The Housing Bubble

It’s Friday desk clearing time for this blogger. “Many banks are revoking home equity lines of credit because mortgage balances are exceeding the actual value of homes. Brad Dodson of Palm Bay is one. Bank of America sent him a letter and told him he no longer had access to the $60,000 credit line because of declining home values. ‘It was the banks that gave the easy money and they are the ones who should have to pay for the loss, not me,’ Dodson said.”

“Mike Scafiddi made a series of bad decisions that left him strapped for cash - and wondering how much longer he can keep paying the mortgage for the home he and his wife have owned for 22 years. He got $27,000 from the refi, paying off most of the credit card debt. But the monthly mortgage payments rose more than $600.”

“Sitting at the kitchen table where he signed for the loan, he said he doesn’t expect sympathy for his lapse in judgment. ‘People will say, ‘Screw you, you were an idiot,’ and for a minute, I was,’ he said.”

“In order to sell standing inventory and continue growth within the development, RiverWalk Place in Manchester has just unveiled a dramatic price reduction. Ten select units have been reduced by as much as $100,000, with pricing now starting at $249,900.”

“Says Eric Chinburg, developer of RiverWalk Place and owner of Chinburg Builders, ‘We would like to sell these standing townhomes so that we can move on to the next phase of the project.’”

“Once upon a time, the crazy offers came from buyers who bid prices to astronomical heights and waived inspections and contingency clauses in sales contracts. Now, as homeowners compete with record high supply from foreclosed homes and builders’ discounted inventory, the shoe’s on the other foot.”

“Frustrated as her house languished on the market for three straight summers, J.J. Rodgers is trying a new sales tactic: giving the two-story home away in an essay contest. Rodgers last listed the property at $169,000 after cutting the price three times.”

“‘We don’t have anything to lose,’ said Rodgers. ‘If we’re unsuccessful, at least we did something different from what we’ve already tried.’”

“‘People are offering all kinds of goofy things to get their houses sold,’ said real estate agent Allen Butler in Surprise, Ariz. ‘But what gets a house sold really is going to be based on price and price alone.’”

“Pity the Maryland taxpayers. Montgomery County, residents seem certain to face higher property tax bills — just as the economy slows down.”

“Karen Butler of Germantown moved her son to off-campus housing at the University of Maryland at College Park. But after tuition and mortgage payments, Metro fare and groceries, she has little left each month for clothing, which has become a luxury.”

“‘I’m sick of it,’ she said. ‘I just can’t afford to keep up.’ So Butler, a 40-year county resident, is packing up for West Virginia.”

“Data provided by the Warren County permit office shows that permits issued for new home construction outside the City of Vicksburg fell by more than 40 percent from 2006 to 2007. Homebuilder David Brewer said the Vicksburg market is glutted with new homes.”

“Brewer said many laborers and subcontractors are looking for work, he said. ‘I have guys calling me from Jackson, from Madison, guys calling from Oxford,’ he said. ‘Lumber prices are phenomenally low. Sheetrock is low. I went from paying 28 cents a square foot for sheetrock to between 15 and 18 cents. A $15 board is now $9.’”

“Brad Galey, White Construction’s project manager for the Ameristar Casino expansion, said that if work doesn’t pick up for him soon, he may look for a job with one of the gas pipelines being laid through Warren County or move to Utah or Colorado, where he has been told there is more work available.”

“‘The way I see it, the phone hasn’t rung, and I don’t hear many builders saying the phones are ringing off the hook,’ he said.”

“The site for the planned $43 million Renaissance Tower in Fayetteville, now a large hole in the ground in the shadow of a towering construction crane, will languish a while longer, development partner Richard Alexander said.”

“The hotel, retail and condominium project is one of several Northwest Arkansas projects delayed because of a slowing real estate market and tightening loan standards.”

“Developers of the long-delayed Grandview Heights multistory condominium towers may change the project to an upscale hotel instead, Benton County Planning Director Ashley Pope said. The project features 486 units priced between $ 300,000 and $ 1.3 million.”

