The Housing Bubble

The Courier Journal reports from Indiana. “Southern Indiana home builders have scaled back their annual expo due to slower sales. Last year, the Expo was in Floyds Knobs and featured eight homes priced from $750,000 to $1 million. Some are still unsold. ‘Houses in those price ranges have more days on-market than typical,’ said builder and Realtor Bill Burns. ‘By the time they have it days on-market that long, if they’re carrying it, financing it, the carrying costs, the interest cuts into your profit quite quickly.’”

“This year, five builders have put up just six houses for the show, but they’re three- to five-bedroom, multigabled brick homes strung out along Zoeller’s Champions Pointe course. Asking prices range from $419,500 to $479,000.”

“‘That range may be (selling) a little slow, depending on the location,’ said Donna Gibson, executive officer for the home builders association. ‘We wouldn’t dare build homes like we did last year…but that price range, in that location, on that golf course, we feel they’re going to move.’”

“Helping them move will be a ‘Buy Now, Build Now’ campaign, similar to the one Louisville had this spring. The Southern Indiana Realtors Association and One Southern Indiana, formerly the Chamber of Commerce, will be delivering a message.”

“‘Interest rates are good; they’re rising a little bit, but there’s a lot of housing on the market right now,’ Burns said. ‘Hesitate now and it may be your loss, because rates have been rising.’”

The South Bend Tribune from Indiana. “Four Seasons Housing Inc. will close one of its plants, laying off 20 people and moving 18 others to different buildings.”

“A little more than a year ago, the company was expanding. In September 2005, Four Seasons built a 170,500-square-foot plant that opened in early 2006. The $4 million plant included 80 new jobs. In 2004, the company had about $45 million in sales, and was hoping to hit $60 million in 2006, said Brent Bardo, general manager of Four Seasons, during an interview in 2005.”

“It didn’t make that goal, said Bob Dumm, company president, who declined to name a 2006 sales figure for the privately held company. ‘That’s part of the reason (for closing a plant),’ he said. ‘The industry as a whole is pretty flat.’”

“The other part of the reason is this: Four Seasons saw 59.2 percent growth from 2005 to 2006, Dumm said. ‘We expected it to continue through 2007,’ he said. ‘It did not.’”

“The entire industry is feeling that, said Dennis Harney, executive director of the Indiana Manufactured Housing Association. ‘The economy has been a challenge for us,’ he said. ‘Indiana and Michigan are leading the nation in foreclosures and bankruptcies.’”

The Detroit Free Press from Michigan. “With the glut of empty houses, both for sale and foreclosed, unkempt properties are increasing in nearly every community in metro Detroit.”

“Job transfers, sellers who already have purchased another house and moved, and those who have lost their homes to foreclosure have contributed to the increase in vacant properties in southeast Michigan. Coupled with an overall sluggish market and plunging home values, serious buyers are having a heyday. They expect more for less and can demand it or take their dollars elsewhere.”

“Agents can, and will, only do so much. ‘When people look at a street and they find foreclosures and uncared-for vacant properties, it decreases the value of surrounding homes; that is a statistical fact,’ said Keith Weber, an agent who markets homes in southern Oakland County.”

The Journal Sentinel from Wisconsin. “Bad home loans continue to dog Wisconsin and the nation, with rising default and foreclosure rates in this year’s first quarter, the Mortgage Bankers Association reported.”

“Blame for the deepening mortgage woes has been cast at borrowers and lenders for their allegedly profligate ways, but economist Duncan portrayed a more complex stew of life’s reversals: an uneven job market, speculators who helped fuel the nation’s 2001-’05 housing boom and dumped the unwanted leftovers, and fraud.”

“More trouble is brewing. As of March 31, 4.33% of U.S. borrowers and 3.28% of Wisconsin borrowers were at least 30 days behind on mortgage payments.”

“That’s bad, he said, but not disastrous, Duncan said. ‘Look at the big picture. This is not going to cause a national recession. It’s a housing recession, which I think will pass in the fourth quarter,’ said Doug Duncan, chief economist for the Mortgage Bankers Association. ‘The peak on foreclosures will be early ‘08.’”

“Badger State mortgage problems have shocked even industry veterans like Bill Malkasian, president of the Wisconsin Realtors Association.”

“‘You take our three recent scenarios; higher foreclosures, tighter lending standards and higher interest rates, and the boat gets a little tippy,’ Malkasian said. ‘All three factors are pulling at our housing market. You just can’t take hit after hit after hit.’”

The Daily Journal from Minnesota. “The national slump in the housing market has affected Minnesota, according to data from the state Department of Revenue.”

“‘There’s no question the market has softened in Fergus Falls, but people are still buying houses,’ Realtor Jim Worner said. ‘You always have to remember, things that happen nationally, like in Los Angeles or San Francisco are driven by the economic situations in those towns.’”

“Location continues to drive housing prices, according to a new report from the Minnesota State Demographic Center. Some areas of Minnesota continue to demonstrate strong price growth, close to 50 percent, despite the overall sluggish real estate market.”

“Prices shot up 48 percent in Lake of the Woods County, 47 percent in Red Lake County and 33 percent in Clearwater County from 2003-04 to 2005-06, according to the report. Median prices fell in Kittson, Lake, Murray and Traverse counties over the same period.”

“Median sales prices have risen in Otter Tail, Grant and Wilkin counties substantially since 2000. Prices in Otter Tail County are up 43.1 percent since 2000 and 18.6 percent since 2003. In the same time frames, prices rose 37.3 percent since 2000 and 24.1 since 2003 percent in Grant County and 22 and 5 percent in Wilkin County.”

The Pioneer Press. “The number of Minnesota homeowners seriously late on payments or in foreclosure on subprime adjustable-rate mortgages jumped to all-time highs in the first three months of this year.”

“The Mortgage Bankers Association said that 14 percent of some 56,900 subprime adjustable-rate mortgages in Minnesota were 90 days or more past due or in some stage of foreclosure in the first quarter. That’s up from 12.43 percent in the final months of 2006, and up from 8 percent a year earlier.”

“Julie Gugin, executive director of the Minnesota Home Ownership Center, called Minnesota’s high subprime-delinquency rates ‘extremely worrisome.’ ‘We’re continuing to look at ways to address the crisis,’ Gugin said. ‘We’re estimating another three years of these kinds of patterns before we see a real leveling out.’”

“The state’s economy isn’t missing enough beats to explain the trouble, said state economist Tom Stinson. He suggested the late payments were more a reflection of loose mortgage lending standards such as not requiring borrowers to verify their income.”

“An estimated 18 percent of homeowners holding subprime mortgages in Minnesota were 60 days or more late on their payments as of April, up from 11 percent a year ago, according to First American Loan Performance. That’s higher than the national subprime delinquency rate of 13.4 percent.”

“In the greater Minneapolis-St. Paul metro area, almost 19 percent of homeowners with subprime loans were 60 days or more late, putting it in the Top 25 for worst performing metro areas.”

“Stinson said he expects the state’s mortgage woes will deepen over the next year and a half as the interest rates on adjustable-rate mortgages continue to reset. ‘There are still people out there who are on subprime ARMS that have a year or year and a half to go before they reset. They aren’t feeling the pressure yet,’ Stinson said.”