The Housing Bubble

The Herald Tribune reports from Florida. “Like so many other new home builders, Adams Homes of Northwest Florida was left holding a lot of inventory in Sarasota and Charlotte counties when the housing market started its swoon heading into 2006. But like few others, the Gulf Breeze-based builder was able to survive that blow and has made a remarkable recovery. But Adams Homes is a relative babe in the woods in Sarasota and Charlotte counties, markets the company entered in late 2004 to take advantage of the Southwest Florida’s rampant flipping during the housing boom.”

“‘Everything was selling. That is the way it was at the time and we just continued to sell and sell and people thought they were going to flip forever because houses were going up $10,000 in value every month,’ said Nancy Carroll, the company’s North Port-based sales manager. ‘Since we build with $1,000 down they would come in with $10,000 and buy ten homes. It all came to a screeching halt in January of 2006 — and then they wouldn’t close on them.’”

The Palm Beach Post in Florida. “Sales of new homes jumped last month, but don’t get too excited: June still was the second-weakest month on records dating to 1963, the Commerce Department said. For June’s weak reading, there are plenty of culprits. ‘The biggest issue is the foreclosures and the short sales and what they’re doing to the appraisal value of homes,’ said Ray Puzzitiello, owner of Puzzitiello Builders in West Palm Beach and president of the Gold Coast Builders Association.”

“Not even rock-bottom mortgage rates, usually a reliable driver of sales, have done much to spur demand for homes. ‘People either have another house to sell, which they can’t sell, or they don’t have the down payment, or maybe their credit score isn’t perfect,’ Puzzitiello said.”

From Florida Today. “Foreclosure filings in Brevard County have dropped sharply this year. But the slowdown could be nothing more than a temporary reaction to changes in the filing procedures that took effect in February, and within a few months foreclosures could return to — or even surpass — previous high levels. ‘It just created a temporary dam, and these things have backed up,’ said Melbourne attorney Tom D. Waldron, who defends property owners in foreclosure cases.”

“The Florida Supreme Court earlier this year instituted changes in the state’s foreclosure process that may have prompted the slowdown in new filings. Over the past decade, mortgages have increasingly been packaged into Wall Street securities that were then sold and resold to different investors. Along the way, mortgage ‘notes,’ — the documents that show that a debt exists — often were misplaced or destroyed. Now, as part of a foreclosure filing a lender has to sign an affidavit saying they are in possession of the note.”

“‘That caused them to take thousands of foreclosure filings off the table and start all over,’ Waldron said of law firms representing lenders.”

The News Journal in Florida. ” CNNMoney.com ranks Deltona fourth in affordability among 25 cities across the country where residents ‘can see their incomes go the furthest.’ In her work at Prime Real Estate, which specializes in short sales, Julie Norton, a real estate broker who lives in Deltona, said transactions are closing for 50 to 60 percent less than what houses previously sold for in West Volusia. ‘Unfortunately because of the housing bubble we seem to be the foreclosure capital of the world, so things are definitely half-price these days,’ she said.”

From GoUpstate in Alabama. “Nick Wilmott bent down on the beach near the high-tide mark and touched one of the reddish-brown pads of oil. It had washed up overnight from the BP spill off Louisiana and had yet to be cleaned up by the machines that sweep the beaches here every night. ‘Here’s your problem,’ said Mr. Wilmott, president of the Baldwin County Association of Realtors. ‘What’s happening is buyers are just on hold and there are great deals, but they are saying, ‘We are going to wait and see what happens with the oil.’”

“Rusty and Deana Swanson of Thomasville, Ala., are among them. In late May, they had done everything except close on a three-bedroom condominium on the fourth floor in the Seawind building overlooking the gulf. As the oil spill dragged on, Ms. Swanson said she saw similar condominiums selling for far less than the $290,000 she had agreed to pay. She became worried that she wouldn’t be able to rent the apartment to help pay the mortgage, and that it would be worth less than what she was investing. The Swansons pulled the plug on the deal.”

“‘I’m not going to follow through with something when I am watching the prices plummet,’ said Ms. Swanson, a dietitian.”

