserve Chairman] Ben Bernanke. Three brilliant men that are clueless as to how to end the housing depression and begin to repair the foundation of our economy.”

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Readers suggested a topic on family and planning for the future. “So…….what does a parent tell an 18 year old about what she should do to get ready for the future? I have no idea what to tell her. An education is a major investment, and if the present trends continue, a total crap shoot on whether that investment will break even, much less give her any kind of advantage over some $10/day guy in Bangalore or Harbin. Especially when she doesn’t have any idea on what to major in.”

“And knowing her, college will be a waste of time/money if she goes, and doesn’t find a subject/career path that interests her. And doing math and science just for the sake of taking them, is not a great motivator for her. Her mom, an RN, is pushing the nursing route. She isn’t that interested, and it seems to me that that’s what everybody and their brother is working towards. In 5 years, we are going to be overrun by ‘health care professionals.’”

“Depression set in this week, when she saw all her friends heading off to college (blissfully unaware on how hard it is going to be to pay back $80-100K in student loans). That, and working two shifts at the ‘casual eating establishment’ and taking home exactly 30 bucks.”

“I never had the remote possibility of going to college, so I have no idea what to tell her. I see this country going into Banana Republic mode, if present trends continue (and no evidence to indicate that they are)…….maybe that’s just the natural order of things. To me, there’s a lot to be said for staying out of hock, and living in a bunker for the next ten years, until the dust settles.”

A reply, “She’s 18 years old. I don’t think she has to decide right now what to do with the rest of her life. The fact that she’s working is a good sign, even if it’s not a great job. Not many 18-year-olds have great jobs, nor should they. Not many people start out at the top. Ultimately, I think many more young people are going to going to go to college part-time while holding a job. Makes a lot more sense financially than starting out adulthood deep in debt.”

Another said, “I had 56 different jobs by age 26, at which time I sold my newer RX-7 sports car, abandoned my lease on a house on the boardwalk in Newport Beach, CA, and got serious about education. Some of us need time to explore. Result of AA, BA, MBA and two successful careers. And huge loans that took years to pay off. Retired at 53.”

“Worked out just fine. In this economy, student loans seem very, very risky. Guess I got lucky, but I was 5-10 years late in being employable anywhere that included a pension.”

Capital Media Services . “Most of Arizona’s metropolitan areas lagged behind the rest of the country in income growth between 2009 and 2010, a report from the Bureau of Economic Analysis showed. But particularly telling is that the earnings component — the amount of change due solely to what people were bringing home in their paychecks — was far below the rest of the nation.”

“Dennis Hoffman of the W.P. Carey School of Business at Arizona State University said most troubling is the attitude of consumers. ‘We’ve got confidence wounded and barely breathing,’ he said. And that was before the nation’s credit rating was downgraded and the markets took a beating. ‘Now we’re just taking a stick and just jabbing it,’ Hoffman said. ‘It’s worrisome.’”

“Marshall Vest of the Eller College of Management at the University of Arizona, said he also had hoped that the 2010 figures would be the bottom, with recovery beginning late in the year. ‘Clearly, the odds of recession have increased,’ he said.”

“Hoffman zeroed in on the poor earnings numbers. ‘Part of those lost earnings could be people that just left,’ he said, especially undocumented workers. He acknowledged that the report reflects what might be called ‘old news which confirms what everybody knew’ about the state’s economy for the last two years. ‘The real interesting thing is going to be what this is going to look like 12 months from today,’ Hoffman continued.”

“‘Any reasonable economic forecast had some improvement baked in the cake in 2011 and accelerating in 2012 and accelerating (again) in 2013,’ he explained. But he said the news of the last three to four weeks makes him doubt that. ‘I fear that we’ve stalled out here,’ Hoffman said.”

