The Housing Bubble

KGET 17 reports from California. “A new real estate report paints another bleak picture of property values for home sellers in Bakersfield. ‘The median price of a home has dropped 20 percent since it’s peak in 2006,’ said appraiser Gary Crabtree. ‘Forty-six percent of all single family houses sold were actually foreclosure properties.’”

“Real estate agent Jon Vaughn walked TV-17 through one of those homes Monday. The four bedroom, 3,000 square-foot house might have sold for more than $600,000 two years ago, but Monday, it was listed at just under $406,000.”

“‘You’ve got to be lowest priced one in the area in order to sell it,’ said Vaughn. ‘I remember back in ‘03 and ’04, a lot of people saying, ‘I just can’t afford a home. Well, these days, it’s so much more affordable.’”

The Modesto Bee. “Monday was a record-breaking day for foreclosures in California. A staggering 5,238 properties were scheduled to be sold in auctions on courthouse steps across the state, including 145 in Stanislaus County.”

“‘This is the single largest day ever for foreclosures,’ said Sean O’Toole, (who) tracks mortgage defaults throughout the state. By comparison, 400 to 500 auctions a day were scheduled statewide a year ago, O’Toole said. That average rose to about 2,500 per day by the end of 2007, but he said there’s never been nearly as many auctions as happened Monday.”

“David Absher, president of Dual Arch International, which does most of the foreclosure auctions in the county, said that during the past six months, typically 60 to 80 auctions were scheduled a day, but ‘the volume is mounting.’”

“About 10 people showed up Monday to watch the auction in downtown Modesto, including a few who came with money to buy. But during the first 90 minutes, none of the auctioned homes attracted bids.”

“That means those lenders are stuck owning the properties they foreclosed on. Most of them, whose defaulted mortgages were issued mostly in 2005 or 2006, are owed more than the houses now are worth.”

“‘No one wants to buy this stuff because they don’t know where the housing market’s going,’ Absher said. ‘When the prices are continuing to slide down, how do you know you’re getting a good deal?’”

“Antonio Lima was looking for a good deal at Monday’s auction, but the Modesto house he came prepared to bid on had its foreclosure postponed. He’s seen the inside of that home, and he’s convinced it’s a nice three-bedroom house. That Norman Way property, however, has an outstanding mortgage of nearly $300,000.”

“‘I know for sure they’ll never sell it for that much,’ Lima said. He plans to make a lower-priced offer on the house through a real estate agent.”

From ABC 7.com. “At a packed house in Temecula, first-time home hunters and savvy investors were hoping to buy one of the roughly 80 foreclosed homes on the auction block. All are bank-owned properties.”

“Colleen Rutledge of Fallbrook bought a two-story Perris home as an investment at a foreclosure auction for $250,000, plus a $12,000 commission. She spent about $25,000 more fixing it up.”

“With similar properties selling in the low-to-mid-300s, Rutledge thought she’d make a quick profit. She initially listed it for $369,000 when it was the only foreclosed property on the block. Now the home next door, and several others on the block are in foreclosure, and prices continue to fall.”

“She’s lowered her price several times and now has it listed for $274,000. She says she’ll be lucky to walk away with any profit. Rutledge admits she got caught up in the foreclosure auction frenzy.”

“‘You really do have to know your numbers, know what your maximum bid is, and you’re done when you’re done,’ said Rutledge. ‘And you got to know what you’re getting into or you’ll lose a lot of money, unfortunately.’”

The Los Angeles Business Journal. “The state of California lost nearly 16,000 jobs last year due to the stumbling mortgage industry, by far the most of any other state, according to a survey released Monday by MortgageDaily.com.”

“Countrywide eliminated nearly 12,000 jobs across the country last year, far more than any other company, the survey said.”

The Orange County Register. “Orange County lost more than twice as many mortgage jobs last year as any state except its own, California. O.C. lost more mortgage jobs than 49 entire states.”

“The state with the second-highest number of mortgage job losses, after California, was Florida with 2,507, according to MortgageDaily.com.”

The Contra Costa Times. “It may be a new year, but 2008 is starting out with plenty of pain for East Bay mortgage and housing-industry workers.”