The Atlanta Journal Constitution in Georgia. “Regulators on Friday shut down Jasper-based Crescent Bank & Trust, the 10th Georgia bank to fail in 2010, and the 40th since the banking crisis started two years ago. Crescent, like other failed Peach State lenders, succumbed to the collapse of the real estate market.”

“Crescent was a heavy lender to subdivision developers, strip retail centers and builders of vacation homes. From 2004 to 2008, Crescent doubled in size from $500 million in assets to $1 billion, fueled by a diet of real estate development loans. Problems started in 2007 with the collapse of the housing market.”

“Problem loans, those late, in default or foreclosed, grew from $14.8 million in June 2007 to $82.5 million a year later. Meanwhile, Crescent’s reserves plunged. The bank lost $13.7 million in the first quarter this year, after losses of more than $30 million in each of the past two years. ‘Unfortunately, timing is everything,’ said Chip MacDonald, a banking attorney at Jones Day.”

“Just before Bruce Gallman and Jerry Miller opened their $33 million-plus Castleberry Point project near downtown Atlanta in the fall of 2008, they thought they had 70 percent of the units sold. Nearly two years later, they consider themselves lucky to have sold 60 percent of the units. ‘We had a lot of pre-sales that walked away’ during the turbulent months after the October stock market crash and collapse of some Wall Street titans, said Gallman. Only a fifth of those original customers actually completed their deals, he said.”

“As the partners planned the project during the height of the real estate boom in 2006 and 2007, they expected the lofts to sell for $160,000 to $700,000 for the largest penthouse unit. In retrospect, the partners said as they stood on the top floor of the complex and showed off the penthouse units, rooftop pool and courtyard fountain far below, they should have left their dream on the drawing board.”

“‘If you had really known the depth of what was coming, you would have done nothing and stayed in cash,’ said Miller.”

“Miller said they were reluctant to lower prices. Some economists were predicting at the time that the economy would recover the following summer. ‘We thought we had brought [the project] out at the bottom of the market rather than the beginning of the crash,’ said Gallman. They would learn they were wrong.”

“By the summer of 2008, they were almost done. They had recruited many of their retail tenants. About 70 would-be buyers had paid deposits on loft units. When Napoleon Williams became the project’s second resident that fall, in a live-work unit that includes both his Vitesse eXchange clothing boutique and living quarters upstairs, he expected plenty of other neighbors, including two restaurants, a bookstore and a fitness center. He enjoyed the quiet at first. ‘I didn’t realize how bad it was,’ he said.”

The Sun News on South Carolina. “Grand Strand real estate sales are outpacing those in other parts of South Carolina but prices continue to fall at a faster rate than the state average, according to a report. The Grand Strand and other areas that also have many investor-buyers are following a similar pattern of low prices driving up sales, said Tom Maeser, a real estate analyst with the Coastal Carolinas Association of Realtors.”

“‘We saw probably more extreme price increases in 2005, 2006, 2007 because investors were buying properties and were bidding properties up,’ he said. ‘It seems only natural that we were the ones taking the bigger hits.’”

The Post and Courier in South Carolina. “Summerville homebuilder Arnold Goodstein remembers the exact moment that he grasped the severity of the Charleston area’s real estate market slowdown. It happened in 2007 during a routine meeting for his company, Summerville Homes, when a sales rep said the regional homebuilder had sold three homes the prior month.”

“‘The company had 3,000 lots and 30 subdivisions. I looked at him and said, ‘What do you mean we only sold three homes?’ Goodstein said at a court hearing Friday afternoon. ‘When (the real estate market) died, it died — like Wile E. Coyote going off a cliff.’”

“Recently, he asked a judge to convert his bankruptcy case from a Chapter 11 reorganization, which would give him a chance to propose a pay-back plan, to a Chapter 7 liquidation case, a telling move for a businessman who’s been described as aggressive and optimistic. ‘I’m 66 years old,’ he said after the hearing. ‘It’s time to put this behind me.’”

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The Daily Telegraph reports from Australia. “More than 3000 NSW residents have been caught rorting first-homebuyer concessions, leading to a record haul last year of $7.5 million in swindled stamp duty alone and some of the rorters even being jailed. Treasurer Eric Roozendaal made no apology for the tough approach. ‘This is an important program to help NSW families get into their first home and set them up for life,’ he said.”

