The Housing Bubble

The Ventura County Star reports from California. “Ventura County consumer bankruptcy filings jumped 122 percent last year as lenders toughened refinancing requirements, area bankruptcy attorneys say. The days of being able to ‘refinance away’ problems, as has been a tradition in California, are over, said Michael Sment, chairman of the Ventura County Bar Association’s Bankruptcy Section.”

“‘It’s a train wreck,’ said Louis J. Esbin, president of the Central District Consumer Bankruptcy Attorneys Association. ‘We’re seeing people who in the past may have been able to refinance their way out of debt, but now many lenders are out of business. Lenders now require proof of income, tax returns. No longer can a person who fogs a mirror get a loan.’”

The Contra Costa Times. “Frustrated with banks that refuse to renegotiate home loans, residents gathered outside the Antioch branches of three national banks Friday afternoon to voice their discontent.”

“CCISCO spokeswoman Oliba Cardona said…her group wants banks to lower mortgages to better reflect the property’s market value, thus allowing homeowners to afford the monthly payments more easily. ‘We want the banks to renegotiate people’s debt so homeowners can keep their homes,’ Cardona said.”

“Juan and Josephine Ramirez moved into their $375,000 house in Antioch three years ago. The initial monthly payment on their adjustable-rate mortgage was $2,700. Now, it’s $3,200. ‘It’s impossible,’ Josephine said. ‘We are trying to maintain the payments on our credit cards.’”

“The couple, who have two young children, said homes in their neighborhood are now selling for $150,000.”

“‘A lot of us are going into foreclosure, or in danger of going into foreclosure,’ said protester Luis Flores, who could no longer keep up with the $4,000 monthly payment on the home he’s lived in for seven years. ‘It came down to paying the bank or buying food.’”

From ABC 7 News. “In a report issued Friday, (a) real estate tracking firm finds average property values in San Jose lost 11.2 percent, San Francisco lost 14.1 percent, Los Angeles lost 19.3 percent and real estate in Sacramento is down 29.8 percent, which is the most in the nation.”

“A group of East Bay homeowners, facing foreclosure, resolutely marched through Antioch, stopping at three banks where they say no one is listening to their desperate plight.”

“Bernice Ramos is six months behind on her mortgage payments, which ballooned up to $5,600 a month on her $500,000 house which has lost half its value. Her husband is working less and the bank has sent letters threatening foreclosure. She’s packing boxes because she thinks they’ll be kicked out next month.”

“‘All of these people are in the same situation. That’s why we’re here together with our church, we decided to start doing something so somebody will listen to us,’ said Ramos.”

The Oakland Tribune. “A couple of years ago, when new lofts and condominiums throughout Oakland’s urban neighborhoods were selling for three quarters of a million dollars, Ken Stevens’ services weren’t needed. Nowadays Stevens, CEO of Accelerated Marketing Partners real estate auction company, is so busy he’ll be running auctions in two counties Sunday — selling condos in Oakland and single family homes in Pittsburg.”

“Thousands of new housing units — condos, townhomes, lofts — have sprouted up from one side of the city. Some developers are opting to sell vacant units at a great discount — often below cost — to move inventory and satisfy the bank. And that’s where Stevens comes in.”

“Last weekend his company auctioned one- and two-bedroom condominiums in the Shadow Woods development in the Oakland hills, starting with a modest $220,000 opening bid. On March 30, his company auctioned off 41 condominiums in the Eight Orchids development in Oakland’s Chinatown with a starting bid of $245,000 — up to half off previous market prices.”

“‘We’ve talked to several others in the downtown market who are in various stages of construction and or marketing, but some developers just don’t like to have auctions because of the supposed negativity,’ Stevens said, adding that he thinks they should ‘get over it.’”

“‘It’s the most effective way to move inventory in a (distressed) marketplace and it’s a great way for a buyer to get a fair to good deal,’ he said.”

“At 1 p.m. Sunday, his company will auction 34 condominiums and townhomes in the Jade development on Jefferson Street in downtown Oakland, then race to Pittsburg to auction off 37 new single-family homes in the Vista Del Mar planned community at 5 p.m.”

“According to Jade’s advertising, the company had already substantially lowered sales prices before deciding to auction a chunk of its inventory. A minimum bid has been set at $259,000, and potential buyers must be pre-qualified by a lender.”

“Michael Ghielmetti, VP of Signature Properties, said despite very slow sales, the company is not yet considering an auction to market its 130-unit Broadway Grand condominiums in Oakland’s uptown neighborhood.”

