The Housing Bubble

The Review Journal reports from Nevada. “Local housing indicators in November continued to soften, two Las Vegas research firms said this week. Closings and median prices in the new- and existing-home categories fell from a year earlier, data from SalesTraq and Home Builders Research showed. The market’s median new-home price plummeted following massive cost cuts in October and November, as builders looked to move inventory. And sustained high supply on the resale side suppressed median prices there.”

“The pain hit the affordable condominium-conversion market especially hard. The segment, which carries median prices well below $200,000, moved just 67 homes in November, down from more than 1,000 sales at the conversion market’s peak in December 2005, said Dennis Smith, president of Home Builders Research.”

“Builders pulled just 343 permits, the lowest total ‘in this century,’ said Larry Murphy, president of SalesTraq.”

“‘This market is really, really bad,’ said Realtor Mike Altishin. ‘Quite frankly, I’m not interested in taking a listing at this point unless someone is extremely motivated to sell.’”

“Altishin has a home for sale below $200,000, and it’s fallen out of escrow three times. He’s also sold his own investment properties; one, appraised at $210,000, just sold for $165,000. And Altishin had to cover the closing costs to boot.”

“‘I saw a commercial on TV with some people who had purchased a home at an auction, and they were excited that they had purchased this $250,000 house for $20,000 below value,’ Altishin said. ‘When I heard that, I said, ‘That was about $25,000 too much.’”

“‘It’s a horrible market, but it’s a horrible market that’s going to get better,’ Smith said. ‘We are very close to the bottom. Unfortunately, the turnaround is not going to happen overnight.’”

In Business Las Vegas from Nevada. “More midrise condo projects in Las Vegas have been postponed as part of the continuing shakeout of the housing industry. The number of condo units suspended jumped 21 percent in the third quarter from 3,877 to 4,688, according to Applied Analysis.”

“With financing harder to come by for developers, there were more than 20,000 units suspended or canceled through the end of the third quarter. The prices of new homes and existing homes have fallen, giving local buyers some incredible bargains that hadn’t been available and further competition for the condo market that is also a lifestyle choice.”

“‘There is a lot of competition in the marketplace, and it is difficult for buyers to be willing to pay the premium for a project when there are 27,000 resale units on the market today,’ Applied Analysis Principal Brian Gordon said.”

“In its latest statistics tracking the third quarter, Applied Analysis reported there were 13,033 condo units under construction, led by MGM Mirage’s CityCenter. There are 7,219 existing condo units, up from 5,849 at the end of the second quarter.”

“The closing price of units sold in the third quarter averaged $694,600 or $539 per square foot. At the end of the third quarter, there were 854 luxury condos on the market, up 19 percent from the second quarter. The units had an average asking price of $830,800 or $624 per square foot.”

The Nevada Appeal. “Nevada’s unemployment rate continued to rise in November despite seasonal hiring in the retail sector.”

“Bill Anderson, economist for the Department of Employment, Training and Rehabilitation, said the primary culprit was the construction industry, which was down another 2,500 jobs from October. He said because of the collapse of the housing market, construction has lost some 7,300 jobs in the past 12 months.”

“The Las Vegas area reported 5.3 percent out of work, up from 1.2 percent from a year ago.”

The Arizona Republic. “A slowdown in condominium sales in downtown Scottsdale has altered the plans for Hotel Valley Ho and its residential units. Two years after completing renovations for $80 million, the hotel is opening its tower suites for nightly rentals.”

“Valley Ho, built in 1956, reopened in December 2005 with plans for 37 condos, lofts and penthouses. Three penthouses have been sold, and another will be furnished as a model to entice more buyers.”

“Valley Ho has a handful of full-time residents, and part-time residents and investors, said Andrew Chippindall, Valley Ho general manager.” “Valley Ho’s top-floor units start at $1.6 million for 1,688 square feet, and two-bedroom condos are going for $700,000 and up for 1,350 square feet.”

“Sales of existing condos and townhouses in Scottsdale have fallen nearly 9 percent this year through November, compared with 2006. Median prices have been slumping as well, down 7 percent in November from the previous year. Building permits issued in Scottsdale for condos and apartments have fallen 18 percent this year, with less than two weeks left in 2007.”

“The slowdown persuaded Toll Brothers to hold off indefinitely on construction of its 62-unit Regency townhouse project, south of Valley Ho.”

“Toll Brothers is completing 85 condos on the same site at its six-story building called the Mark. Model units are scheduled to open early in 2008.”

“The two-day auction at the Mesa Convention Center could be the start of a trend. Not only are foreclosures climbing, but so is the number of homes going back to lenders. 2,000 people showed up to bid at, or at least to watch, an auction for more than 200 Valley homes on which lenders had foreclosed.”

“Before last year, most of the homes in default sold at trustee auctions on the steps of the Maricopa County courthouse. Now there are few bidders for those auctions because many of the houses are worth less than what is owed on them.”

“Values of the houses to go on the block ranged from $100,000 to $600,000. All had been taken back by big U.S. lenders. More than three-fourths of the properties sold for prices ranging from $75,000 to $465,000.”

“There weren’t a lot of bidding wars, and prices didn’t soar.”

“Prices started low. The opening bid on a relatively new three-bedroom, 2 1/2-bath house in Goodyear started at $80,000.”

“Unfortunately, there’s plenty of new inventory because 1,344 homes were foreclosed on in metropolitan Phoenix last month. Also, almost 3,500 homeowners who are behind on their mortgage payments got notices that their lender was about to start foreclosure proceedings.”

