The Housing Bubble

The New York Times reports on Nevada. “Michael Hutchings bet it all when he built his 3,300-square-foot dream home on a strip of rock-strewn desert gazing west toward the Las Vegas Strip. He had made a fortune building custom homes as Las Vegas boomed higher and higher, and for his own, he chose red Spanish tiles, wrought iron and silky white plaster. A guesthouse? Sure. Swimming pool? Of course. That was 2006. You know what happened next. Today, more than eight years after the housing crash, Hutchings, 49, owes about $800,000 on a property that has not recovered its value from the bubble days. ”

“As neighbors lost their homes to foreclosure, he started to hear gunshots and see stray dogs roaming the streets here around Sunrise Mountain. A drug dealer moved in down the block. Over the protests of his wife, Terrisa, Hutchings now stashes an unloaded shotgun in the bedroom closet and a handgun in the kitchen cabinets. He could walk away from his mortgage and lose the $580,000 he has paid, or he can keep pouring his savings into the same hole. It is a mess with no good choices, he said, just like the presidential election. He will vote Republican, but Clinton or Trump — either way, it feels like a losing wager, he said.”

“‘The whole system’s kind of broke,’ he said. ‘We’re trying to reinvent ourselves, trying to run businesses, trying to pretend like it’s 2003 again. And it’s not.’”

“Las Vegas is a glittering promise built on a simple truth: The house always wins. But years after rotten loans and plunging home values made Las Vegas the center of the housing crisis, thousands of people have yet to recover from the cataclysm that tipped the U.S. economy into a recession.”

“Even with new resorts springing up on the Strip, home values recovering and record numbers of visitors pouring back to this American playground, thousands of people in golf-course mansions, gated condominiums and stucco starter homes are still stuck in 2008, battling with their banks, owing more than their homes are worth, trying to negotiate a sale to avoid foreclosure. To visit this underwater America is to take a tour of too-easy money, bad choices and worse luck, and of the way the economic toll of the Great Recession still haunts much of America.”

“Mark and Anna Lissor are hitting retirement age, but they owe about $500,000 on an overdue home-equity loan they used to remodel their house. They are hoping to negotiate a short sale for less than the value of their loan. It would spare them foreclosure, at least. ‘I was so stupid,’ Anna Lissor said. ‘How could I be so naive? I just didn’t realize what was going to happen. Our balance was going up every month, every month. And then everything plummeted. And we were in the hole.’”

“The Lissors are Republicans. Still, Anna Lissor gives President Barack Obama credit for creating programs that sought to keep people in their homes. But she said the bailouts had ended up favoring banks over typical homeowners. She sees Clinton as a liar and a cog in a rigged system. Mark Lissor walked into his study and pulled up the real estate listings for the neighborhood. A galaxy of blue dots filled the computer screen, each representing a house at some stage of the foreclosure process.”

“‘There’s one down the street,’ he said. He clicked over to his home, a red dot up for sale to satisfy the bank. ‘I don’t care what they sell it for. I’m getting nothing out of it.’”

“Head to the northern fringe of town, where waves of new homes run abruptly into an eternity of desert. The Jansons live here, in a peach-colored house they bought for about $290,000 at the height of the bubble. They are all Democrats, and staunch Clinton supporters. They worry that a Trump presidency would be a pipeline to the rich and stifle government programs to help workers or the poor. ‘If Trump gets in there, we’re in deep trouble,’ said Josephine Janson, 55.”

“Last Christmas, her husband, Kevin Janson, 56, lost his $20-an-hour job as a security guard at MGM Grand and took a replacement gig at a downtown casino for $12 an hour. Josephine Janson was getting fewer and fewer hours at the jewelry counter at Kohl’s. Then, in June, she was hospitalized with a severe potassium deficiency, and said she had lost her job the day she returned to work.”

“The family started to strain to make $2,000 monthly payments on a loan that, even at the best of times, ‘was a little bit beyond our means,’ Kevin Janson said. As the house’s value sank, they owed more than it might ever be worth. They spent $3,500 and countless hours to modify the loan and reduce the payments to a more manageable $1,500 a month. They have Kevin Janson’s paycheck and his pension as a retired member of the Air Force. ‘We can probably do it, but just barely,’ he said.”

“Many of their friends and neighbors sold at a loss or walked away from their homes, but the Jansons decided to stay. When he drives home from work every day at midnight, he skims past signs for sparkling new houses — Harmony Homes! The Preserve! — but the house is all the family has. ‘What we have is what we’re sitting in,’ he said.”

The Gazette Extra reports from Wisconsin. “Picture what happens to a loose football at the 50-yard line. That’s the scene that Realtors and mortgage lenders say they’re now experiencing in the Janesville housing market. The Rock County housing sector has been on the rise over the last year. But in the last three months, it has strapped itself into a rocket and is ramping up faster and climbing higher than at any time in recent history. Perhaps more significant is the skyrocketing average sale price. Average prices jumped from $129,000 in the second quarter of 2015 to $151,600 in the second quarter this year. That’s $1,000 more than the average sale price for a Rock County home in mid-2007, when home sales here and throughout the U.S. reached a historic high-water mark.”

