The Housing Bubble

The Gazette Times reports from Oregon. “For years in Corvallis, the housing market was booming, with new construction in subdivisions such as Timberhill and Willamette Landing keeping developers and real estate agents busy. New housing permits were down 60 percent this year compared to 2006 and — thanks to tighter lending policies and a generally slower housing market — homes ranging from $300,000 to $500,000 make up 75 percent of what’s available to homebuyers in town.”

“At the upper range of the residential real estate market, a few sellers have even started to slash prices, a move unheard of in Corvallis just a few months ago. In high-end homes priced at more than $500,000, real estate agents now have a 14-month supply.”

“‘For the most part, you’re looking at home buyers who are seeing wild swings in the market and they’re sitting on the sidelines right now,’ said Mike Goodrich, who runs Legend Homes’ Corvallis office.”

The Bend Bulletin from Oregon. “After nearly a quarter of a century without a serious downturn, history finally caught up with the Central Oregon housing market in 2007. Swooning like an oxygen-starved sprinter at the end of a too-long run, the region’s residential real estate market struggled by nearly every measure throughout the year.”

“High sales prices were cold comfort to would-be home sellers who found it difficult to move their homes at any price.”

“Bend started the year with more than 1,100 unsold homes on the market, according to MLS data reported by Bratton Appraisal Group’s Mike Caba. That number quickly soared to more than 1,600 by June as speculators and other homeowners tried to sell at the same time.”

“The number of listings gradually shrank to around 1,300 by early this month, as some homes sold and some would-be sellers opted to pull their homes off the market to wait for another season.”

“Still, at the year’s average monthly sales rate, it would take more than a year to sell off even that reduced year-end inventory level.”

“The region’s other local markets had similar stories to tell in 2007. More than 572 unsold homes on urban lots were on the market in Redmond by the middle of December, according to Caba’s numbers — a 13-month supply at the year’s average sales rates.”

“Sales in La Pine were off 52 percent from 2006 through the third quarter, according to the Central Oregon Association of Realtors. The same was true in Jefferson County. In Crook County, sales numbers slipped by more than 46 percent.”

“The chill in local home sales, which actually started in summer 2006, found its roots in a number of factors, including the virtual disappearance of speculators and investors. Mortgage defaults in Deschutes County rose to their highest level in more than 10 years, with more than 560 mortgages falling far enough into arrears to enter the first stages of foreclosure by Dec. 20, according to county records.”

“Buena Vista Custom Homes, who moved into the Bend market in early 2006, tried to pull out with an auction of 29 empty homes in its inaugural northeast Bend subdivision in mid-December, but the auction was a bust. Not a single Bend home moved at a price that Buena Vista President Roger Pollock would accept.”

“In the long term, said Mark Kramer, general manager of the region’s largest custom cabinetmaker, optimism still reigns.”

“‘No one expected it to continue at the pace it was going at,’ Kramer said, ‘But the thing about Central Oregon is, it’s still a great place to be, and everybody I talk to still feels comfortable about making an investment in a home here. Maybe there’s going to be a little bit of a lull in the market, but nobody feels there is going to be a decline in the long term.’”

“The remodeling market remains relatively strong despite — and in some ways, because of — the downturn in production home building, said Pacwest Homes’ director of sales, Gary May. That’s partly…because the price of labor and materials has plunged since the general housing market cooled down.”

“The price of framing, for example, has plunged from $20 to $25 per foot at the peak of the labor-short housing boom to around $10 to $11 per foot now, May said. Some materials, like concrete and tile, have retained the prices they hit at the peak of the boom, but others, like framing timber and cedar, have come down.”

“Pacwest laid off its in-house tile setters and drywallers at the beginning of the year, reacting, along with most home builders, to the slide in new-home construction, May said. But it has kept its project managers, finish crews and painters working, and it’s hiring subcontractors to fill in the gaps as work comes in.”

“Which is apparently keeping at least some of them working, despite the drawdown in new- home construction, albeit at lower prices.”

“‘Our subs provide great service to us, especially now that they are a little slower as well,’ May said. ‘They jump through hoops for us. And if it means the difference between working for a couple of weeks or being idle for a couple of weeks, for the sake of a couple of hundred dollars in price, we’re finding that the subs are being a little more flexible in that. So, at the end of the day, it’s the consumer who wins.’”

The Olympian from Washington. “About 2,000 homeowners in Thurston County are trying to sell their homes, according to the Northwest MLS, and it’s taking longer than many had expected.”

“Price reductions have become commonplace to stimulate sales, but it doesn’t stop there, real estate agent Eric Hjelm said.”

“Two summers ago, all most sellers had to do was put a ‘For Sale’ sign in their yard and ’start packing,’ Hjelm said. Today, the seller has a ‘laundry list’ of things to consider before marketing a home, he said.”

“Homeowner Frank Burnham of Olympia, a Hjelm client, has been putting his list to work. It includes installing new carpets, painting and making sure his 2,400-square-foot house is clean and uncluttered before it is put on the market. Burnham had planned to ask $350,000 for his house, but has lowered the price to about $329,000.