The Age in Australia. “Commercial property rents will double and residential property prices will rise by up to 40 per cent during the next four to five years, a respected economist said yesterday in a bullish forecast for the Australian economy. BIS Shrapnel’s chief economist, Dr Frank Gelber dismissed the notion the housing market was suffering from a ‘bubble’ effect. ‘At the end of the day, we haven’t got a bubble in our residential market. We’re under-supplied not oversupplied. We need to build more, and we will. [House] prices will go up another 30 per cent over the next three years,’ he said.”

“Problems in Europe and America were unlikely to affect Australia’s economic outlook, he said. Almost 80 per cent of Australia’s exports go to Asia, Dr Gelber said. ‘We’re much more dependent on what happens in China.”’

The Wall Street Journal. “The construction boom in China has played a crucial role in global demand for raw materials, to the enormous benefit of resource exporters such as Australia, Brazil, Canada and much of Africa. The Chinese government this month reaffirmed its commitment to policies aimed at restraining high housing prices and property speculation. Ben Simpfendorfer, an economist at Royal Bank of Scotland, says China’s commodity consumption is likely to fall more sharply than overall economic growth.”

“‘It is heavy industry and commodities that are worst affected, as they benefited most from the earlier investment-led growth surge,’ he says. ‘The financial markets may not be recognising the risks of a sudden drop-off. They’re still not used to China’s outsized swings.’”

The China Post. “The Taipei County Government successfully sold yesterday all of the 12 commercial use land lots in the region. Competitive bidding from investors lifted the price to a record high level for land transactions in the county. In an earlier auction of land parcels for residential use in Xinzhuang on June 25, the price also set a new record.”

“Many realty market analysts said the land prices in the Greater Taipei area will continue the upward trend despite some measures taken by the Central Bank of China in an attempt to cool down speculation on the market. The limited supply of available land space in Taipei City and Taipei County prompts investors to outbid each other to get hold on the much-vaunted land parcels in anticipation of generous return on long-term investment by selling completed housing units at hugely inflated prices, they said.”

From China Daily. “Housing experts have suggested that Beijing impose a special tax on vacant homes, in order to lower the city’s vacancy rate and provide more houses to people who are in need. Between the Second and Third Ring Roads, for example, the rate of homes with electricity meters registering no use was around 20 percent. However, between the Fourth and Fifth Ring Roads, the rate rose to 30 percent, according to the survey. The survey did not include houses listed as being up for sale.”

“‘Houses should not be reduced to being investments for speculators. Their core function is to provide accommodation for people,’ said Wei Aiming, deputy to the People’s Congress of Beijing.”

“However, many multiple-home owners have expressed anger over Wei’s proposal. ‘The government should protect people’s interests if their properties are lawfully acquired,’ a man surnamed Yang said. He owns four apartments in Beijing, one for parents, one for him and his wife, and two that are vacant. ‘Those two apartments are a bit far from my office, so I choose to live in them during weekend, because they are closer to vacation spots,’ Yang said.”

“‘Compared with people in foreign countries who own their houses forever, we only own houses for 70 years. We have limited rights (on our apartments) already, why does the country want to take more? It’s not fair,’ said Yang.”

The Strait Times on Singapore. “Public resale flat prices have smashed records for the eighth straight quarter, rising 4.1 per cent in the second quarter of this year. The frenetic activity in the Housing Board (HDB) resale market shows no sign of letting up, with median COV also hitting a record of $30,000 for the second quarter - up 20 per cent from $25,000 in the previous quarter. COV refers to the cash upfront paid by a buyer over a flat’s valuation, and is often an indication of demand levels.”

“Analysts say the strength of prices have propped up the private property market, which saw prices rise 5.3 per cent in the second quarter compared to the first despite the slowdown in sales volume. In some estates such as Queenstown, for example, the median resale price for an executive was an eye-popping $781,500, while at Bishan, it was $685,500. For five-roomers, the median resale price was $682,500 for Marine Parade and $675,000 for Queenstown.”