“In the last three months, Rock County home sale prices have vaulted from an average of $141,000 in April to $148,000 in May. And in June, typically the heart of home-selling season, the average price rocketed up to $162,000. That’s led buyers to pivot away from toe-dipping the market. Instead, they’re increasingly willing to dive into bidding wars with a half-dozen or more prospective buyers competing for a single listing, said Mary Ellen Mackey, a Realtor with the Realty Group of South Central Wisconsin.”

“To win bidding showdowns, Mackey said, some homebuyers have to shell out more money. ‘I think buyers are aware of a lack of supply, and they’re feeling a bit more pressure to grab a house before the peak market has even fewer housing options for them. It’s one thing that’s led to multiple offers on properties, and you’re seeing prices and what people end up paying jump above what you’d think of normal price standards,’ she said. ‘Some buyers are really pushing their limits competing, and sometimes they’re spending more than what they intended going in.’”

“And even as average prices now mirror the housing market peak of a decade ago, Chris Collins, a mortgage lender at Summit Credit Union in Janesville said he’s heard no comparisons of the current market to the housing bubble of 2007. ‘Maybe people are just excited to see the improvements and everyone is in denial or something,’ Collins said. ‘But ‘bubble’ is not a word I’ve heard anyone say.’”

Fox 17 in Michigan. ” As the summer heated up, the housing market has, too. According to housing market experts, those looking to buy a home are seeing historically low inventory, increasing prices, a 12-month wait for new construction, and record low interest rates. And they say they’ve never experienced a housing market like this in Grand Rapids. This is a far cry from where we were just a few years ago, says Tom Cronkright, CEO of Sun Title. ‘Something could literally list today at 4:00 p.m. and under contract tomorrow at noon,’ he said. ‘I can’t remember a time we had inventory move this fast.’”

“As for buyers, ‘In this market, you just have to be patient,’ said Amanda DeLong with Patriot Realty. ‘You have to realize you will most likely be asking over asking price, and you won’t have a ton of negotiating power in regards to the inspection process. You might have to go through that offer process numerous times before you find one that gets accepted for you.’”

The Columbus Dispatch in Ohio. “The central Ohio housing market is booming, with homes selling in record time at record prices. But a close look at figures released July 21 tells a tale of two very different housing markets: a terrific market for homes up to $300,000, where enormous demand allows sellers to name their price, and a buyer’s market for homes with higher asking prices.”

“David Gill, a Berkshire Hathaway agent, got a clear taste of the demand last month when he listed a home in Merion Village. Even though Merion Village has become popular, Gill worried that the home might be too much on the fringe of the village to command a lot of interest. His concerns evaporated when he started fielding calls before the home was even on the market from passers-by who learned it might be coming up for sale. He listed the home for $229,900. By the end of the first day, after multiple showings, Gill had three serious offers in hand. The sellers accepted the highest one, for $235,000.”

“‘It’s crazy, it really is,’ Gill said.”

“Just north of Merion Village, it’s a different story. Five homes are for sale on prestigious Schiller Park ranging from $994,000 to $2.59 million. Some have been on the market for years, and all have dropped their asking price. Theresa and Dale Marquart are learning the hard way that the market for expensive homes is small. The couple has been trying to sell their Tartan Fields home for a year.”

“The 5,441-square-foot home is in immaculate condition and loaded — five bedrooms, 5 1/2 bathrooms, three-car garage, a deck and a patio next to lush landscaping. But the Marquarts haven’t gotten any traction on the home. They recently dropped the asking price for the third time, to $819,900, down from a starting price of $889,900. Their agent had warned them that the market cooled as prices rose, but the process remains ‘very frustrating,’ said Theresa Marquart. ‘Your friends and family say, and all you hear about, is that this is such a hot market. Well, it is if you’re selling a house under $300,000. But not for others.’”

From CCTV America on Illinois. “Despite a housing recovery across most of the United States, some areas continue to struggle. House prices have not gone up as high and as fast everywhere, leaving millions of homeowners underwater or owing more on their properties than what they paid. Homeowner Donna Roop said there is a lot on her mind these days. Two years ago, she lost her lucrative job of 20 years as a sales rep at AT&T and is now struggling to keep her home.”

“Now, at age 53 and with a college education, she works part-time as a pool attendant earning just over $8 an hour. To make matters worse, her house is underwater. In 2003, she said she paid $130,000. Now her house is worth around $70,000. Even she were to sell it, she would still owe the bank thousands of dollars. ‘It’s been devastating,’ Roop said. ‘Put a lot of work into the house, money, had a lot of plans, and always wanted to have my own house. What do you do? No one is willing to help you — nobody.’”

“But Roop is not alone. Data from Zillow, a housing research firm, shows that despite the housing recovery since the 2008 crash, 12.7 percent of all properties with a mortgage remain underwater. Markets in the nation’s former industrial heartland are doing especially bad, with nearly a quarter of all underwater mortgages. Chicago has now displaced Las Vegas as the city with the highest rate of negative equity, 20.3 percent.”

“Matt Laricy, managing broker of Americorp Real Estate in Chicago, said stagnant wages and higher property taxes are hitting low-income areas the hardest. ‘The south and the west side of the city [Chicago] seem to only keep getting worse — more and foreclosures coming up over there even though the market is turning, compared to the downtown market that seems to be booming,’ Laricy said.”

“Roop’s bank refused to modify her loan four times. She’s now facing court proceedings, where, unable to afford an attorney, she’ll represent herself. ‘I thought there was help out there, and there isn’t,’ Roop said.”