The Coeur d’Alene Press. “Living situations could be improving for Kootenai County families, according to numbers reported by a national data collection organization. But they’re probably getting worse, based on indicators from local nonprofits and agencies. Emily Simnitt, spokeswoman for the Idaho Department of Health and Welfare, said the number of folks on food stamps statewide has increased every year since 2008.”

“There were 20,507 individuals on food stamps in Kootenai County at the beginning of this year, Simnitt said, adding that about half of that tends to be children. ‘We know that many people who have been coming in for food stamps in the last few years have never been receiving assistance before, which is directly related to the economic downturn,’ she said.”

The LA Times. “To shield its economy from the fallout of the 2008 financial crisis, Beijing orchestrated a massive economic stimulus. It invested billions in infrastructure projects and encouraged banks to open the credit spigot to fund construction of apartments, office towers and retail centers. The strategy catapulted China past Japan to become the world’s second-largest economy; its growth helped keep the global slump from deepening.”

“But like taking steroids, there were side effects. The burst of credit has fueled inflation, which is proving painful for average Chinese. Soaring prices for pork, vegetables and other staples have authorities worried about the potential for social unrest. So has a property bubble that has put home ownership out of reach of millions, exacerbating the gulf between rich and poor.”

“Meanwhile, the nation’s debt levels have reached new heights. A national audit released in June found outstanding loans to local governments, among the biggest players in the building binge, amounted to $1.65 trillion, or nearly a third of China’s GDP.”

“The big concern inside and outside of China is a so-called hard landing. If Europe and the U.S. fall back into recession and demand for Chinese-made goods declines, Beijing won’t be able to juice its economy like it did the last time around. ‘It’s a lesson on the limits of stimulus. The more you do it, the less and less you’ll get out of it,’ said Patrick Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing. ‘You’ve already tapped all the good investments out there. A second time, you’d just be shoveling money out the door…. It will just compound their problems.’”

“The best solution for China, analysts said, is to turn its own citizens into shoppers whose buying power can drive the economy forward. Personal consumption accounts for about 40% of GDP in China, compared with about 70% in the U.S. China’s per capita annual income of $7,600 ranks below Angola and Albania. Although disposable income is rising, most households remain obsessed with saving because the social safety net is so flimsy. Individuals must shoulder most of the expense for their own healthcare, education and retirement.”

“A migrant from central Henan province, Cheng earns $300 a month. He admired the styles on display in the window of the Gap store. But he shops in flea markets instead. ‘The clothes over there cost a tenth of my monthly salary,’ said Cheng, a 22-year-old cellphone salesman, nodding at the multi-story Gap. ‘After I paid for rent and food, I’d have nothing left if I bought something there.’”

From Asia News. “Due to over-production in the auto industry, at the end of this year there will be an excess of 10 million vehicles in China. This is more than the auto production in Japan in the year 2009. Another big problem is the surplus of real estate investment in China, which has reached a 30% bubble. There are 64.5 million vacant apartment units, enough to house 200 million people.”

“In China, an estimated 1,300 people control more than $1 trillion of assets. According to a survey by Western financial institutions, 1.5 percent of Chinese own 45% of bank deposits and 67% of assets. China’s state-owned enterprises enjoy more than 75% of the investment by the country, with more than 2/3 of the country’s fixed assets. During the 2008-2010 global financial and economic crisis, state-owned enterprises obtained more than 90% of the state funds to stimulate the economy. Nevertheless, 80% of China’s corporate profits come from 120,000 private SMEs, and less than 12 of large state-owned enterprises. Only under the conditions of monopoly are several state-owned giants such as Sinopec able to gain huge profits.”

“The Gini coefficient (which measures income inequality) has reached 0.57. In the 1980s, it was only 0.25; in the 1990s, it was 0.39. Now, this coefficient is much higher than the 0.43 of the United States, and 0.37 of India. In China, the people who have average living expenses on the absolute poverty scale of less than $2/day have reached more than half of the entire population of more than 1.3 billion.”