“The percentage of resale transactions done above valuation increased to 96 per cent, up from 93 per cent in the previous quarter. Meanwhile, HDB said it has launched almost 9,000 new flats in the first half of the year - last year’s total supply - and will launch another 7,200 flats in the second half of the year to meet demand.”

The Ottawa Citizen in Canada. “Majed and Magdalena Turk recently bought their first home, just in time to welcome their son into their lives. It’s micro living with a spectacular view and exactly what they wanted. Unlike previous generations, the Turk’s family home doesn’t have a backyard for a swing set, a second bedroom or even a double garage for guy stuff. In fact, at just 664 square feet high above Laurier Avenue at Bank Street, you could say their entire home is the size of a garage. And they couldn’t be happier.”

“With condos ranging from 468 square feet to 1,500 square feet in the thoroughly modern condo, the Mondrian, and prices between $120,000 and $550,000, the Toronto-based developer says they’re inundated with young urbanites keen to buy into micro-sized living.”

“‘We’re not rich, we’re just managing. My friends are seeing how much we’re saving by not renting, so they’re buying in,’ says Majed. Furniture issues aside, Majed says there is one other benefit to micro-living. ‘It makes you bond. You can’t leave and pout when you have a disagreement.’”

The Vancouver Sun in Canada. “Metro Vancouver developers may have got ahead of themselves with the number of housing projects they are pushing into the pre-sale marketing phase, says a local market research firm. ‘It’s a big jump,’ Jeff Hancock, senior manager at MPC said in an interview. ‘I wouldn’t say [the 2010 number] is too many. I would say it will be interesting to see whether the market can absorb the number of units that have just come on [the market].’”

“Hancock said the number of units now in the marketing phase has the potential to put downward pressure on prices, depending on whether developers decide to proceed to construction. ‘I think a lot of developers were just ready to go and decided to test the market,’ Hancock said. ‘And if they don’t get the pre-sales they need, they’re okay with that and will just hold back.’”

The Telegraph on the UK. “The average asking price for a home in England and Wales fell by 0.6pc to £236,332 during the four weeks to July 10, according to property website Rightmove. The company said an average of 30,000 new homes were currently being put up for sale each week, 45pc more than during July last year. Miles Shipside of Rightmove said: ‘The number of new mortgages being approved each month is less than half the number of new sellers, with the imbalance being exacerbated by the increase of nearly 50pc in the number of properties coming to market compared to a year ago.’”

“‘More aggressive pricing is now the order of the day, which means that conditions are ripe for a strong buyers’ market in the second half of 2010. This is likely to see the average price gains of 7pc for the first half of the year wiped out by year-end,’ he said.”

The London Evening Standard. “Two Australians have taken to the streets wearing sandwich boards to sell their £600,000 Kensington flat. Nathan Baws, 36, and Thor Portus, 33, decided to cut out the mortgage brokers and advisers and offer a straight deal to buyers. They want a £50,000 deposit to secure the flat, with the remainder to be cleared by £950 weekly instalments, and hope their novel approach will attract more attention than an estate agent could at a time when the housing market is struggling.”

“They are following the example set last year by unemployed graduate David Rowe, who used a sandwich board to advertise himself for work. Mr Baws said: ‘I think you’ve got to do stuff like that just to get yourself out there. English people are normally fairly conservative compared with Australians. We do whatever it takes, even if it means humiliating ourselves.’”

“The flat, in DeVere Gardens, is in a mansion block with a porter. It has two large double bedrooms and a new kitchen and bathroom. Mr Baws said: ‘We figured if we came up with a payment structure, it would make it easier for someone to buy without needing a mortgage. The phone hasn’t stopped ringing. We haven’t sold it yet but hopefully we will soon.’”

The Irish Examiner. “More than 1,800 properties were repossessed in the North in the last year, it was revealed today. The number of people ordered to surrender their keys after defaulting on mortgage payments emerged after figures showed that more than 80,000 householders and almost 19,000 business owners failed to pay their rates in 2009/10.”

“John Wilkinson, chief executive of LPS said: ‘These are challenging times for both businesses and individuals across Northern Ireland. Nevertheless, with anticipated reductions in public expenditure, the income generated through rate collection will become even more important. The fact remains, however, that there are a number of people who have the ability to pay but who refuse to.’”

