The Housing Bubble

The Bend Bulletin reports from Oregon. “Home sales in Bend are down, but…more renters are in the market, and there are more houses to choose from, said Regan Scott, principal broker of Deschutes Property Management in Bend. That means falling rents for single-family homes and move-in incentives in some cases, Scott said. ‘This is unique in our market because this hasn’t happened in the past,’ Scott said. ‘We’re dealing with a new clientele, that (leasing) was not their goal. We have a new clientele that is doing this out of necessity to react to the market.’”

“Developers also are hiring Scott to find renters, for new homes that aren’t selling, he said. Scott said the influx of rental homes is primarily due to a soft housing market that is forcing investors who purchased homes for a quick profit to rent them in order not to lose them. Scott said many of the homeowners who hired his company never intended to rent their properties.”

“Stephanie Kramer, owner of Austin Property Management in Bend, has roughly 350 housing units, mostly single-family homes, under management, including a number of single-family homes that were added within the last six months, she said. Kramer expects to have 450 units under management by summer, partly fueled by homes that aren’t selling.”

“She also sees many new arrivals to the area who are choosing to rent instead of buy, betting housing prices will fall. There are also more potential home buyers who can’t line up loans, she said.”

“Valerie Hunter, a broker who specializes in foreclosures, said owners who lease a home usually have some equity in it. Otherwise, they are forced to sell, but in the current market, it takes a ‘fire sale’ to unload a property, Hunter said.”

“As a result, owners with properties in jeopardy usually list their homes for sale and for rent simultaneously, ‘just trying to get anybody to come to the table,’ Hunter said.”

“The Bend market had 1,262 single-family homes for sale in February, according to this month’s report from the Bratton Appraisal Group in Bend. The report listed 45 single-family home sales in February, the lowest since January 2005.”

“Traci Platiro, operations manager for Windermere Property Management in Bend, said her company can offer — with the homeowner’s approval — half-off discounts on the first month’s rent or, in some cases, a first month’s rent of $99.”

“‘People are taking a lot harder look in today’s market, in order to not have a vacancy, to see what they can do — so reasonable rates and move-in incentives always help,’ Platiro said.”

The Willamette Week from Oregon. “There are seemingly three kinds of Portland renters: those who’ve had a recent rent increase, those who soon will, and those competing for the dwindling supply of decent rentals at a decent price.”

“And industry insiders are predicting even larger rent increases ahead. So why these big changes? The mortgage crisis has made it harder to qualify for a loan. That means those who may have become owners a year ago are now forced to rent.”

“Norris & Stevens managing director Brian Bjornson says rents were kept ‘artificially’ low for the last few years because it was easy to buy and many renters opted to own instead of rent.”

“‘Now, many of those same buyers would like to rent out their condos,’ Bjornson says. ‘These condos in the Pearl and the South Waterfront aren’t selling, and the owners have $2,000 mortgages. They want to get as much of that mortgage covered as possible, so they try to keep rents high.’”

“According to Norris & Stevens—one of Oregon’s largest locally owned real estate and property management companies—newer two-bedroom, two-bath apartments in the metro area rented for an average of $865 at the end of 2007.”

The Yakima Herald Republic from Washington. “Hundreds of new lots have been created, and as many as 650 more are at one stage or another in the application process as developers move to meet what they say remains a strong demand in a popular area for residential housing.”

“The rapid pace of development and the resulting inventory does give developers pause. The growth is exceeding what has been the traditional market absorption rate of 200 to 300 homes per year.”

“‘For all of our thinking, we aren’t going to guess right every time. If we don’t guess right and something causes people to tighten up, that really drives down the housing process in Yakima,’ said Jon Kinloch, Apple Tree resorts director of marketing.”

“Pat Strosahl, CEO for United Builders of Yakima, called the current demand insatiable. So who are the buyers for these new developments? Strosahl said a quarter of the homes United Builders is selling in its various developments — including Zillah Lakes near Zillah and in the Yakima area — are from outside the area.”

“‘We think Yakima has a lot of advantages that Bend, Ore., has. There is a pretty significant range of recreational activities in close proximity. We are within three hours of the major metropolitan areas,’ he said. ‘We have this wine-country thing and house prices are reasonable compared to other markets.’”

“The proposed as-yet unnamed development by United Builders and its partner, is focusing on baby boomers approaching retirement. Apple Tree is seeing a larger percentage of buyers, 50 percent, from outside the area.”

“‘They are made up of professionals moving to Yakima for a particular job or moving to Yakima to retire or for some other reason,’ Kinloch said.”

“With retirees from the Seattle area and elsewhere having cash from selling their homes, the demand is expected to continue.”

The Olympian from Washington. “Thurston County foreclosure notices have increased more than 50 percent in the first quarter of 2008 compared with the same period last year. South Sound real estate agent Phil Sharp has tried to capitalize on this increase by offering tours of foreclosed property to potential investors.”

“On Saturday, about 15 people loaded into two white vans and toured 12 homes in Lacey and Olympia that were listed for sale by banks, or by owners hoping to sell their houses before they are sold at auction.”

“Thurston County hasn’t been immune from the ‘mortgage mess’ because of past lax lending standards and a slower housing market brought about by higher inventory levels, Sharp said.”

“A few years ago, there were only about 400 homes on the market to choose from, he said. Since, inventory levels have surged past 2,000 homes. The number fell to 1,977 homes in February, according to Northwest MLS data.”

“Because some owners might be home during the tour, he asked the group to be respectful with comments. ‘People are already feeling down; they don’t need to be kicked,’ Sharp said.”

“Tim Salo of Olympia said he wants to diversify his investment portfolio by buying real estate. He started shopping for foreclosed properties about six months ago, but then prices averaged about $250,000. Since, he has noticed prices for distressed property fall 10 percent to 15 percent.”

