The Housing Bubble

TC Palm reports from Florida. “For the second year in a row, Atlas Van Lines is reporting that more residents have moved out of Florida than are deciding to settle in the Sunshine State. ‘The post-Katrina exodus from Louisiana into the surrounding states leveled off and the housing market continued to stagnate. Real estate costs undoubtedly influenced migration patterns this year as well,’ stated Greg Hoover, chief marketing officer of Atlas World Group.”

The Orlando Sentinel from Florida. “More than 2,000 homes in Lake County ended up in foreclosure last year, according to final figures compiled by Clerk of Courts Neil Kelly.”

“Banks, mortgage companies and other lenders filed 269 complaints against delinquent borrowers in December, boosting the foreclosure tally to 2,081, a county record. After a brief lull for the holidays, lenders resumed efforts to seize properties from debtors Tuesday, the first day of business in the new year.”

“They filed foreclosure actions against 26 properties, according to Kelly’s Web site. Another dozen mortgage foreclosures were filed Wednesday.”

The News Press from Florida. “A record wave of foreclosures in 2007 crested in the last three months of the year — but experts warn the worst may still be yet to come. The monthly numbers were leveling off as the year ended, but that may not last.”

“‘I think that’s just the lack of productivity because of the holidays,’ said mortgage broker Jeff Tumbarello in Fort Myers. ‘I think there’s a glut of foreclosures; the system just can’t file them.’”

“For the year, there were a record 10,700 in Lee County, according to the Southwest Florida Real Estate Investors Association. That’s compared to 3,923 in 2006, according to records.”

“December saw 1,441 foreclosures, including 433 on homes that were the primary residence for a family. For the year, there were 7,324 single-family foreclosures. That’s 4 percent of the county’s 180,305 single-family homes.”

“Most of the year’s foreclosures were filed since August, Tumbarello said. Prior to that, the monthly numbers were in the hundreds.”

“Ground zero for the foreclosure explosion was Cape Coral, where 4,858 were filed, almost half the total. Home construction has come almost to a standstill in the Cape with a record-breaking low of only nine single-family permits issued in December. A year earlier, 90 permits were issued and the record was 858 in March 2005.”

“In a way, Cape Coral was a victim of its own success as prices surged in the boom that ended in late 2005, said Bob Knight, president of the Lee Building Industry Association.”

“Ray Kest, a business professor at Hodges University in Fort Myers who follows the local economy, said banks and other lenders are unable to process the increasing numbers of people who aren’t making their payments. ‘I understand they’re backed up so far, it’s a tidal wave coming.’”

“Retail sales statistics from 2007 already show the area slipping into the equivalent of a recession, he said, and the owners of the county’s 248,128 occupied housing units are leaving as they find themselves unable to make enough money to live here.”

“Factors such as higher oil prices and a soft national economy could affect the local tourism industry, which so far has been holding up, Kest said. If that happens, ‘We’re in for a rough ride.’”

The Sun Herald from Florida. “Although economic forecasters are predicting a lackluster 2008 for automobile sales, area dealers are looking for a gradual recovery, especially toward the latter part of the year.”

“Mark Schlundt, general manager of DeSoto Auto Mall in Arcadia, said he agreed that credit had become tight during 2007. What started in real estate eventually spilled over into automobile financing.”

“‘Everyone had heard so much about the subprime (mortgage) lending market. In general, things had tightened up so much that you had to have pretty solid credit … to even think about buying a vehicle. I think that’s going to loosen up this year,’ he said.”

“Gene Gorman, president of Gene Gorman’s Auto Sales, said he agrees that truck sales are off and that the image of the truck market following home sales isn’t far off the mark.”

“But high gas prices and sluggish home sales have yet to kill the market for used sport utility vehicles, Gorman said. What may be changing is that their owners are using them more for the original reasons SUVs were designed.”

“‘People may be staying in their homes, but they still want to make sure their lifestyle goes on, so they still want an SUV to haul their boat and carry the kids around,’ Gorman said. ‘People who can afford a boat are not going to be that concerned about additional gas mileage — and they’re not going to be taking their SUVs on a long trip anyway.’”

The St Petersburg Times from Florida. “The Great American Job Machine got stuck on ‘idle’ in December, sending unemployment up to the highest level in two years and renewing investor worries that the economy will slip into a recession.”

“Job losses were largely concentrated in manufacturing, construction and financial services, a fallout from the continued housing slump. In addition, retailers hired fewer additional people than usual this past holiday season.”

“Unemployment also is rising in Florida, although December’s numbers aren’t available yet. The November rate was 4.3 percent, up from 3.3 percent in 2006.”