“The most severe problem is the more than three trillion U.S. dollars foreign exchange reserves China has. During the recession, the government should apply a policy of collecting domestic currency in an effort to restrain inflation. The specific approach is very simple: allow converting foreign currency freely on the one hand and on the other hand raise the currency exchange rate. In this way the circulation of the domestic currency on the market will be reduced, and the inflation will naturally decline. But why does the Chinese government continue its stand, and not take such a simple measure? It is due to the difference between bureaucrat-capitalism and democratic politics.”

“From the viewpoint of bureaucratic politics, eliminating inflation is not beneficial for them to continue to earn excess profits. An appreciation of the RMB would make the current expensive housing market in China even more unable to find buyers. The collapse of the housing market in China would be a direct harm to the interests of bureaucratic capitalism. It would be absolutely unacceptable to the bureaucratic capitalist clique in China that is controlling Chinese politics now of course, the Chinese Communist regime that is relying on the support of the capitalists would not accept it either. Politics has become the politics for the capitalists, and already very far from the interests of the average Chinese. This is the root reason that the economic and social problems in China are not solved.”

“The view from the national interest and the Chinese people is completely reversed. Opening the free exchange of currency, and improving the RMB exchange rate, coupled with opening of a fair import market, will control inflation within six months. But, this would make the businessmen with black hearts making money from high prices lose profit. More importantly, the real estate tycoons in China who made a lot of money along with the bureaucratic businessmen in China by forced demolition and relocation of the Chinese citizens, may have to go bankrupt. As a result, China will lose half of its billionaires.”

‘Meanwhile the lowered house prices from the bankruptcy auctions will reduce the number of people who are facing housing hardship to half. In this round of interests confrontation, we can clearly see which kind of government the Chinese Communist Party regime is. It is a political power of the bureaucratic capitalist standing against the people.”

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Readers suggested a topic on hurricanes and housing. “Hurricane Irene is going to slam into the bubble territories of NJ, NY, CT, RI and MA. These bubble states have barely come down (especially Long Island and NYC) since the pop of 2006.”

“How will the hurricane effect the decline? Empty houses rotting away quicker? Insurance money NOT going into rebuilding? Hidden inventory being brought into the daylight? Little money from the Feds for disaster relief? The excuse people need to just walk away? Hastening the pace of localities to declare bankruptcy to get away from insane public union contracts (as city in RI recently did just this)?”

A reply, “Barely come down? my house has come down 30%. Thankfully, I’m not near the water. Maybe, my house value will go up, since the shoreline properties are always the most pricey.”

Another said, “I spent the 2004 hurricane season in Gainesville, FL when Charlie, Frances, Jeanne, and Ivan all came through the state in a 6 or 7 week period. It was very draining mentally and the storms caused a lot of damage. For the record, I absolutely hate hurricanes.”

‘In 1985 hurricane Gloria got as high as a category 3 or 4 hurricane before making landfall on Long Island. The eye broke apart very quickly and the damage was much less than anticipated. That said, I suggest we wait until after the storm passes before taking on this topic.”

The Long Island Business News. “An estimated 387,813 residential and commercial properties on Long Island are situated in the projected path of Hurricane Irene, according to CoreLogic. Of the properties at risk in Long Island, roughly 66 percent are located outside a hazard flood zone as designated by the Federal Emergency Management Agency.”

“There are more than 1.8 million properties in 12 coastal major metropolitan areas at risk of potential damage from Irene, according to CoreLogic. The risk analysis, based on Irene becoming a Category 3 storm, found there were 127,357 properties on Long Island that are located in FEMA flood and surge zones. The next most prone area is Virginia Beach, with 107,814 properties in flood and surge zones.”

The Daily Times. “Weakening but still dangerous, Hurricane Irene sent hundreds of thousands of people fleeing across Delaware and neighboring states Friday. In coastal Sussex County, Denis and Cathy Casey were holding out Friday evening on whether to leave their oceanfront home that sits atop a dune in the Sussex Shores private subdivision north of Bethany Beach.”

