The Housing Bubble

A report from MarketWatch. “The housing market is starting to look a bit like Dr. Jekyll and Mr. Hyde, at least when it comes to homeowners’ equity, according to data out Monday from research firm Black Knight Financial Services. For some homeowners, properties are again becoming ATMs — and in many cases, well-paying ones. Even as the amount of equity owners hold in their homes hovers near a 10-year high, owners pulled the most cash out of their homes since 2009 last year, Black Knight said. ‘Cash-out refinance transactions’ netted homeowners a total of $68 billion in 2015. That’s more than $60,000 per borrower on average. California accounted for 42% of that total, with an average of $96,000 per borrower.”

KMBZ on Kansas/Missouri. “From Johnson county to Clay county, home sales are through the roof. Realtors across the metro say the market hasn’t been this good in a long time. They say it’s not been this good in over a decade. It’s putting real estate agents to the test. Janie Logan Snider, with Keller Williams in Overland Park, has been a realtor for 16 years. She says she hasn’t seen homes sell this fast in over a decade. ‘Definitely the market is inflated and people are paying a premium for houses right now.’”

“Brad Brown owns ReMax Advantage in Kearney. He says it’s definitely a sellers market. ‘Two days ago we listed it at 10 o’clock in the morning and had a contract by 11 on it. Fastest I’ve ever seen.’ Logan-Snider says if the home is in good condition or the right price, it will sell fast. ‘Pretty much anywhere in Johnson County, up to about $450,000…we’re talking serious bidding wars. Multiple offers, up to 5, 6 offers the first day on the market.’ She says some people aren’t selling because of the buyers market. ‘Most people who are hanging on at this point are afraid they’re not going to be able to find another house to move in to, because of the bubble we are in,’ Logan-Snider tells KMBZ.”

Real Vail on Colorado. “With ski season winding down in Colorado’s high country and the Denver-Boulder housing market so strong, real estate experts say Front Range buyers appear to be turning their attention to second-home and investment opportunities in the state’s major ski-town markets. Bank of America Regional Sales Director Ann Thompson added that soaring Denver home prices may be driving some of that trend. ‘Denver metro has seen about 16 percent gains in home prices, and now that they’ve got that equity going, they look at that and say, ‘I can improve my home, or I can also use that equity to make a down-payment on a second home,’ Thompson said.”

“Drive-to markets will be always continue to be the most popular for Front Range buyers, especially when they’re home values have increased so much and they’re feeling priced out in their own primary metro-area market. ‘Equity in your home builds a lot of confidence about financial comfort,’ Thompson said. ‘When you have equity in your home, there is that ability to borrow on that equity, but even if you’re using stock options or a bonus or what have you, it’s just all about that confidence to make that investment [in a mountain second home or rental property].’”

The San Francisco Chronicle in California. “Could the Bay Area’s housing shortage turn into a surplus? Given the number of high-density residential projects that seem to be popping up everywhere, the answer might seem to be yes. Last year, building permits for a total of 12,766 single or multifamily housing units were issued in the San Francisco metro area, 28 percent more than in 2014, according to U.S. Census Bureau data. In the first two months of this year, 2,173 units were permitted, up 89 percent from the same period last year.”

“Experts say the Bay Area is not close to filling its housing hole, except at the high end of the market, where much of the new construction has taken place. In San Francisco, developer Equity Residential is offering one month free rent at the new Azure Apartments in Mission Bay and at Potrero 1010, a 453-unit complex going up by the Interstate 280 extension. One-bedroom apartments at the Azure start at $3,825 a month. At 1010 Potrero, the most affordable unit is a studio for $2,950. ‘I think (free rent) is a sign of weakening at the top,’ said Ken Rosen, chairman of Rosen Consulting, a real estate market research firm. ‘We could definitely have a surplus there, especially if we have a correction in the economy or tech sector.’”

The Williston Herald in North Dakota. “Representatives of the apartment, real estate, and oilfield employers spoke to their understanding of the housing market as it stands today as part of Thursday’s Williston Job Fair. ‘One of the biggest fears we’ve heard from potential buyers is, ‘I don’t want to buy a house at the top of the market and it be worth half,’ said Jeff Zarling of Dawa Solutions on housing prices leveling out. ‘This is one of the few markets in the country where a homebuyer has that perception. Most homebuyers look at a home purchase as an investment in their future.’”

