The Housing Bubble

The Review Journal from Nevada. “Las Vegas new home sales are down 43.8 percent for the year and median prices have slipped 4.4 percent. ‘Part of the good news is prices went down,’ said Dennis Smith, president of Home Builders Research. ‘That’s odd to say that, but people have to realize they have to meet the market demand.’ Given the market conditions, it might indicate that sellers, particularly investors, are finally facing reality and pricing their homes so they’ll sell, Smith said.”

“He hopes prices continue to decline, which should in turn reduce the inventory of resale listings for the good of the housing market in the long term.”

“Kurt Lehman of Realty One Group said home prices must fall further before sales rebound, but he doesn’t know when the bottom is coming.”

“‘The number of houses selling per month is really the key to what’s happening,’ he said. ‘Still, a house that someone could buy five years ago for $175,000 now is one of thousands of average resale homes…and the asking price is $320,000 when most people can’t afford it, especially with the tightening of underwriting by most lenders. It’s going to be an economic problem until more (people) are making a lot more money and aren’t afraid of buying into what appears to be a sinking home value market.’”

“People are taking a little longer to jump into the housing market after moving here, real estate consultant Ron Rulof.”

“‘They’re still coming into town, but they see a little turmoil from what they’ve been reading so they’re sitting on the sideline,’ Rulof said. ‘What you have in a nutshell, because of market conditions, is they’re spending a little more time renting.’”

“Smith said the Las Vegas housing market fits the definition of a recession, but how long it lasts is the great unknown. ‘Six months? A year? Two or more years? Unfortunately, nobody has that answer. In our opinion, those that continue to say by early 2008 are basing it on hopes instead of facts,’ he said.”

In Business Las Vegas. “The Las Vegas housing market won’t reach its bottom until the second quarter of 2009 when it could effectively fall in excess of 20 percent, according to the latest projection from Moody’s Economy.com.”

“Earlier this year, Moody’s predicted that Las Vegas prices would fall 13 percent from its peak of $320,000.”

“The effective loss to homeowners, however, is even greater because of costs for improvements and other expenses to entice buyers, said Mark Zandi, chief economist at research firm.”

“‘I think the correction is in full swing and has a way to run,’ Zandi said. ‘Affordability is a very significant problem for first-time buyers and investors are looking to get out. Until it is affordable and those investors do leave the market, you won’t find a bottom.’”

“Zandi said homeowners are starting to realize that with the large level of inventory, they will have to cut prices if they want to sell. Las Vegas has been hurt by its large number of investors. That leads to a high vacancy rate, which creates a glut on the market.”

“‘What happens is you have a good year or two, the investors jump in and juice it up and then it’s not affordable,’ Zandi said. ‘It creates a bubble that bursts.’”

“The state reported 5,235 foreclosure filings in May, a 40 percent increase over April and five times the number reported in May 2006. In May, Nevada had 2,870 notices of default, 2,626 notices of trustee sales and 739 bank repossessions.”

“Mesquite, (NV), is about to go from a sleepy town to becoming a place on the map for retirees. Pulte Homes has kicked off sales for its 3,500-home senior community and will launch sales in 2008 for its 1,500-home traditional community.”

“Pulte expects 30 percent to 40 percent of its buyers in the senior community to be second-home buyers, many who live in Las Vegas, Salt Lake City or California. Others will choose Mesquite as their primary residence, including those who currently live in Las Vegas, Pulte officials said.”

“Economist Mark Zandi warned there are problems with swelling or unsold inventories in Las Vegas and other parts of the country and that should hamper projects like Sun City Mesquite in the first six to 12 months.”

“‘People want to come down but they can’t sell their home,’ Zandi said. ‘They don’t want to sell at a price they feel is unfair.’”

The Arizona Republic. “Despite competition from a huge number of homes for sale in the Phoenix area, real estate expert Jay Butler told Tempe business leaders Thursday that prices remain above the national average.”

“‘The market is about where it should be and people don’t like to hear that,’ the director of Realty Studies at Arizona State University said.”

“The inventory of homes for sale has climbed to about 51,000. The median price of a home in the Phoenix area used to be about 90 percent of the National Association of Realtors’ national median price, he said. Prices began rising during a hot housing market in early 2005, and over the past year and a half have settled at about $260,000. The national median is $219,000.”

“Buyers can’t afford as much because of the higher prices and because skittish lenders have been tightening their guidelines. Sellers won’t or can’t lower prices because they owe too much. And buyers are having problems selling their own homes.”

“‘The problem is a lot of people say this is a buyers market, but most buyers first have to be sellers,’ he said.”

“In Tempe, Butler said the big issue is that the houses are getting old and not necessarily being well maintained. There are many rental properties and sometimes amateur landlords let them get run down, Butler said.”

“‘I think Tempe is holding its value a lot better than other communities, but the aging of the housing stock is going to be a big issue,’ he said. ‘What concerns me more is homes not being well maintained. And there’s a certain amount of indifference.’”

From Tucson Weekly in Arizona. “Residential foreclosures are skyrocketing in Pima County, and fingers point to ARMs (adjustable-rate mortgages) as a primary culprit.”

“For the first five months of 2007, the number of ‘Notice of Trustee’s Sale’ recorded with Pima County totaled just more than 1,600, a whopping 55 percent increase from the same period a year earlier.”

“This year’s monthly totals have ranged from a low of 276 in February to 398 for May. That last figure alone is a 90 percent increase over the number just 12 months earlier.”

“While some people see opportunities to make money by cheaply buying homes facing foreclosure, on the steps of the County Courthouse a few weeks ago, more than a dozen homes were offered–but the four potential bidders in attendance quickly passed on each one of them.”

“Located along a sloping street in the prestigious Starr Pass neighborhood, a burnt tan home stands out among those around it, all of which have a light desert sand stucco finish. But the home is also different because it was in foreclosure because of a loan in excess of $400,000.”

“The growing number of foreclosures certainly isn’t restricted to Pima County. One estimate puts the nationwide jump at 25 percent just between February and March of this year.”