“The Caseys were monitoring the storm closely, though, mostly concerned about Category 2 winds hitting their year-round house. The couple had put up wood panels to cover a stained glass window on the front of their house and aluminum panels on their windows that face the ocean. ‘We’re betting, or hoping, the wind is less of a factor,’ said Denis Casey, an attorney in Salisbury.”

The Christian Science Monitor. “Besides worrying about their homes and businesses, residents in the coastal town of Nags Head have an extra concern: their beach. For the first time in its history, the town decided this year to pump new sand onto a 10-mile stretch of its eroding beach. The $36 million beach nourishment project began in May and the majority of the work was done when the first hurricane Irene warnings began to trickle in.”

“Town fathers had hoped the new sand, provided at local taxpayer expense, would protect exposed local properties there for the next 10 years. Irene could sweep it out to sea in a matter of hours. Destruction of the new beach could be one of the single biggest economic losses that the area sees from hurricane Irene.”

The Brevard Times. “The prospect of billions of dollars in insurance claims on underwater homes could mean a financial and litigation windfall for the banks. Although mortgage documents and individual state laws vary, common language in mortgage documents requires that any insurance check be made out to both the bank and the homeowner. The homeowner is then contractually required to sign the insurance check over to the bank which is then held in escrow by the bank.”

“Banks can make many legal and equitable arguments as to why the property should not be rebuilt, but rather deemed a total loss. If deemed a total loss, the banks could then be able to claim that the insurance proceeds cover the outstanding mortgage balance.”

The South Town Star. “Orland Park officials say the proposed luxury apartment building, Ninety7Fifty on the Park, will boost the local economy and serve as an anchor to further development, but similar projects ­— albeit condominiums — by the hand-picked developer have flopped elsewhere. Flaherty and Collins also has troubled projects in North Carolina that ended up in bankruptcy — an ambitious 53-story condo tower in Charlotte that was never completed, and a 274-unit apartment complex in Raleigh, later sold to a Chicago investment firm, according to the Indianapolis Business Journal.”

“‘We’re apartment guys who dabbled in condos. We’re batting 1.000 in apartments and we’re 0-for-2 in condos,’ CEO Dan Flaherty told the SouthtownStar.”

“The 50 units at the Echelon are very attractive condos in a convenient location. But after the first phase of Flaherty and Collins’ proposed 168-unit development was complete, the condo market tanked and only one-third of the units were built. Current owners have a laundry list of issues that include leaking windows, leaking plumbing, mold, mismatched cabinets, buckling floors and no soundproofing. They also were promised a pool and clubhouse that never got built because not enough units were sold, they said.”

“Echelon resident Maxine Carr said every time it rains, water comes in her living room window, causing puddles on the window sill and wood laminate floor. She fears she will get mold, like another neighbor. Carr filed an insurance claim for damages to the new unit she bought one year ago, but her insurance company denied it. She provided the letter from the insurance company saying water damage was due to ‘faulty workmanship to the flashing and the installation of the deck above’ her unit.”

“When she called Flaherty and Collins, she said she was told her condo was no longer under warranty. Carr said she may have to sue for repairs and damages.”

“Barb Hollivay, who purchased her unit three years ago, has a hole in her garage ceiling from her upstairs neighbor’s leaking bathroom. Noise from adjoining units is so loud, ‘it feels like they are living in the house with me,’ she said. ‘There is no privacy.’”

“Residents said they can literally hear every move their neighbors make. Sometimes they can even see what others are doing through the vents in the walls, Taylor said.”

The Island Packet. “Beaufort County is warning municipal leaders that the next reassessment probably won’t be business as usual. New projections from the assessor’s office show the county’s tax base could shrink by 4.4 percent once property is revalued. Bluffton could be hit hardest and might see its tax base wither by nearly 10 percent.”

