The Housing Bubble

A report from the Oregonian. “Condo king Homer Williams gambled that Portland’s condo mania had reached such a fevered pitch that he could sell Pearl District luxury on a humdrum stretch of Southeast Portland. He and his partners launched a $40 million building, a sprawling, 123-condo complex, along eclectic Belmont Street in 2006. Their timing couldn’t have been worse. Since sales opened last year, 2121 Belmont had no sales, Williams said Tuesday.”

“To cope, Williams said, the complex will switch to apartments, the fourth such conversion of the slowdown. Williams acknowledges that the slowdown is real but says much of it is tied to psychology. ‘It’s between the ears,’ he said. ‘People are afraid right now.’”

“Portland has roughly 1,300 new and existing condos on the market in the 28 biggest downtown projects. Over the past five years, an average of 800 condos sold annually.”

“The next year could be bleak for developers with large, slow-selling condo buildings. In some ways, they have a self-fulfilling problem. Brokers steer buyers away from struggling buildings over worries that the developer may reduce prices or, worse, that the bank will take the building back.”

“‘I discriminate against unsold property,’ said John Cooper, a Portland real estate broker. ‘If I’m representing a buyer, I don’t want to put him in that situation. It was just the wrong time to come on the market.’”

“It’s not a given that developers will be fill their condo-turned-apartment buildings at the sky-high rents they want. But Williams predicts the renters they do get will someday turn into buyers. Rents are so high, it will make financial sense for them to buy, he said. But he acknowledges that buyers will stay renters until the economy and housing prices settle.”

“The trouble for developers stuck paying construction loans: No one has a clue when that will happen.”

The Bend Bulletin from Oregon. “The number of mortgages entering the early stages of foreclosure during the first three months of 2008 nearly tripled the number in the same period last year, according to the Deschutes County Clerk’s Office.”

“The likelihood is that we are catching up with the rest of the nation,’ said Bob Mullins, a volunteer for Bend-based Consumer Credit Counseling Service of Mid-Oregon. ‘Deschutes County has been lagging behind. It was only a matter of time before we started catching up. We’ve still got a ways to run because this started here later than in the worst parts of the country.’”

The Curry Pilot from Oregon. “The slump in the housing market that has cut home prices and sales across the country is being felt in Brookings. Shell Lent believes the local housing market is more affected by the national housing crisis than the numbers may indicate.”

“‘I had two houses for sale and sold one right away, but I had to drop the price from $449,000 to close to $300,000,’ he said. ‘It isn’t over, you haven’t seen anything yet.’”

“Lent currently has a house for sale that has dropped in price from $419,000 to $290,000.”

“During the last housing boom, from 1988-1992, the Curry County area had 110 real estate agents and 300 listings. By 1999, there were 55 agents and 850 listings. By the spring of 2006, the number of listings had dropped to 320 with 120 agents.”

“During the past year, the real estate market has lost some agents and the number of listings has risen to 400 which, as J.B. White, president of the Curry County Board of Realtors said, essentially repeats the pattern of 1992-1999 slump.”

The Mail Tribune from Oregon. “Jackson County’s residential housing slump continued to reflect the national numbers during the first quarter of 2008.”

“Sales prices for the area’s existing single-family residences tumbled 9.6 percent to $235,000 during the first three months of the year. The March median sales price for existing single-family residences declined 12.9 percent to $235,000, from $270,000 a year earlier.”

“California’s residential real estate woes continues to ripple into the Southern Oregon market, said Doug Morse, an agent in Medford. ‘Forty-three percent of our buyers are from California and they’re not coming up because they haven’t been able to sell their houses.’”

“New construction also remained slow. Just 62 homes were sold countywide in the first quarter with the median price falling 17.1 percent to $269,450. The inventory of houses on the market as of April 1 dropped 7 percent to 2,171.”

“‘It points to the people that don’t need to sell aren’t putting their places on the market and the people with their houses on the market really need to sell,’ Morse said. ‘I think it helps a lot more right now because when there are so many homes on the market, the buyer thinks maybe they shouldn’t buy.’”

The Seattle PI from Washington. “Seattle single-family home prices in March sank 2.2 percent from the same time a year ago. The numbers reflect continued pickiness on the part of buyers, who are benefiting from an abundance of homes on the market and slower sales.”