“‘Florida will get closer to the national average in the next couple of months,’ predicted University of Central Florida economist Sean Snaith. ‘But once we get past the first part of 2008, things will start to pick up a little bit. We should remain below the national level longer range.’”

“Snaith said the increase in unemployment might even have a bright side, giving the Federal Reserve Board a reason to cut interest rates again at the end of this month, perhaps as much as half a percentage point.”

The Sun Sentinel from Florida. “Alarmed by the declining housing market, owners of the Fashion Mall this week postponed for at least two years plans to build 600 condos on the property. In the meantime, construction will begin on an entertainment hub with shops, restaurants and offices.”

“‘The idea is to rejuvenate the project by adding more office and retail,”‘ said Erick Collazo, director of Boca Raton-based MBA Development Partners, which was hired two months ago to recast the project given falling housing prices.”

“The residential portion will be on hold until the housing market rebounds, Collazo said. ‘Market conditions show that the residential market is not going to turn around until 2009, so it won’t be until a few years after that that the residential portion will be built,’ he said.”

“‘It doesn’t seem like a developer right now would be looking to add more housing stock when the housing market is down,’ Dan Keefe, assistant to the mayor.”

From WFTV 9 in Florida. “Central Florida homeowners living in areas with high numbers of foreclosures may soon pay a hefty price for the slumping housing market. Some communities in Central Florida have increased fees 25-percent this year since owners of foreclosed properties aren’t paying up.”

“But some homeowners said it’s unfair to force them to foot the bill. ‘They are always going to go up, go up, but I think it’s unfair to have to pay for somebody else’s mistakes,’ said Mike Wuinones, a homeowner.”

The Hartselle Enquirer from Alabama. “November represents the second consecutive month the state housing inventory has decreased from the previous month, according to the Alabama Center for Real Estate at The University of Alabama.”

“‘We will continue to closely monitor this very important market indicator as the reduction in excess supply will be critical for the market to regain traction as we enter 2008,’ said Grayson Glaze, executive director of the UA center.”

“Slower home sales during the latter part of the year contributed to the increase in the number of homes on the market, as the current supply of Alabama homes, when compared with November 2006, reflects a significant increase in year-over-year supply by 6,238 units, or 17.16 percent, Glaze said.”

“According to Glaze, the inventory of homes for sale at the current sales pace is 11.3…months at the current sales pace. The 2007 year-to-date average inventory/sales ratio is 8.5, while the average Alabama inventory/sales ratio in 2006 was 6.6, closer to traditional and desired industry levels, Glaze said.”

“Total statewide home sales of 3,768 units in Alabama during November posted a decline of 11.78 percent.”

The Birmingham News from Alabama. “Regions Financial Corp., the largest bank based in Alabama, said Thursday a troubled real-estate market has led the company to quadruple provisions for bad loans in the fourth quarter, and take millions in other charges.”

“Birmingham-based Regions Financial said the provision for fourth-quarter 2007 bad loans will be increased to $360 million, from $90 million at Sept. 30. Regions said the prospect of not being repaid for loans made to residential developers prompted the increase.”

“‘The velocity and the volume that has gone from ‘performing’ to ‘in trouble’ has done so at a very quick pace,’ Regions CEO Dowd Ritter said in a conference call with investors. ‘Projects that were viable, with good sales four and five months ago, are at zero activity today.’”

“Ritter said prospective home buyers are having trouble finding loans, which has led to an oversupply of housing and an ensuing reduction in the value of residential property. Regions lent money to some of the developers of that property, and now has to face the prospect that it won’t be repaid for all of it, Ritter said.”

“In the third quarter, Birmingham’s Superior Bancorp and Montgomery’s Colonial BancGroup acknowledged problems with residential loans in Florida. The cold air wafting through the financial services industry is keenly felt in Birmingham, where 40,000 people work in some aspect of the business.”

“Also Thursday, Regions said it plans to record about $131 million of other pre-tax charges in the fourth quarter. They include…$42 million in other valuation-related expenses, most of which relate to its mortgage servicing business.”

From Reuters. “Regions said it is experiencing a sharp slowdown in real estate demand, especially in parts of Florida and Georgia, and in particular around Miami and Atlanta. It said this is hurting its $7.5 billion portfolio of loans to residential builders.”

“Regions also announced a $38 million charge related to its Morgan Keegan asset management unit, where two bond mutual funds fell more than 50 percent in 2007 because of exposure to risky debt, according to Morningstar.”

“‘Industrywide credit issues have reduced consumer demand, which in turn has led to an oversupply and decline (in) residential real estate values, all of which are increasingly stressing developers of residential properties,’ Ritter said.”

“‘This is, without a doubt, the most challenging environment that the financial services industry has encountered in many years, particularly relating to residential real estate,’ Ritter said on a conference call.”