“The county is required by law to revalue property every five years. The next reassessment is based on property values as of Dec. 31, 2012. Those changes will show up in residents’ property-tax bills in November 2013. However, the unprecedented decline in property values complicates matters. State law provides a formula to roll back taxes when property values rise, so the county or municipality brings in the same amount of revenue.”

“But if property values fall, does the formula require taxes to be raised? The law is silent on the question. A recent opinion from the S.C. Attorney General’s office said ‘yes,’ the formula is to be followed no matter the result.

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It’s Friday desk clearing time for this blogger. “Hundreds of at-risk homeowners poured into the Palm Beach County Convention Center on Friday in hopes of saving their homes. According to U.S. Rep. Ted Deutch, D-Boca Raton, maintaining homeownership is pivotal in turning the economy around. ‘The government needs to recognize that if we want to be serious about making the economy better, we have to help people own their homes,’ Deutch said.”

“Ron Faris, president of Ocwen Financial Corp., primary sponsor of the Hope Now event, said mistakes were made with unsustainable loans that hurt the consumer. ‘Many customers, although they might be able to afford their payments, their houses are significantly under water and it makes it difficult for them to want to continue on,’ Faris added.”

“Two years ago, Mary Blady’s husband, Howard, who works in construction, was laid off when the housing market collapsed in the wake of the recession and lending crisis. Then, when they couldn’t pay their mortgage on time, the bank foreclosed on their Winter Park home where they had lived for 10 years. Howard recently got a full-time job again, making the same money as he had before, but the bank has refused to set up a payment plan to stave off foreclosure, Mary said.”

“‘The banks caused this, then we helped them with a huge bailout, and now they’re foreclosing on our homes,’ she said. ‘How crazy is that?’”

“When she found out that the Hardest Hit Fund might be able to save her house, she said she discovered that despite their recent struggles with unemployment and underemployment, they didn’t qualify for assistance. That kind of frustration has made her wonder why an assistance fund was set up at all. ‘Why don’t you just hand over that billion dollars to the banks now and save a few trees?’ she said. ‘You can even give ’em our house keys.’”

“About 1,140 homeowners on the Treasure Coast and in Okeechobee County have applied for the program. But of those, just 61 local applications have been approved. Treasure Coast homeowners received only $49,207 so far out of the $1.098 million that was allocated to them collectively out of the program’s budget.”

“Meanwhile, 269 Treasure Coast applications were rejected because they did not meet the program eligibility guidelines. ‘Very few applications even ended up at the final table,’ said Anthony Gambardella, president of the Realtors Association of St. Lucie Inc. about the Hardest Hit Fund. ‘(It’s) another tail chasing the dog program.’”

“New Jersey is third in the nation in the number of loans either in foreclosure or on the brink, with more than one of every 10 either already in foreclosure or ’seriously delinquent,’ according to a report issued by the Mortgage Bankers Association. The figures are also affected by when the loans were taken: Those between 2005 and 2007 accounted for 30 percent of all mortgages but 65 percent of the seriously delinquent loans – thanks, of course, to the housing bubble.”

“At the same time, New Jersey is one of several states suffering from backlogged foreclosure filings that would have drastically driven up the number, the association cautioned. ‘The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due,’ said said Jay Brinkmann, MBA’s Chief Economist. ‘The bad news is that drop is offset by an increase in newly delinquent loans one payment past due.’”

“About half of all residential real estate sales in Ventura County this spring involved properties in some stage of foreclosure, according to RealtyTrac. Ventura County had the seventh-highest average sales price for foreclosure-related homes among the state’s 58 counties — $348,892, said Daren Blomquist, RealtyTrac director of marketing communications.”

“Beverly Durham, a Realtor with RE/MAX in Camarillo, said she has seen an increase of short sales in Oxnard, Camarillo and Ventura, while nonforeclosure sellers are choosing to hold on to their properties. ‘If you don’t have to sell, I would stay in the home unless you really need to get out of it,’ Durham said. ‘Why would a buyer pay more money for a property when they can go down the block and get the same home for a lesser price?’”