“In Western Washington overall, the median price for a single-family home was $325,000, well below the year-ago price of $345,000. There still were far more homes on the market than a year ago. House and condo listings increased 61 percent from 2007 in Seattle, 64 percent in King County and 35 percent in Western Washington.”

“Pending sales of single-family homes and condominiums in Seattle and King County were down sharply, compared with last March, by 29 percent and 39 percent, respectively.”

“‘Our market is pretty strong,’ said Carolyn Matson, a real estate agent at an open house for a Green Lake bungalow last weekend. ‘I think it’s nice that buyers have some room to negotiate, especially given what the market has been like for them.’”

“Sellers should also realize it’s no longer enough to hang a sign and wait for multiple offers to pour in; some may need a six-month marketing plan that includes online tours and newspaper ads, she said.”

“Sharon Heustis, who rents a house in Ballard, said she hadn’t seriously considered buying a house in Seattle when prices were ‘insane,’ and she didn’t want a no-money-down loan or mortgages with balloon payments made out of lead.”

“But with prices calming and interest rates low, it might be feasible, she said. Still, she’s inclined to wait another year or so in hopes they drop further. ‘I think they should get better — Seattle, I think, has been overvalued for about three years,’ she said.”

“But Ashley and Brian Yarno, who have been looking for a fixer-upper around Green Lake for six months, think the window to buy might be smaller.”

“‘If we don’t buy within the next five months, we’re stupid,’ said Ashley Yarno, whose aunt is a real estate agent and advised the couple, in their mid-20s, that the time to act is now, before prices start climbing again.”

The Seattle Times from Washington. “If their plans pan out, John and Judith Mehrens soon will own a waterfront condominium in a brand-new Bremerton complex that’s currently advertising units starting at $109,000.”

“28 units in a project called The 400 will be auctioned off to the highest bidders April 20 in an eBay-like experience: unbelievably low starting prices followed by last-minute bidding frenzies if the goods strike the public’s fancy.”

“It’s shaping up as the Puget Sound area’s largest auction of brand-new, nonforeclosure housing and potentially the start of a trend.”

“‘If it looks like a person could buy one for a price somewhat below what they were being marketed for before the auction, we’d be interested in doing that,’ John Mehrens says. ‘But if it becomes a feeding frenzy, we’ll go have a cup of coffee.’”

“The building’s developer, Mark Goldberg, chairman of M.S. Cavoad Co. in Seattle, says his major goal is to get out from under his construction loan. Even before it was completed last July, The 400 was 70 percent presold at prices topping out at $919,000, or $531 a square foot.”

“Then Bremerton’s real-estate market followed the national trend and ground to a halt. Some presales fell apart.”

“Jacqui Curtiss, broker in Port Orchard, says she’s not surprised the remaining units are on the auction block. ‘In real estate, timing is everything, and the timing was bad,’ Curtiss says. ‘Builders and developers are struggling everywhere. And when you have a lot of units in one building, your exposure level is a lot higher.’”

“Recently it took several months to sell five units in The 400, an unacceptable pace, Goldberg says. ‘We’re not going to sit around for the next year selling one or two.’”

“Paul Thomas, a founding partner of Northwest Auctions in Seattle, has conducted a dozen auctions in the last year for homeowners. He foresees more builders going this route.”

“‘At least three-quarters of our residential auctions over the next year or two will be conducted for builders who are desperate to sell their properties before losing them to the bank,’ Thomas projects.”

The Vancouver Sun. from Canada. “Contractors in Metro Vancouver took out substantially fewer building permits in January and February this year than they did in 2007, Statistics Canada reported Monday.”

“Municipalities issued permits for $872.7 million worth of work over the first two months of the year — 19 per cent below the $1 billion worth of work approved in the same months of 2007.”

“In B.C., ‘[the] construction market has been overheated for several years, so a decline in building permits isn’t necessarily a bad thing,’ said Philip Hochstein, president of the Independent Contractors and Business Association of B.C.”

“The ‘hectic pace of the past few years’ has driven labour rates and materials up sharply, Hochstein added, so ‘a moderation in activity will bring back some certainty,’ to contractors and their clients.”

The Chilliwack Times from Canada. “Hot, hot, hot. That’s been the temperature of the local real estate market for the past few months, but a cooling may be upon us.”