“And for those that have committed to Williston, there are a lot of incentives for those seeking permanent residence. FHA loan limits have been raised in the area to $317,000 in the past year to help get cash-strapped people into a home without needing the traditional 20 percent down. The USDA loans can also be taken advantage of due to the ‘rural’ region designation, which helps potential buyers with lower income levels. ‘Anyone on the production side has been busier than they’ve ever been,’ Zarling said. ‘We’re moving to that point we’ve talked about for years of normalcy and stability.’”

The Victoria Advocate in Texas. “Despite negative year-over-year changes in the housing market, the cooling of home sales is creating a healthier market in the Crossroads. While the buying and selling isn’t nearly as frenzied as it was around the oil boom, the market is reaching a much more normalized level. Prices aren’t as high, and houses are taking longer to sell, but real estate agents and analysts say the cooling of the industry is healthy.”

“‘There was a lot of activity between 2010 and 2015,’ said Jim Gaines, chief economist for the Texas A&M Real Estate Center. “What we’re seeing is a transition back to ‘normal.’ Typically the pendulum doesn’t go in and just hang in the middle. It could be for a short period of time we will swing the other way as the market corrects itself.’”

“Although the region was named one of the unhealthiest housing markets in the country in a report by Nationwide Insurance, much of the change during the past few years has been a normalizing of the market. ‘We’re seeing a lot more houses hit the market as a result of the recent layoffs and reductions in workforce,’ said Rick Martinez, president of the Victoria Area Association of Realtors. ‘It’s not just the oil business, as you know. It’s the Pioneers, the Alcoas, the Invistas.’”

“The increase in the number of homes on the market means properties are staying for sale for longer because there are more choices for buyers. The average price is still about 2 percent higher than last year, but the median price has dropped about 8.5 percent, Gaines said. ‘That’s what happens when the market cools off a little bit,’ Gaines said. ‘When it’s (previously been) really hot, the prices cool off a little bit.’”

The Republican Herald reports from Pennsylvania. “The process to foreclose vacant and abandoned properties would be speeded up to fight blight under legislation written by two senators from Northeast Pennsylvania. Sens. David Argall, R-29, and John Blake, D-22, Archbald, plan to introduce a bill soon to make Pennsylvania the eighth state with a ‘fast-track’ foreclosure law. The legislation would shorten a process that can now take anywhere from 300 to 540 days and will apply only to property that meets criteria for being vacant and abandoned, the senators said.”

“Foreclosure occurs when lenders seize a property because the owner can’t keep up with mortgage payments. A lengthy foreclosure process allows properties to decay, become dangerous eyesores and reduce property values in the surrounding neighborhood, Argall said. ‘We believe we can get it down to 60 days,’ Argall said.”

The Buffalo News in New York. “It takes an average of 2.7 years to complete a foreclosure in New York State. That figure from RealtyTrac is more than a year longer than the national average, and it astounds and frustrates observers, particularly when home buyers are scouring the marketplace for deals. Everyone asks, why does it take so long, especially in cases where the properties are abandoned and have come to be known as ‘zombie homes’?”

“Assemblyman Michael Kearns, D-Buffalo, rattles off addresses of properties in Erie County with incomplete foreclosures. Oftentimes, he said, there are prospective buyers wondering why they are blocked from making deals. ‘The frustration point is that these properties have value,’ he said. Kearns mentioned a foreclosed home on Woodside Avenue in South Buffalo that a police officer wanted to purchase. A bank started a foreclosure on that property in 2010 but hasn’t completed it, he said. ‘This is an epidemic and it’s been hidden for too long.’”

The Bucyrus Telegraph on Ohio. “We’ve all seen them, the properties that aren’t maintained. The grass in the yard is rarely mowed, the paint on the house is peeling. There are literally hundreds of such properties across town, and they don’t exactly contribute toward making Bucyrus a more beautiful place to live. ‘It’s the absentee landlords, I like to use the term property hoarders. It’s people who are holding onto these properties, most of them don’t even live in town. Many of them bought in when the market was going up and now they’re stuck. I understand they may not be financially able, but that was the risk you took when you bought the property,’ said city law director Robert Ratliff.”