“While the median price of a house in Cascade County hasn’t changed much over the past three years, Flathead and Gallatin Counties have seen dramatic changes. New homes were going up left and right in those counties, but now homebuilders aren’t so busy. The reason people aren’t buying houses, says Patrick Barkey, the Director of the Bureau of Business and Economic Research at the University of Montana, is because prices keep going down.”

“‘With prices falling, why not wait a little longer and see if you can get a better deal,’ he points out. Barkey predicts prices will stop falling by then end of 2011, which is good news for realtors.”

“According to RealtyTrac, there were 280 sales in April through June in Douglas County and the average price was $89,504. Homes that were not in foreclosure that were sold average $100,155. While the numbers are good, it shows that the high number or repossessed homes, has made it a buyers’ market.”

“‘Now is an incredible time for potential homebuyer,’ said Sheree Newmeyer of Better Homes and Garden Real Estate/Metro Brokers. ‘The high number on the market have given buyers several to select from, and the prices are incredible. When you look at what these homes sold for new versus what they are now, it is great for the buyer. Couple that with the low interest rates, and it’s a double bonus for buyers.’”

“Residents going through foreclosure in East Central Illinois have lost their jobs or had their hours cut; are dealing with an illness and have more medical bills. Some are going through a divorce, or have taken out a subprime mortgage loan they could not afford. In some cases they’re first-time home buyers like Kevin Schoening. Foreclosures will not go away by the homeowner avoiding court or ignoring letters from lenders or attorneys, said Schoening, who said people who go through a foreclosure should document every person they see and every conversation they have about the case.”

“‘There’s going to be some tears, some yelling, some sleepless nights,’ he said. ‘When you’re in foreclosure, you’ve got to jump into that system. Show up in court. If you don’t know what to do, say, ‘I’m not sure what do to,’ said Schoening, whose wife has regained her health and is able to work again. They’re now renting a home in Champaign. ‘There is life after a foreclosure,’ he said.”

“Head north from Las Vegas on Interstate 15 and you can’t miss Mesquite. Boom times began with the completion of Interstate 15, which connected Las Vegas with points north. Somebody put in a couple of poker machines at the truck stop. Soon casinos followed. The city incorporated in 1984 and drew up its master development plan during the early 1990s. The goal was to attract retirees by offering an alternative to Las Vegas.”

“But like so many other places, Mesquite began to struggle as the housing industry imploded and hard times came. The hulking ghosts of the boom times, The Mesquite Star and The Oasis casinos, are shuttered now, with fading paint and empty parking lots. As its corporate owner tries to emerge from bankruptcy, the big lights outside The Oasis still offer the $5.99, all-you-can-eat roast beef buffet to travelers. But now the feast is nothing more than an empty promise.”

“Mesquite isn’t one of those foreclosure ghost towns that blight other parts of Nevada. It seems more a case of arrested development. Newly paved streets lead nowhere. There is an empty, half-baked feel to the place. Even the city’s anticipated growth proved to be a mirage. After years of recession, the official U.S. 2010 Census count is 15,277, still almost double what it was a decade ago but far short of the 20,440 Mesquite claims on its website. ‘Either we managed to drive away 6,000 people or that number is a fantasy,’ said Morris Workman, who until recently covered City Hall as editor of The Mesquite Local News.”

“Responding to Rebecca Mowbray’s story ‘Foreclosures are growing part of the New Orleans area real estate market,’ reader milwriter commented: ‘And remember the major cause of this housing crisis: the unholy alliance of the feds and financial services industry encouraging, prodding and prompting many who could not afford real estate into the market.’”

“‘It’s time to stop leading ALL working adults to believe that owning a home (or condo) is part of the American dream. Many can’t and never will be able to afford their own residence.’”

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