“‘Now, it pencils out,’ he said about the investment.”

“Still, Salo acknowledged that it was sad to see people losing their homes. On the second stop of the tour, 15 people filed into an Olympia house and came face to face with Timothy June, the owner. While everyone looked through the house, June stayed busy by cleaning up his daughter’s room.”

“Asked how he felt about the tour, June said he was glad to have people looking around. ‘I want the house sold,’ he said.”

The Sequim Gazette from Washington. “From about 2003-2005, Sequim real estate took off. The heyday of the local real estate boom is over. What’s left is a market stable enough to coast into the next jump in sales.”

“‘The outlook for Sequim-area real estate is positive when you consider factors relating to long-term supply and demand…and the fact that baby boomers are going to continue to retire here for years to come,’ agent Michael McAleer said. ‘For now we still have a constant flow of buyers that is still higher than 2001 and 2002 and a large housing stock for them to choose from.’”

“‘While houses are still being sold at a price higher than five years ago, we are not on an island,’ McAleer said. ‘We are not going to see the number of buyers from out of the area like we did during our big sale years.’”

“McAleer said an inflated housing stock and reduction in buyers emphasizes a buyers’ market in Sequim. ‘We define a buyers’ market based on number of houses on the market and how many houses sell per month,’ he said. ‘If there are six months’ worth of houses for sale, it’s a balanced market. Right now Sequim has 11 months of housing available, compared to 17 months nationally.’”

“The county’s median household income is $46,213, according to the state. With $10,000 down and an 8.23-percent loan, the median household would be able to purchase a $150,000 home, according to HSH Associates Financial Publishers.”

“There were about a dozen houses on the market at or below $150,000 in the last week of March. With median housing costs at $339,950, most county residents are unable to afford most of the housing stock.”

The Bellingham Herald from Washington.”The undeveloped 20-lot Roseberry Ridge subdivision is now the property of Skagit State Bank, after a slowing local real estate market left its would-be developer without better options.”

“Property records indicate that the bank filed a February foreclosure notice on the seven-acre property. The notice says that close to $2 million in unpaid debt was secured by the property. Whatcom County Assessor’s Office records indicate that Roseberry Ridge LLC paid $700,000 for the property in 2006.”

“Given present conditions in the real estate market, Roseberry Ridge developer Ken Tiderington said he didn’t think he could sell the lots fast enough to pay off his loan or even keep current on interest payments.”

“‘We would have had to keep paying interest until the market turned,’ Tiderington said.”

“Tiderington is also developer of the 173-lot Pacific Highlands subdivision in Ferndale. He said the first 90 lots sold in about two weeks when they went on the market in 2004. He has now sold all but 26, but at this point the market has ‘just disappeared.’”

“‘There’s an overbuilt, abundant inventory of unbuilt lots in Ferndale,’ Tiderington said.”

“‘You cannot get a spec loan at any bank in Bellingham,’ Tiderington said. ‘The market’s dried up, the lenders have dried up.’”

“‘People who have money are still buying lots and building houses,’ Tiderington said. ‘That end of the market always stays the same. When the market is this bad, (custom home buyers) get the best deal.’”

“That’s because subcontractors will cut their prices when work is scarce. ‘Subcontractors right now are hurting big time,’ Tiderington said.”

The Vancouver Sun from Canada. “Metro Vancouver condominium prices are forecast to climb over five per cent this year and average 3.5 per cent a year for the next four years, according to the Conference Board of Canada and Genworth Financial Canada.”

“‘Prices are rising, so if you can get into the market, clearly in the Vancouver market, which is one of the best in the country, then you are going to get some return in terms of building your equity.’ said Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, which promotes affordable home ownership.”

“‘Of the leading indicators for a price correction that we look at, so far, none of them have come to pass,’ said senior analyst Robyn Adamache. ‘So there is still quite a ways to go.’”

The Calgary Herald from Canada. “Calgary’s resale housing market has taken a dramatic turn and the latest MLS sales data from the month of March suggest it has become a buyer’s market with listings continuing to soar and sales plunging compared with a year ago.”

“‘We have moved into a market that is currently providing a great variety of choice for the buyer,’ said Ed Jensen, president of the Calgary Real Estate Board.”

“Total MLS listings inventory at the end of March was 12,597, a whopping 167 per cent increase from 4,723 registered in March 2007. The month-end inventory for single-family homes in Calgary metro was 5,957, up 155 per cent from a year ago, while for condos it was up a staggering 283 per cent from a year ago to 2,781 listings from 726.”

“‘With that surplus in inventory, what we’re seeing here is roughly one in five of the homes are selling,’ said Jensen.”

“‘The days of the sellers in the last couple of crazy market years just naming their price and throwing their house on without presenting their house correctly, those days are done. And I think we have to come to reality,’ he said.”

“‘One overhanging question is that supply level and how that will impact prices,’ said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp. ‘I don’t believe we’ve reached the highest level of supply yet.’”

“‘We don’t expect any dramatic decrease in prices but we think that prices are going to go up and likely the annual average is going to be less than five per cent. Things are stabilizing right now but still the biggest risk is that with all that supply out there, it’s going to give people even more time for selection,’ he said. ‘It’s going to cause people maybe to compete more with each other. That sense of urgency to buy has diminished dramatically from a year ago.’”

“The average sale price of a single-family home in Calgary metro has increased for each month this year from the $444,769 it was in December — $455, 297 in January, $471,696 in February. It had peaked at $505,920 last July.”

“‘We’ve gone through some crazy years where our inventory was almost non-existent,’ said Jensen. ‘I think the sellers need to pay attention that this is a buyer’s marketplace.’”