“Banks and mortgage lenders of varying sizes continue to chop jobs in Alameda and Contra Costa counties, according to a review by the Times. And some home-loan finance employees who have lost their jobs say the outlook for their industry looks bleak.”

“‘This is going to get worse before it gets better,’ said David Miles, an Oakland resident and mortgage worker who lost his job with Wachovia bank in December. ‘The mortgage industry hasn’t hit bottom yet.’”

“In the 12 months that ended in November, housing-related industries shed 10,300 jobs in the East Bay.” The grim totals include a loss of 7,100 jobs in residential and specialty trade construction and 2,400 jobs in credit intermediation, an industry category that consists primarily of mortgage agents and loan officers.”

“A growing number of former mortgage workers who lost their jobs have decided to seek employment outside of the field in which they had worked for years. ‘I’m keeping my fingers crossed that I can find something in the mortgage area,’ said Robin Stutzman, a San Ramon resident who lost her job with Bank of America in late 2007. ‘But if I get anything, it will probably be a temporary job.’”

“Stutzman also is seeking a job as an executive assistant, she said. ‘I’ve never seen anything like this before,’ Stutzman said. ‘I never thought that getting into the mortgage industry that it would decline this badly.’”

The Voice of San Diego. “With prosecutors nationwide illuminating real estate fraud schemes undertaken during this decade’s heated housing market, at least one of the state’s legions of real estate professionals face new training requirements.”

“California’s Office of Real Estate Appraisers raised the bar last week for would-be appraisers wishing to join the 19,500 appraisers already licensed and working around the state.”

“Some appraisers this decade were pulled into shady schemes in which agents and loan officers and buyers colluded to rip off banks.”

“Buyers would, based on artificially inflated appraisals, convince the banks to lend them more than the house was actually worth, kick cash back to the parties involved, and then foreclose, leaving the lenders holding a house worth less than the mortgage.”

“Some longtime professional appraisers, real estate and mortgage agents and brokers have complained loudly that the barrier to entry into their professions is too low. They lament the young or novice workers who entered the business to get rich quick, did sloppy work and since have left the old-timers to try to dust off their reputation.”

“‘The problem before was that any idiot could get a license,’ said Todd Lackner, a residential real estate appraiser in Mission Valley. ‘[Now] it’s going to really weed out the bottom end people.’”

“Sara Schwarzentraub is a local appraiser who teaches some of the required classes for new licensees. The state should incentivize the mentoring of new appraisers by established professionals, she said.”

“‘The training area — that, still, nothing has been done about,’ she said. ‘Training people falls to fee appraisers, and when they’re training somebody, they’re not making any money.’”

“And, without a close relationship with a mentor, the temptation rises to appraise a home at a higher value than it’s worth, or to otherwise engage in real estate fraud schemes, Schwarzentraub said.”

“When prices were rising, lenders often didn’t lose money even on homes abandoned after the cash-back schemes. But now, the lenders that are still making loans, and their backers, are saddled with so many foreclosed homes and have taken so many losses that they are exponentially more careful with the money they lend.”

“Lackner said he feels a bit vindicated by the market conditions, though his office sees about a third as many requests for appraisals as they did a couple of years ago.”

“‘People always made fun of me, they said I was conservative,’ he said. ‘They called me ‘Lowball Lackner.’ Call me what you want but I’m accurate.’”

“Pete Ogilvie, president of the California Association of Mortgage Brokers, said his organization supports increased requirements for professionalism across the board in real estate professions.”

“‘The only people we can’t make more professional are borrowers and investors,’ he said.”

The Press Enterprise. “The city of Moreno Valley could suspend a planned increase in fees charged to developers and home builders.”

“The Building Industry Association of Southern California’s Riverside County chapter has asked city officials to postpone a planned 2.6 percent increase in development-impact fees, saying it would only prolong the struggling housing market’s recovery.”

“In the current market, home builders are drastically discounting the price of newly built homes, which, in turn, drives down prices and property values on the re-sale market, he said. The BIA is asking the city to require payment at the time of occupancy, which can be six months later, Winckel said. That would reduce home builders’ costs and allow them to sell homes at more competitive prices, he said.”

“‘You don’t raise prices on goods when you’re not selling them,’ BIA Executive Officer Borre Winckel said.”