The Housing Bubble

In Business Las Vegas reports from Nevada. “Las Vegas analyst Dennis Smith said the housing market slump is deeper and longer than most expected. It’s going to be painful for a while longer before it gets better, Smiths said. In the resale market, the news is sobering, with 9,847 transactions during the first four months, a drop of nearly 33 percent from 2006.”

“Smith said one of the big differences in the inventory of new homes and resale homes is that larger home builders will slash prices to whatever it takes to sell their unsold product.”

“‘It’s more difficult for the smaller builders to match these price incentives, so it’s crucial for them to keep unsold standing inventory at a minimum,’ Smith said. ‘It is impossible for home owners to compete with the price reductions of the larger homebuilders. Owners who are leveraged can’t cut their price much without losing money on their investment.’”

“Smith said that one of his clients told him that Lennar Homes sent a letter to companies they do business with offering a 30 percent discount on their standing inventory of homes if they closed escrow by the end of May.”

“‘If a home is priced at $500,000, you could get a $150,000 discount and purchase it for $350,000,’ Smith said. ‘The discount on a $750,000 home would be $225,000. That is a primary reason that the resale (market) will normally take longer to correct. There are more of them, and they can’t or won’t lower prices to match the new home discounts.’”

The Review Journal from Nevada. “Potential supply is flattening and market demand is modest in Las Vegas’ luxury condominium market, a local research analyst said. The report showed 4,214 existing units with another 13,409 under construction. Most of those have been sold or reserved. Total units that are built, proposed or canceled exceed 97,000.”

“Industry insiders are saying that many high-rise condos are being put back on the market for resale and, like single-family detached homes, they’re not selling.”

“One luxury condo broker said he walked the floors at Metropolis and saw lockboxes on nearly every door. Real-estate agents use lockboxes to access empty homes for showing. He said 70 percent of the units at SoHo Lofts are listed for sale.”

“Las Vegas-based SalesTraq reported 213 escrow closings at Sky Las Vegas in April at an average price of $723,480 a unit. About one-third of high-rise closings are showing up for resale the next day on the MLS, SalesTraq President Larry Murphy said.”

“‘There’s so many condo owners trying to figure out what to do with their property. They’re on the phone to us all day. It’s a very hot topic,’ said Eric Smith, owner of a company that matches owners of executive homes with potential renters.”

“Condo presales account for 9.8 percent of the market, while speculative plans call for 56,300 more units, or 57.6 percent of the market, Applied Analysis reported. More than 14,000 units have suspended sales or have been officially canceled.”

“Buyers at projects such as Krystal Sands, Vegas Grand and Icon filed class action lawsuits against the developer and the next potential lawsuit could involve Spanish View Towers, which has halted construction in the southwestern valley.”

“Sisters Allison Gaynor and Barbara Chandler and their late mother, Saralee Bowers, thought they had a secure deposit when they put down more than $600,000 on three luxury high-rise condos to be built in the southwestern Las Vegas Valley.”

“They entered contracts stating that the first units at Spanish View Towers would be available for occupancy in July.”

“The developer’s current actions, together with his history, may establish a pattern that constitutes racketeering, the lawsuit contends.”

The Arizona Republic. “Pulte Homes Inc. will consolidate its three Phoenix area divisions into two as part of a nationwide restructuring that will trim about 2,000 jobs, or 16 percent of its total workforce. Pulte reported 1,190 employees in the state at the end of 2006.”

“Local housing analyst RL Brown said he wasn’t surprised that a major builder would be doing some restructuring in the current market. ‘I would imagine, though that their (Pulte’s) situation in Arizona is no worse than elsewhere,’ he said.”

“In any given month, Mesa businessman Jamison Manwaring is juggling 100 or so clients who are selling very different homes with one goal: making a sale without using a real estate agent.”

“Instead of paying commission, they hand over a few hundred dollars to his For Sale By Owner affiliate for some professional guidance, an Internet listing and a yard sign. Last year, about 250 homeowners decided to go it alone with the company’s help. They’re not the only ones striking out on their own.”

“The prospect of selling a home without a typical 6 percent commission is especially appealing in Arizona and elsewhere where the housing market has cooled.”

“‘In markets like this, you tend to see more for sale by owners. They’re cutting the sales price as close as they can, so they want to cut out the commission,’ said Jay Butler, director of realty studies at Arizona State University’s Polytechnic campus in Mesa.”

The New Mexico Business Weekly. “The nationwide less-than-perfect-credit mortgage crisis has spread to New Mexico, as subprime delinquencies increased a hefty 25 percent during 2006, to the point where now, one in eight of these loans statewide is overdue.”

“Subprime adjustable-rate mortgage performance is even worse, with nearly 14 percent of these loans delinquent here.”

“New Mexico’s foreclosure rate on subprime loans is higher than all its Mountain state neighbors except Colorado. Only about 10 percent of New Mexico’s mortgages are subprime, below the national average. And, the bulk of them appear to have been made by out-of-state lenders.”

“Greg Frost, the founder of Frost Mortgage in Albuquerque, said most subprime business in the market has been done by local brokers for out-of-state subprime shops like New Century Mortgage, Argent, Fremont Investment, or First Franklin. And, he said some of these out-of-state players haven’t done too well by their customers.”

“‘There are a lot of loan originators who have availed themselves of the subprime account executives’ willingness to take a minimal application from them and finish it, process it, and baby-sit it through to underwriting and closing,’ Frost said.”