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The Herald News reports from Illinois. “The foreclosure crisis has hit home for the Triezenbergs of Manhattan Township. Mark and Tia Triezenberg and their five young children, including one with severe disabilities due to autism, must leave their home by Aug. 29. Mark, who ran his own home-building business from 1999 to 2008, is looking for a rental unit. The couple took out a mortgage on their 4,500-square-foot, five-bedroom home with Lincoln-Way. The mortgage was sold off to another company. The Triezenbergs also took out a home equity loan on the house through Lincoln-Way so Mark could buy 10 lots for his business. The two loans totaled $825,000.”

“‘They approached us when we were doing good,’ Tia said. ‘Then when things got tough, they pushed us aside and said we’re on our own.’”

“‘This is like Pearl Harbor,’ Mark said during an interview at a Mokena restaurant. ‘Only a few people saw this coming.’”

The Detroit News in Michigan. “Southeastern Michigan set a foreclosure record for the first half of the year — 47,563 foreclosures, a 35 percent jump from the first half of 2009. Teresa Blundell wasn’t one of them — but just barely. It took the 55-year-old Lapeer woman nearly a year to get her mortgage modified to a lower payment. In the meantime, she was kicked out of a federal loan assistance program, her lender trashed her credit, and she was one week away from foreclosure without even knowing it. Five years ago, her home had been valued at $175,000. But that fell to $75,000 when the real estate bubble burst, making a new loan out of the question.”

“It’s a success story that’s rare under loan modification programs. Many homeowners who don’t get a federally backed no-fee modification get more expensive modifications from lenders, often with added fees. And, as Barry Zigas, director of housing policy for the Consumer Federation of America, points out, homeowners with no income can’t pay any loan, no matter how generously it’s restructured. ‘The program isn’t very helpful to people who can no longer afford their mortgage,’ Zigas says. ‘More than two-thirds of the applications for HAMP list loss or lack of income as the primary reason for requesting the modification.’”

“For homeowners who do get a modification, the hope is that changes to their loans will give them breathing room until home prices recover and they can refinance or sell. Blundell says that’s her goal. Her interest rate will start gradually moving up again in five years. ‘I’m hoping that people can actually afford to buy a house again,’ she says. ‘That’s my plan.’”

WEWS 5 in Ohio. “Fifty percent of Cleveland mortgages are underwater according to Cuyahoga County Treasurer Jim Rokakis. ‘In the Gulf of Cuyahoga County you can’t clean up the foreclosure mess until we cap the gusher of foreclosures. There’s no BP in sight trying to lower a cap on this gusher. It flows freely,’ Rokakis explained.”

“Rokakis heads to Washington Tuesday and hopes to talk with Obama Administration officials about potential solutions, so homeowners don’t just walk away from their mortgage. He believes the treasury needs to start an incentive program to force mandatory principal reductions. This would reduce loans to their current values, instead of having a $150,000 mortgage on a house valued at $100,000.”

“Rokakis would like the second component of that program to give bankruptcy judges the authority to reduce primary residential properties to their current value. It would be a cost to taxpayers, but Rokakis feels we’re already footing the bill for these programs on the back end.”

“‘The taxpayer will pay just as they paid for TARP, just as they paid for the bank bailout. But when mortgages go bad and at record numbers, eventually those properties come back at a much lower number and banks reflect those losses. We’re going to pay for those anyway. The difference is if we accept the loss now, we can save what’s left of the equity and more importantly we’ll save neighborhoods,’ Rokakis said.”

The Akron Beacon Journal in Ohio. “Government and community leaders call abandoned homes a scourge on neighborhoods, saying they destroy areas and drag down property values. But without a comprehensive list detailing how many there are, and where they are, it’s difficult to know the true impact and to address the problem. To that end, the Summit County Fiscal Office is asking county residents for help. People can log on to a Web site and anonymously report suspected abandoned homes.”

“It’s unclear how many properties are abandoned in Summit County, although officials worry that the number is high because the region has been hit hard with mortgage foreclosures. A survey last year of a two-mile area in East Akron turned up 523 vacant properties.”