“‘I don’t think it has tightened up to a point where a bank wouldn’t look at a viable project if it was presented to them,’ said Ross Mallioux, chief lending officer for First Federal Bank of Arkansas. ‘But with so much oversupply out there right now, it comes down to asking what is a viable project.’”

“At some of downtown Houston’s most desired addresses, high-rise condos sit empty. ‘We’ve been on the market with this one for about 137 days, which is not even average yet for time on the market in this area,’ Treadstone Realty Group’s Kirt Primeaux said of a unit at the Kirby Lofts on Main Street.”

“Primeaux said the unit, which once had a selling price of near $500,000, may realistically only fetch half of that from a buyer nowadays. ‘A lot of people are waiting to see what happens, and time is on their side,’ he said.”

“It’s a price fall that’s being felt far beyond downtown. Parts of suburban Houston and other outlying communities have also witnessed rising foreclosure rates and falling home prices.”

“For example, a 24,000-square-foot mansion in The Woodlands appraised at more than $7 million recently sold for roughly a third of that price.”

“In 2005, the housing market in Pinal County boomed. In the last three months of 2005, Pinal County saw 6,055 new and resale homes purchased, according to Arizona State University Polytechnic. In the first three months of 2007, home sales dropped steeply, to 3,320.”

“However, much of the resale market is based on bank foreclosures and short sales of homes by banks that want to get as much as they can out of a house at risk of foreclosure while developers sit on the sidelines, said Bambi Sandquist, a Pinal County real estate agent.”

“The market has brought in investors, but not necessarily a population of families that will continue to live and spend money in the area, she said. ‘This kind of happened overnight,’ Sandquist said. ‘There’s lots of investors. They’ve been coming and buying new homes. Prices are half of what they were in some places.’”

“ST. Joseph, the real estate agent, is going to have a busy spring. Nationally, the housing market is not exactly booming, and St. Joe is known to be a whiz at selling houses. Just plant him in the ground in the front or back and it encourages the sale of your house. Maybe.”

“‘The sale of St. Joseph statues is brisk,’ says Mark Gould, who runs Religious Supply Center in Davenport. ‘When the ground thaws, I expect a bigger rush.’”

“Gould says, ‘I get calls all the time from real estate agents wanting to buy St. Joseph statues for their clients.’ A friend tells of an agent who carries a box of St. Joseph statues in the trunk of the car.”

“Some put St. Joseph in a plastic bag, but the story is told of one seller who wouldn’t do that, ‘because I was afraid he’d smother.’”

“Religious supply stores have St. Joseph statues in all sizes and prices. ‘I have one wooden St. Joseph that is 5feet tall, hand-carved. The price is $6,000,’ says Gould.” “That might be appropriate for some really high-end Quad-City homes that are on the market.”

“Watching the housing/mortgage/financial crisis unfold, I keep thinking about the joke about the difference between neurotics and psychotics. The former builds castles in the sky and the latter moves into them.”

“Until the bubble burst, a lot of folks were living in these castles in the air, made possible by bountiful and creative mortgage financing. Now, we’re being reminded that there is indeed something called reality from which many became detached.”

“Peter Thiel, president of a global hedge fund, writing about market bubbles in the latest Policy Review journal of the Hoover Institution, says, ‘U.S. real estate prices in 2005 were more distorted than in 1929, 1979, or 1989, or at any other time in history.’”

“To go back to the psychotic living in the castle in the sky, the task today must be to restore a sense of reality to the patient rather than moving in with him.”

“Proposals such as allowing bankruptcy judges to rewrite mortgage terms contributes to chaotic fundamentals, massive government intervention, whether it be through moratoriums on foreclosures and interest rate freezes, or government takeovers and refinancing of loans creates new distortions.”

“Our resilient and prosperous free society is built on law and personal responsibility. Pain is a normal part of life. It tells us something is wrong. What is critical is that we get the right message about the nature of the problem.”