The Housing Bubble

A report from CBS DFW in Texas. “Prices are rising seemingly as fast as the demand for newly built homes in Frisco. Ted Wilson’s company Residential Strategies, Inc. tracks the housing market in North Texas. Wilson said the median price of a new home in Frisco has now topped $500,000 for the first time. In 2010, it was $285,000, he said. ‘Frisco is one of the most sought-after suburbs in the Dallas-Fort Worth area,’ said Wilson. ‘We’re running out of land in this part of the world. So land prices have climbed dramatically and construction prices and labor have also increased dramatically.’”

The Denver Post in Colorado. “Home affordability in Colorado’s largest metro counties, with the exception of Mesa County, has dropped to its lowest levels in nine years, according to an analysis from ATTOM Data Solutions. ‘We are entering some thin ice for housing in markets like Colorado that have reached affordability ceilings,’ said Daren Blomquist, a senior vice president with ATTOM, parent of RealtyTrac.”

“If affordability reflects the thickness of the ice, then rising interest rates are akin to warming temperatures and people in places such as the Front Range need to listen for the sounds of cracking ice, Blomquist warns. ‘Higher rates could quickly put downward pressure on home prices by limiting demand,’ Blomquist predicts.”

“In metro Denver, home prices passed their housing bubble peak in early 2013 and haven’t looked back. Several years of double-digit home price gains combined with low single-digit income gains have eroded affordability to levels not seen since right before the housing downturn.”

From Worcester Magazine in Massachusetts. “The holidays are supposed to be relaxing and filled with joy from the company of family and friends. For far too many, however, the holidays are just another day spent worrying, if, and when, they will lose their home. The collapse of the housing market in 2008 left many lives in ruins and many families without their most personal and prized possession: their home.”

“Worcester is no stranger to the harsh aftermath of the collapse, and the city might not be seeing any significant changes anytime soon. According to The Warren Group CEO Tim Warren Jr., ‘Worcester hasn’t gotten past it’s heaviest load.’ He also thinks other parts of the state are still facing a similar distress.”

“Worcester, according to Doug Rawan, chief financial officer for Drew Mortgage, is ‘a tough market.’ ‘You ever see them put down a tar road? They put down the tar and these big rollers come by and it suppresses the tar,’ he said. ‘That’s what the big banks are doing to human beings, meaning people that own houses.’”

“‘Sixty-five percent of modifications,’ he continued, ‘are defaulting in the country for the second time … the big picture is it’s going to get worse … Once you become a payment late or two payments late, unless you can re-instate the mortgage, they’re not going to accept it. So, now what happens it get worse.’”

“If you look at the collapse of the housing market in 2008, a lot of people will point to sub-prime mortgages and say that caused the collapse. Worcester Anti-Foreclosure Team (WAFT) member Grace Ross confirms sub-prime mortgages’ role in the collapse, but also contends that what determines whether you will be foreclosed or not, is when you got the mortgage that the bank is foreclosing on.”

“‘It’s all related to the housing bubble,’ she said. ‘In Massachusetts, outside of Greater Boston, the home prices were ramped up to double their real value, so once the bubble burst anybody, regardless of what kind of mortgage you had, could be in trouble.’ ‘The issue,’ she continued, ‘is this price ramp-up.’”

“Ross contends the situation now is worse than during the Great Depression. ‘Somehow, in our society, when we’re running now with foreclosures at over three times the rate during the Great Depression people go, ‘Oh, the Great Depression was really bad,’ Ross said. ‘The Great Depression was a walk in the park compared to what we’re going through right now.’”