The Plain Dealer in Ohio. “New foreclosure filings in Cuyahoga County rose more than 12 percent during the first six months of this year, with the suburbs continuing to feel the brunt of the increases. ‘We’re seeing increasingly more folks coming from the Westlakes and the Beachwoods,’ said Mark Seifert, Empowering and Strengthening Ohio’s People’s executive director. ‘By and large we don’t see bad loans anymore. These are good traditional loans. . . it’s unemployment that’s killing people.’”

“Euclid had the highest number of suburban filings during the first six months of the year — 420, a nearly 18 percent increase from the same time last year. But the city said a good number of filings have not been taken to judgement and sheriff’s sales.”

“‘The banks are sitting on them,’ said Marty Castelletti, the city’s manager of neighborhood development and chairman of its foreclosure prevention committee. ‘Banks seem to be trying to control their inventory by not letting too many foreclosures happen too fast so they track them better and dispose of them better.’”

The Grand Forks Herald in Minnesota. “It’s a buyer’s market short of buyers for lakeside cabins and vacation homes in northern Minnesota. A few years ago, many believed that every lake front property in the Land of 10,000 Lakes was going to sell fast, and prices climbed at double-digit rates. Now, some shorelines in northern Minnesota are dotted with ‘for sale’ and bank foreclosure signs.”

“It’s part of a growing trend: According to the National Association of Realtors, one of every 10 vacation homes nationally is in foreclosure, the highest rate in five years.”

“Greg Anselmo is a broker for Edge of the Wilderness Realty in Itasca County. He said counting lots, cabins and vacation homes, there are about 300 to 500 pieces of property available. ‘We’ve got 1,000 lakes in this county, and we’ve got a shortage of buyers, that’s for sure, and I don’t know how to change that,’ Anselmo said.”

“With buyers seeing a lake home as more of a want than a need, Anselmo said Realtors are putting in a lot of time evaluating property. ‘If it’s 35 percent off the high point from 2006, that’s probably where it should be,’ Anselmo said. ‘Buyers are pretty sharp and not going to overpay on the high side. If they see value in it, they’re making offers.’”

“In the Brainerd Lakes area, Realtors say banks are involved in about two of every five sales of waterfront property, which has helped push prices down, especially on the high end. Mark Kuhnley, Edina Realty, recently told the St. Paul Pioneer Press a lake home in the Brainerd Lakes area listed at $1.7 million two years ago is on the market at $999,000. Another home at $1.8 million three years ago is now $1.3 million. Kuhnley said there are 80 properties at more than $1 million on the market.”

“As for the sellers of lakefront property, some are willing to take a hit, some are willing to wait it out, and there are others not ready to take a loss. Anselmo likens the market to mutual funds and commodities. ‘It’s supply and demand,’ he said. ‘There’s a supply of homes, but people that normally had the money just aren’t in a position to demand a lake home.’”

Fox 11 in Wisconsin. “One in every 113 homes in Wisconsin is in foreclosure, and it’s hitting people right here in Northeast Wisconsin. For Dawn Gervais, home is where the heart is. And as her home slips into foreclosure, her heart is breaking. Three years ago, Gervais bought a house on Green Bay’s west side. With her husband, and four kids, she was living the American dream. But she fell behind on a few payments and now that dream is becoming a nightmare.”

“‘I have to come up with the current then and then you have the back payments,’ said Gervais. ‘I took on a second job trying to make things work, and it just seems like it’s not working.’”

“Gervais’ home is up for the sheriff’s auction in August, and she’s not alone. Brown County foreclosures are scattered all over the area. But inside the sheriff’s department, the walls are riddled with hundreds of foreclosure properties. ‘I would say we’ve got another good two years of more of the same…This is just the tip of the iceberg,’ said Realtor Yang Kong.”

“Kong works with distressed homeowners on short sales, which is trying to sell a home before it falls into foreclosure. ‘I think everybody’s one paycheck away from not making that mortgage payment. I don’t see a lot of people with big reserves,’ said Kong.”

“Gervais’ husband was let go of his job, leaving her struggling to make ends meet and feeling like they never will. But getting foreclosed on isn’t just about losing her home. ‘I’ll be admitting to failure, and looking like I can’t handle life,’ said Gervais.”

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