“Home builders big and small have been scaling back their development plans for the coming year and selling off untouched swaths of land - particularly in outlying areas - to cope with the struggling market. That has created opportunities for investors looking to buy land at a discount.”

“Real-estate experts say the sell-off trend is likely to continue next year as the housing market struggles through its correction.” “‘Our view is that the market is going to get worse before it gets better,’ said John Graham, president of Scottsdale-based developer Sunbelt Holdings.”

“Currently, much of the land offered for sale is in areas like Pinal County and Buckeye, or other far-flung regions.”

“Valley broker Bo Mills, who specializes in industrial properties, watched as land investors sold undeveloped properties zoned for industrial use in the West Valley to hungry home builders during the housing run-up a few years ago.”

“Portions of that land remain untouched and are back on the market, Mills said, but they aren’t being rezoned for industrial uses.”

“‘We’ve always been concerned with the lack of Class A and Class B industry employment centers,’ said Barry Broome, president and CEO of the Greater Phoenix Economic Council. ‘The best real-estate sites should be used for employment sites. You’re in competition for employers; you’re not in competition with houses.’”

The Arizona Daily Star. “When the market got tough, real estate broker Dave Sunderman did what many industry experts advise: He hit the street.”

“Although he might have taken that idea too literally. Sunderman recently stood on the corner of East Tanque Verde and North Sabino Canyon roads with a sign saying ‘Will Sell You A Home For Food’ and offering to donate a portion of his commissions to the Community Food Bank.”

“‘I’m seeing a lot of agents going out and looking for second jobs,’ said Chip Rock, owner of Re/Max Majestic Realty. ‘The agents who know how to sell real estate are still selling real estate. The ones who came in during the boom, they don’t know how.’”

“Among those who may be phasing out is Rick Van Camp, of Red Horizon Realty. Van Camp previously worked in sales for a company that rebuilds circuit breakers, but left for full-time real estate work in 2004. Now he’s gone back to the electrical equipment firm and just does real estate part time.”

“‘My old broker used to say if you had a pen and a pulse, you could write a real estate contract, he said. Since then, it’s gotten much slower.’”

“The total volume of real estate sales — and pool of potential commissions — has fallen nearly 42 percent from October 2005 to October 2007, the most recent figures available, according to the Tucson Association of Realtors MLS.”

“Rock said that, in the current environment, he expects the ranks of real estate agents in town to drop eventually by about a third. ‘The gold mine came to an end,’ he said.”

“Some agents are finding that the post-slowdown market takes more work, including more weekends holding open houses, and more self-promotion.”

“‘Three years ago, quite frankly, you could show up and probably you would have a piece of business drop in your lap,’ said Rosey Koberlein, CEO of The Long Cos., parent of Long Realty ‘That’s not the business climate now.’”

The Yuma Sun from Arizona. “Despite sluggish home sales, sharp decline in new construction and a doubled foreclosure rate, observers of the real estate market are sure there’s a light at the end of the tunnel for the industry.”

“They just can’t see it yet.”

“‘Actually, I don’t think Yuma has been hit as hard as other places,’ said Vicki Bardo, outgoing president of the Yuma Association of Realtors. ‘We had a better year than I thought we would have. Yuma really hasn’t had it as bad as other areas.’”

“That’s not to say the real estate market here hasn’t been hit hard, she said. ‘We’re sitting here with a lot of inventory. There’s no question it’s been devastating, especially when someone has to move and they can’t sell their house.’”

“She said 1,500 dwellings of all types were listed recently for sale by the Yuma association’s MLS. That doesn’t include homes the owners are trying to sell themselves or most of the new construction.”

“‘The market is bleeding and there is a lot of volatility in the mortgage market. Most of the exotic mortgages are gone. They no longer exist for people with poor credit or no down payment,’ said Brian Holiman, branch manager for Yuma Mortgage Group.”

“‘But I happen to believe this is a really good time to buy a house,’ Holiman continued. ‘Sellers are realizing they need to bring their price down and make other concessions.’”

“One thing he’s seeing, he said, is that people have become more realistic. ‘They’re buying what they can actually afford.’”

“Caught in the middle are the many people who overpaid for a house - often speculators - with the expectation of a quick turnaround and fat profit from the accelerating prices, Holiman said. ‘That’s come back to haunt them. I’m seeing at least one person a week who’s in trouble.’”

“Holiman speculated that by late 2008, those who would miss payments will have done so, ‘and everyone will start coming back to the table by late ‘08 or early ‘09.’”

“There will be a painful time before then. As of Nov. 30, there had been a total of 675 notices of trustee sales this year, according to records Yuma Stats had gathered from the Yuma County Recorder’s Office. That’s roughly double the number in 2005, when there were 389 trustee sales notices.”

“As of November, city of Yuma had issued 231 single-family dwelling permits, many of them for larger, custom-built homes, building official Randy Crist said. ‘It seems the smaller, tract homes are slowing.’”

“Crist noted the number of housing permits is substantially lower than previous years. For the same 11 months in 2006, 576 housing permits were issued and 969 in the same period in 2005.”

“What seems to be happening, he said, is that developers are positioning themselves for when the real estate market rebounds by continuing to work on subdivisions.”

“‘We still have plenty of work to do,’ Crist said. ‘A lot of subdivisions are continuing to be developed. When the boom comes back, there will be a lot of choices for lots.’”