The Housing Bubble

The Star Telegram reports from Texas. “Home sales are down for the eighth month in a row, compared with the same month last year, according to figures released by the North Texas Real Estate Information System. Sales of existing homes are suffering as the market contends with an oversupply of housing stock, said housing analyst Ted Wilson in Dallas. Those homes were built when the housing market was roaring with record home sales.”

“‘The inventories haven’t been outrageous, it’s just that there’s so much inventory that it’s hard to get attention,’ Wilson said. ‘There has been no pressure on housing, because there has been so much inventory out there,’ Wilson said.”

The Dallas Morning News. “At the end of January there was almost a nine-month supply of pre-owned homes for sale in the Dallas-Fort Worth area, according to statistics.”

“‘Some may be seasonal, but I also suspect some is due to a real slowdown in the market,’ said Jim Gaines, a researcher with Texas A&M University. ‘If sales volume doesn’t show marked improvement over last year, I suspect we’ll see a very definite shift toward a buyer’s market with longer sales times,’ he said.”

“Almost 43,000 pre-owned homes are on the market, 7 percent more than a year ago. Median home sales prices in January were down 1 percent from a year ago to $139,950. Condo sales and prices were also down last month. Sales fell 6 percent from January 2006 and median prices were off 2 percent.”

“In the Dallas - Fort Worth area, 12,000 completed, unsold new homes are up for sale, according to the latest estimates. That’s almost double the number on the market a few years ago.”

“Local builders seem to have gotten the message about sharply cutting back on starts. In December, single-family building permits in the Dallas area were down 48 percent from a year earlier, according to M/PF YieldStar. And November building permits in the area were down 33 percent from the previous year.”

“‘The reality of whether the ugliness is behind us will not become evident until the spring sales market unfolds further,’ said Ted Wilson.”

From Inman News. “The Dallas/Fort Worth housing market slowdown deepened in January, as sales and prices of single-family homes continued to decline, according to preliminary statistics.”

“The median sales price of these homes was down 4.4 percent from $146,400 in December. With the new year came a flood of new single-family listings, 13,892, which marks a significant 53 percent increase from December’s 9,062 new listings.”

The American Stateman. “The number of Californians who moved into Hays, Travis and Williamson counties in 2005 jumped 32 percent from the previous year, and real estate agents helping many of the transplants buy homes here said the numbers did not decline in 2006.”

“Stephanie and John Landers moved from the Laguna Beach area of California to Austin with their two young sons in February 2005, leaving behind a bluff-top home overlooking the Pacific Ocean. ‘Everybody made a lot of money on real estate out there, but it’s kind of like golden handcuffs,’ Stephanie Landers said. ‘If you don’t leave the state, you can’t move anywhere else.’”

“The tremendous amount of money from real estate gains coming out of California helps explain why this relatively small group is often blamed or credited for rising housing prices in Central Texas, even though the majority of California transplants have median incomes no higher than those in the areas into which they are moving.”

“(Realtor) John Rosshirt said California buyers are accustomed to much higher home prices and generally are prepared to pay more than buyers from Texas. This has a ripple effect on the market, Rosshirt said, because buyers who lose out on one house to a California buyer with a higher bid often are willing to pay more the next time.”

The Express News. “San Antonio has recently lost three mortgage lenders, while several other companies have made it tougher for first-time home buyers and borrowers with shaky incomes or credit to get loans. The shrinkage and belt-tightening reflect the nationwide retrenchment in the mortgage industry as defaults rise.”

“Twelve of the largest mortgage lenders have closed recently. Delinquencies on subprime loans jumped 17 percent nationwide in the past 12 months, based on the most recent figures compiled by the Mortgage Bankers Association.”

“‘A lot of lenders are dropping like flies,’ said Rudolph Timpte, an underwriter for a local mortgage banker.”

“In San Antonio, subprime lender Classic Home Lending and wholesalers Harbourton Mortgage Investment Corp. and Mortgage Lender Network closed in December.”

“‘I got a call (in late January) from one of the competition who said, ‘Hey Jack, I’ve got two loans approved with Harbourton Mortgage Investment Corp. and they just pulled out of the market. What am I gonna do?’ said Jack Shull, co-owner and loan officer at Sonterra Mortgage Capital.”

“The belt-tightening started about six months ago when mortgage lenders began to see rising default rates as home values dipped in some regions.”

“‘We didn’t see it in the past because rapid price appreciation meant that if you couldn’t make the mortgage payment, then you could sell the home and get from under the loan,’ said Patrick Gillock, co-owner and lending officer at Sonterra.”

“In December, Dallas-based Sebring Capital Partners collapsed in ‘a really scary event,’ Shull said.”

“Sebring, one of the first and largest subprime lenders in Texas, had been known for its conservative loan policies. It apparently had been forced to buy back many loans from investors because of rising defaults.”

“This month, Wells Fargo increased the minimum down payment by 5 percentage points on borrowers in 150 riskier counties, including Goliad, Victoria, Calhoun and Cameron counties in Texas.”

“Many lenders have reacted like NovaStar Mortgage Inc. In January, the Kansas City, Mo.-based mortgage bank raised its minimum credit score to 620 for San Antonio borrowers who want to finance 100 percent of a home’s value, according to NovaStar’s Terry Burge. That was the second 20-point increase in five months and prevented borrowers in the lowest credit tier from qualifying for 100 percent loans.”

“NovaStar recently began scoring borrowers based on the amount of time in their current job, length of time at their current residence and debt-to-income ratio to weed out those most likely to default.”

“‘We anticipate somewhere between 12 percent and 15 percent of our loans will be affected,’ Burge said. ‘But we feel that’s the right loans to lose if they won’t be with us a year from now anyway.’”

“New Century Mortgage Corp. is requiring first-time buyers to have three active credit lines or utility accounts in good standing, and rental payments don’t count. ‘I used to be able to count rental payments as a trade line, but we have cut that out,’ said Marcia Messer, San Antonio account executive for the Irvine, Calif.-based subprime lender. ‘We’ve really cracked down on first-time home buyers.’”

“Most lenders also are requiring commissioned workers, such as car sales staff and real estate agents, to show greater proof of cash flow via bank records before approving mortgages with limited income documentation, called alternative A, no-documentation or stated-income loans.”

“‘It’s no longer liar’s poker on those stated-income loans,’ underwriter Timpte said.”

“Industry consolidation is likely to continue. The owners of Option One Mortgage Corp. and Argent Mortgage, which make loans in San Antonio, are actively seeking buyers.”