The Housing Bubble

The Gazette reports from Colorado. “Home sales sagged last month by nearly 20 percent when compared with the same time last year, according to the association’s figures released Thursday for sales that took place mostly in El Paso and Teller counties. - The supply of homes on the market rose 12.5 percent over a year ago to 6,470, the group said.”

“Foreclosures totaled 2,877 through October, according to the El Paso County Public Trustee’s Office, and are on pace to break a 19-year-old record.”

“‘The late 1980s to early ’90s were bad,’ said Fred Crowley, a University of Colorado at Colorado Springs economist. ‘In terms of modern history, it’s probably the secondworst housing market for Colorado Springs.’”

“‘You’re going into a store with tons of selection, and everything’s on sale,’ said Randy Reynolds, a longtime residential agent.”

The Denver Post from Colorado. “A third-quarter report on home values in the metro area shows that foreclosures and short sales are still having an impact on Denver-area housing markets.”

“The number of foreclosed homes sold increased from 20 percent to 30 percent of sales between January and September. ‘The number of ARM resets will peak in March, I don’t expect to see a foreclosure peak until six to nine months after that,’ said broker Lon Welsh.”

“In the north Aurora neighborhoods he’s investing in, John Klahn says there are as many, if not more, foreclosed homes as there were six to eight months ago.”

“‘Additionally, over the past six to eight months, I have seen bank-owned homes decline in price in the same neighborhoods,’ he said. ‘So, without looking at anything more than the neighborhoods themselves, I have to conclude that we have not seen the bottom.’”

The Rocky Mountain News from Colorado. “The subprime market meltdown is hitting home builders in the Denver area harder than anytime since the 1980s.”

“‘We’re probably going to see new home sales off 50 percent at the end of this year, compared with 2005,’ said Mike Rinner of the Genesis Group. ‘By comparison, we saw about a 20 percent decline after (the terrorist attacks) on 9/11.’”

The Arizona Republic. “A 400-acre parcel of desert will remain undisturbed for a little while longer after no one showed up to bid on it at the Arizona State Land Department auction on Thursday morning. Once sold, the land likely would be used for residential development.”

“The land, situated west of Desert Ridge and east of Cave Creek Road, was appraised for $100 million. The parcel had a sale price that was far less than the price of a comparable parcel in the Desert Ridge master-planned area. In April, that 270-acre parcel sold for $150 million.”

“Robert McGee has worked in banking in Tucson and Phoenix since 1971. Question: Is it a good time for companies in the area looking to expand? Answer: Depending on the business you’re in, I would be kind of cautious right now. Many of the businesses in the area have been held up by the real-estate market, and the bottom has fallen out of the housing market.”

“Q: What do you predict for the Valley’s economy in the next two years? A: The outlying residential properties could be in real trouble. When gasoline is hanging at $3 per gallon, and you have a two-lane highway to get to some of these places, a lot of the outlying areas, I mean way out, west Laveen, Pinal County, I think that will be in a slump for a while.”

“Q: What is the biggest change in the industry since you’ve been here? A: The condo suites. I’m still uncertain of the viability of the concept here, only because they’ve only been up and running for four or five years in this town, and we have not see a real-estate recession with condo suites.”

“I’m seeing a wide difference in many of the appraisals now, up to a 15 percent to 20 percent difference, depending if the appraiser uses comparable sales or sales-forecast approach. That tells me there is a correction coming in the market.”

“Metro Phoenix’s home prices are catching the attention of big lenders. In the past few weeks, parts of Maricopa and Pinal counties have been put on housing ‘watch lists,’ or lists of ‘declining markets.’”

“That usually means they will fund less of a loan on a property in case prices fall more.”

“More Arizonans filed for bankruptcy protection in October than in any prior month this year, as the weak housing market and tighter lending conditions exerted a toll on consumers.”

“Filings last month in the Phoenix metro area jumped 61 percent from a year earlier, while statewide filings increased 63 percent, according to the U.S. Bankruptcy Court for the District of Arizona.”