“March home sales in the Chilliwack area were the lowest for that month in the last five years, according to Chilliwack and Area Real Estate Board (CADREB) numbers. But CADREB president Trude Kafka isn’t worried.”

“‘Home prices are largely a reflection of market conditions and supply and demand and because we typically don’t experience the artificially inflated prices that can occur in the larger metropolitan areas, the market adjustments here are usually not as severe,’ Kafka said in a press release.”

“There were 206 residential sales last month, compared to 294 for the same month in 2007.”

“This downturn is really just a ‘market correction,’ according to Kafka. ‘We are actually on our way back to a balanced market where prices more accurately reflect the current market conditions.’”

The Anchorage Daily News from Alaska. “The state-owned Alaska Housing Finance Corp., that finances many home purchases in Alaska, is about halfway through a big-ticket ad campaign this spring to try to sweep aside the ‘doom and gloom’ headlines in national media about falling home prices and rampant defaults.”

“‘The more (Alaska buyers) hear it, the more they assume the same thing is happening here,’ said Sherrie Simmonds, spokeswoman for the Alaska Housing Finance Corp.”

“Simmonds stars in the feel-good ads, which are running in prime time on TV networks and radio stations. In the ads, she points out that interest rates are low and Alaska home prices are stable, making it a great time to invest in a new home.”

“The ad campaign, called ‘Alaska’s Housing Market: Built to Last,’ is the first of its kind for the corporation, but it fits the corporation’s role, as a public entity, to ‘educate people’ on Alaska housing issues, Simmonds said.”

“Though the housing market looks stable, that’s not to say there are no legitimate concerns for Alaska homeowners. Energy and transportation costs have skyrocketed, said Dan Fauske, the corporation’s CEO, in a recent interview.”

“The reduction in home sales has also affected some builders, he said.”

“Addressing the recent slowdown in local home sales, Mark Korting of Re/Max Properties Inc. told an Anchorage Chamber of Commerce luncheon Monday that ‘there seems to be a lot of (buyers) out there … just waiting’ for prices to drop further.”

“In addition to ads, the corporation has been hosting a series of community meetings around the state to explain differences between Alaska’s housing market and locations in the Lower 48 where the housing market has crashed.”

The Homer News from Alaska. “Over the past few years, Homer’s growth has been cited as the main reason behind the town’s first stoplight. But if estimates from the Alaska Department of Labor and Workforce Development are accurate, the last big jump in Homer’s population came during annexation.”

“Since then, the city’s population has actually decreased by about 33 people. The department estimates that there were 5,502 people living within Homer city limits in 2007, down from 5,535 in 2002. The population record for the city came in 2003, when 5,877 people lived within the city limits.”

“According to Kenai Peninsula Borough statistics, the population of young families boroughwide decreased significantly from April 1, 2000, to July 1, 2006. The population of children ages 0 to 14 dropped a combined 12.6 percent. The population of adults ages 25-49 dropped 13.8 percent.”

“That decrease can be seen in dropping school enrollment projections and facilities running below capacity, and comes as no surprise to some, indluding Homer resident Dylan Weiser.”

“Weiser moved to Homer in 2000. He said he has seen more retirees move into town, while many younger people have left in that time. This increase in a retired population makes it tough for younger working families, Weiser said. The retirees drive up property values, while younger families are moving farther away from town to afford housing.”

“New home construction also has increased from 23 units in the Homer area in 2000 to 49 in 2006, and the value of this construction jumped from $2.6 million in 2000 to more than $10 million in 2006.”

“The assessed value of taxable real property grew 60 percent from 2000 to 2007. By comparison, the assessed value of taxable real property grew just 30 percent for the seven-year period from 1993 to 2000.”

“These increased prices of homes can be seen in the real estate market as well. There were 27 houses listed on the Alaska MLS Monday with an asking price above $400,000 in Homer.”

“From 2000 to 2005, the Homer area created 317 new jobs, a 14.8 percent increase, and average salaries increased from $27,665 to $32,655, an 18 percent increase, according to the borough.”

“The number of jobs actually decreased from 2003 to 2005 by 63 jobs. The jobs that are available in town are more minimum wage service jobs than professional, said Weiser.”

“‘When you get a good job in Homer, you keep it until you die, if you intend to stay,’ he said.”