“‘If you paid $100,000 for a house eight years ago it’s probably only worth $60,000 today, and if it needs $20,000 in repairs and you’re already $20,000 to $40,000 underwater, who’s going to do that? We’ve got an oversupply of bad properties. We’ve got to change that equation,’ he said.”

The Mail Tribune in Oregon. “From the richest subdivisions of east Medford to the poorest neighborhoods west of the railroad tracks, 436 mostly bank-owned houses sit vacant, often attracting vagrants and drug users and creating a nuisance for their neighbors. In the Chestnut Street area west of Columbus Avenue, there are about a half-dozen boarded-up houses. One was gutted by fire years ago, and another has collapsed so that only the peak of the roof remains. ‘I’d like them to move that away,’ says Dale Greenberg, a 79-year-old neighbor. He says there are three lots and two abandoned houses remaining on them.

“On Delta Waters Road in northeast Medford, 49-year-old Jane Lee looks at two empty houses, one of which is boarded up. A third house was empty but Lee says the new owners bought it in a foreclosure sale. ‘They’ve been empty a really long time,’ she says. ‘I’m hoping somebody does something with them. It’s better than them sitting there.’”

The Las Vegas Sun in Nevada. “Las Vegas’ once-devastated housing market has turned the valley into a squatter’s paradise. The real estate industry has improved the past few years, but with thousands of empty houses still out there — after foreclosures, layoffs and other financial woes pummeled the region — police are getting a rising volume of calls about suspected squatters valleywide.”

“Metro Police said they received at least 4,458 squatter-related service calls last year, up 24 percent from 2014, 69 percent from 2013 and 169 percent from 2012. ‘They are everywhere,’ said Officer Jose Martinez, who targets squatter homes in the northwest valley. ‘There’s a very good chance that you have a squatter within a half-mile of your own house right now.’”

From Capital and Main on California. “Speaking at a real estate conference last September in Florida, Greg Geiser, CEO of Wedgewood Inc., an investment company headquartered in Redondo Beach, California, claimed that his firm is the biggest ‘fix and flip’ company in the country. But for many families, Wedgewood’s business practices are the cause of much distress. One of them is the Caamal family in Rialto, California, a working class suburb near Los Angeles. Wedgewood is trying to evict Mercedes and Pablo Caamal from their modest house, where they have lived for 10 years and in which they have invested their life savings to purchase and improve.”

“The Caamals came to the United States from Mexico in the 1970s and are American citizens. Mercedes, 58, and Pablo have both worked at cooks in local restaurants. They purchased the house in Rialto in 2006. They have five children who are pursuing successful lives. Their 19 year old daughter Daisy is a full-time college student in San Francisco who supports herself by working in a restaurant. Their 23 year old daughter Merari is also a college student who lives at home and works part time in a warehouse. Elizabeth, their 27 year old daughter, also lives at home and works in the same cafeteria, at Cal State-San Bernardino, as her parents. Their 32 year old son Moises and 35 year old daughter Christy are married and live with their respective families.”

“But in 2010, at the height of the economic crisis, the Caamals’ dream started to become a nightmare. Both Mercedes and Pablo were laid off from their jobs at cooks at a local private college cafeteria. They quickly found new jobs and, like many Americans struggling to make ends meet during the economic hard times, applied for a loan modification with Wells Fargo. The bank immediately granted a temporary modification. The Caamals never missed a payment on their mortgage, but Wells Fargo nevertheless denied their request for a permanent modification and then began returning their payments.”

“This, too, is an experience that millions of Americans have faced, because Congress failed to require banks to participate in loan modifications (including a tool called ‘principal reduction’) as part of the 2010 Dodd-Frank bank reform law.”

“After Wells Fargo put the home up for sale at an auction, Wedgewood — which purchases and sells foreclosed properties around the country — bought the Caamals’ home last September for $284,000. After the Caamals and their supporters held a protest at Wedgewood’s headquarters, the company reluctantly agreed to hold off on eviction long enough for the family to secure financing for a loan to repurchase the home.”

“But Wedgewood reneged on its promise and demanded that the Caamals pay $375,000 for the home they are still living in. The Caamals say they are willing to pay that price — and have qualified for a mortgage to make the payments — but Wedgewood has refused their offer. ‘Why is Wedgewood evicting us, when we’re offering to give them a $100,000 profit on their investment?’ Mercedes Caamal said. ‘I don’t understand why they won’t accept our money.’”