“All told, 1,117 Arizona consumers and businesses sought protection last month, including 745 in the Valley. ‘We’re seeing a bit more desperation,’ said Mike Sullivan, director of (a) Phoenix debt-counseling firm . ‘More people feel totally lost because of the housing situation.’”

In Business Las Vegas from Nevada. “Las Vegas housing analyst Dennis Smith says it may be 2004 all over again for the valley’s housing market. No, he’s not saying home prices will rapidly appreciate as they did that year and in 2005.”

“Smith says it won’t be long before prices return to the levels of late 2004 when it comes to the existing home market.”

“In September, Smith pegs the median price for single-family homes at $262,377, a year-to-year decline of $22,623 or 8 percent. That’s roughly the same price as in January 2005.”

“By the first quarter of 2008, Smith says he wouldn’t be surprised if the median resale price fell another $10,000 to $20,000. That would put the year-to-year drop between 13 percent and 15 percent, Smith says.”

“One impetus for the decline, Smith says, is when banks start to liquidate their growing inventory of foreclosed-upon homes. If they base prices on the market demand instead of what the notes are, that will lower prices even further, he says.”

“Pulte, Del Webb and Lennar slashed their prices 15 percent to 20 percent in some communities for homes that will close escrow by the end of the year, Smith says. Those price cuts are worth between $50,000 and $200,000. Pulte even mailed fliers for $55,000 off contracts, and Lennar had discounts of up to $200,000, Smith says.”

“‘The bottom line is that builders have been progressively getting rid of any excess new-home inventory,’ Smith says. ‘It is important to realize that any inventory that exists is not from overbuilding — it is from cancellations of sales contracts.’”

“Smith says the September cancellation rate was 39 percent in September, down from more than 50 percent in August.”

The Review Journal from Nevada. “As any real estate professional will attest, the slumping housing market is still brimming with owners who think their property is worth far more than it actually is. There’s a reason so many homes have gone unsold for six months or a year: the prices are too high.”

“Chief among Southern Nevada’s stubborn property owners is the federal Bureau of Land Management. The agency that controls most of the acreage surrounding the Las Vegas Valley holds periodic auctions to dispose of its surplus holdings, but Thursday’s affair was almost a complete bust. Of the 31 parcels offered, only one was sold. The others drew no bids.”

“The BLM contracts with an appraiser to come up with a ‘fair market value’ for the parcels prior to the auction. Those appraisals, based on comparable land sales of similar-size and nearby properties, become the minimum bid instead of a flexible starting point.”

“A common-sense observation for the BLM: If no one makes an offer on your property, your listed price is not ‘fair market value.’”

“Right now, the public bears all the costs of managing vast amounts of land put to no productive use whatsoever. Moving these tracts into private ownership and onto the property tax rolls serves the public interest more than sticking by inflated values and refusing to sell.”

“The next time the BLM holds an auction in Las Vegas, the agency should consider changing the format to a Dutch auction, also known as a descending value auction. If no one bites at the appraised price, the auctioneer lowers his asking price until someone bids.”

“Competing investors and businesses won’t let their rivals get away with a great deal. If the price is truly ‘fair market value,’ they’ll raise their hands — and taxpayers will benefit.”

The Salt Lake Tribune. “A new type of ‘for-sale’ sign is cropping up along the Wasatch Front. It’s called a ‘lease-to-own’ or ‘lease-option.’ It’s easy to see why such agreements are so popular right now. Home sales are down in many areas locally.”

“Greg and Esther Hatch…have had their home in south Sandy with granite countertops, hardwood floors and a one-third acre lot on the market for some time. They have been offering the five-bedroom, three-bath home for sale in the $350,000 range but have recently lowered it by about $35,000.”

“But to increase the pool of available buyers, the couple began offering a lease-option for $1,850 per month for up to two years. The rent would be higher if the buyer wants the Hatches to set aside money for a down payment.”

“The Hatches are open to the idea of a lease-option, something they have never done before, because they are worried that if they rent out their home while they try to sell it, people may not treat it very well.”

“‘We feel like with a lease-option, people will take better care of it,’ Esther Hatch says.”