“‘Buyers are the ones that are driving this train,’ Burnham said about the current housing market.”

“Burnham, who has taken a job in Astoria, Ore., is willing to wait until the end of year to sell his house. If it doesn’t sell, he plans to turn it into a rental, even though that probably won’t cover his mortgage payments.”

“‘Some sellers are overreaching on price, but those who expect something more reasonable are selling their homes,’ said broker Ken Anderson.”

“Dan Presley of Olympia, who invests in property with a partner, has been trying to sell a 2,000-square-foot house in Lacey for about six months. After working with a real estate agent, they decided to try to sell the house themselves. They have dropped the price several times from $284,000 to $259,900, Presley said.”

“‘A year ago (the house) would have received three or four full-price offers,’ he said.”

“But with so many homes to choose from, the house has received only a couple of nibbles, Presley said. ‘It will pick back up,’ he said about the housing market. ‘It’s just kind of slowing down, and you have to roll with it.’”

“Patti Furu of Tumwater did just about all she could to sell her 1,800-square-foot house. Furu painted it, staged it, upgraded the kitchen, held open houses for nine weeks and dropped the price $20,000. After 10 weeks, Furu finally sold her house last month for about $274,000.”

“‘People are just waiting for an amazing deal,’ she said.”

“When staging and painting didn’t work, Furu began to offer an unusual incentive to buyers: free baked cookies once a month for the first year. ‘It was something to separate myself from the pack,’ she said.’”

“Today, Furu is living in a 1,300-square-foot duplex on a month-to-month lease. After working hard to sell her home, she is now going to take her time looking for the next house to buy.”

“‘I’m waiting to see what the market does,’ she said.”

The News Tribune from Washington. “This was the year Tacoma said goodbye to gonzo development. Goodbye to weekly near-weekly announcements of condo projects. Goodbye to big plans to rescue historic landmarks and goodbye to ambitious schemes for blocks-long mixed-use developments.”

“‘I think the market is taking a breather,’ said Tacoma real estate consultant J.J. McCament. ‘And that’s not necessarily a bad thing.’”

“Give credit – or blame, if you will – to a national cinching up of credit standards that washed over even a relatively strong Puget Sound-area market. And credit, too, a growing unsold inventory of high-end and midmarket condos that it will take the market months to absorb.”

“On the Foss’ east side north of the 11th Street Bridge, developer Mike Cohen earlier this year abandoned plans to build the Crosswater condo project and sold the land. At Tacoma’s Old City Hall, developers abandoned a plan for luxury condominiums. The building is now being renovated into class A office space.”

“At the old Spring Air mattress factory site, North Carolina developer Landmark Group has switched gears. Now Landmark is planning a two-phase, 300-unit apartment project for the former factory site instead of an affordably priced condo project.”

“Landmark executive Jim Sari said the group adjusted its plans after taking a second look at the Tacoma market. Sari maintains that bankers, burned by some markets where prices have collapsed, are unfairly applying tougher standards to the Puget Sound market. ‘Bankers are basically herd animals,’ he said. ‘Where one goes, the others follow.’”

“Even with the slowdowns and changes to apartments, there was ample choice of condos in Tacoma, especially in downtown or nearby areas.”

“‘There were about 3,700 units on the table when I did the analysis last spring,’ said real estate consultant McCament. ‘Now that’s down 3,500.’”

The Seattle Times. “Three Decembers ago, Vulcan Real Estate erected a tent in Seattle’s long-unfashionable South Lake Union neighborhood and invited the public to see plans for 2200, a luxury condominium project to be built there. Within days, 2200 was nearly sold out.”

“So Paul Kelly, the owner of a 17th-floor unit in 2200, should be sitting on top of the world. But it didn’t quite work out that way.”

“What looked like a surefire winner — homeownership in Seattle — has taken on a tinge of uncertainty. Trying since September, Kelly has been unable to sell his one-bedroom unit with its unobstructed view. Hardly anyone has come to see it, he says.”

“As thousands of other sellers have also found out, the Seattle area’s formerly stellar real-estate market has finally, slowly joined in the national downturn.”

“It could be good news for buyers. Negligible price increases, rather than being bad news, could actually be good by allowing wages time to catch up. That, however, is probably not what owners want to hear. But Sam Pace, an agent with Bellevue’s Executive Real Estate, says it’s realistic.”

“‘We’ve had double-digit appreciation for years in a row, and if you think you can’t handle a little bit of a dip, you have a pretty special view of what your return should be,’ Pace says.”

“So the word for next year is patience. That’s the approach Paul Kelly, the condominium owner, is taking.”

“Although he’d like to sell it now (and has reduced his price from $624,000 to $599,000 for buyers who purchase directly from him), he says that realistically it may be spring before he lists it again with a real-estate company.”

“‘I think things should hopefully settle down by then; that’s my plan anyway,’ Kelly says. ‘I know my buyer is out there. They just have to come see it.’”