“But in the meantime, things are tough. There have been fewer than 20 sales since November, and the company has reduced asking prices and come up with innovative ways to market the homes and make buyers less anxious about taking the plunge, such as promising to refund the difference if the prices subsequently drop within two years of the sale.”

“Ghielmetti said the auctions may help the market in the long term by removing excess inventory. But the auctions have definitely hurt his sales in the short-term. When Eight Orchids announced its auction, nothing moved at Broadway Grand for six weeks. After the auction, Signature sold two units. When Jade announced its auction, the same thing happened.”

“Still, he believes Broadway Grand is reasonably priced for the market, now he just needs to convince nervous buyers. ‘In 20 years people will say ‘I wish I bought in 2008,’ he said. ‘It won’t stay like this forever.’”

The Tracy Press. “For close-up view of what ails the nation’s economy, look no further than San Joaquin County. The March jobless rate climbed to 10.3 percent, up from 9.9 percent in February and from 8.2 percent in March 2007.”

“The March statistics suggest there’s more at work than normal cycles. Foreclosures, tight credit, layoffs and a weak dollar are also making a difference. ‘It’s not just the San Joaquin Valley that’s being impacted,’ said Liz Baker, a labor market analyst with the state Labor Market Information Division. ‘It’s every county in the state.’”

“The mortgage meltdown also continues to be felt. RealtyTrac shows nearly 9,000 homes in San Joaquin County in some state of foreclosure — 1,537 in Tracy alone.”

“And there isn’t any immediate help in sight, as many in the real estate sector foresee a continued housing drain through 2008 and into 2009. Grace Alvarez, a real estate agent for 20 years in Tracy, expects another wave of adjustable loan trouble in the early summer.”

“‘Those folks are going to be in dire straits again,’ Alvarez said. ‘That’s depressing, but that’s just the nature of the beast.’”

“Now the county’s Achilles’ heel, falling housing prices could turn out to be the key to reigniting the area’s economic engine. ‘It’s the best thing that could happen,’ said Jeffrey Michael of the University of the Pacific’s Eberhart Business Forecasting Center. ‘It’ll get buyers back in and get activity going again.’”

“Lower housing costs present an opportunity for working families, as many who could only rent during the housing bonanza can now become owners. ‘I am so busy with buyers,’ Alvarez said. ‘Most of them are first-time buyers now, because now they have the opportunity to buy a home for the first time in their lives because the market has dropped so dramatically.’”

“John Solis, who is responsible for helping foster economic growth in San Joaquin County, also sees hope for the future. ‘Industries will continue to move into this area, because it lends itself for opportunity to growth,’ he said. ‘And the cost of real estate has gone down, and that will likely stimulate individuals coming into the area.’”

The Fresno Bee. “Investment groups and home builders are starting to buy excess lots from distressed developers in the central San Joaquin Valley, leading some observers to think the real estate slump may be close to playing itself out.”

“The practice is textbook and happens in every real estate cycle — the last time in the early 1990s. Developers wind up with excess lots after a booming market and want to get them off their books.”

“‘They are a liability to a builder until they build a house on it,’ said Robin Kane, a real estate analyst and broker in Fresno. ‘On every transaction where there is a loser, there also is a winner.’”

“John Trotter hopes he’s one of those winners, and he’s gambling that his read on the market will pay off. ‘We think the bottom is near,’ said Trotter, senior VP of San Diego-based Capstone Advisors.”

“The company is financing acquisitions and buying land to hold until prices rise, and then plans to sell it back to developers. ‘We hold for three or four years and wait for a recovery,’ Trotter said.”

“Capstone has completed two deals, spending about $20 million, and is considering more. Trotter has looked at deals in the central San Joaquin Valley but hasn’t completed any.”

“Prices of raw land in Fresno have fallen 30% to 40% over the past several years, making them more attractive to speculators. And finished lots also have declined in value.”

“Longtime Fresno builder John Bonadelle said he bought land in the Fancher Creek project from Dallas-based Centex Homes last year. Centex officials declined to comment. In Sacramento, privately held Elliott Homes Inc. paid $10 million for 400 acres of excess land last month.”

“Financial institutions foreclosing on land will be the next big sellers of subdivisions, analysts said. ‘The foreclosures are starting to happen,’ said Eric Segal, a real estate appraiser in Fresno. ‘A number of properties have been in default and gone to auction.’”

“The tough times also allow small companies with low overhead to offer more. Purchasers at Elizabeth Heights in Fresno can buy a house ranging from 1,536 square feet to 1,932 square feet for $199,900 to $230,500. The homes have tile entries, larger secondary bedrooms, a tankless energy-efficient water heater and lots of storage.”

“At Laurel Tree in Fresno, buyers can choose from six models ranging from $189,950 to $329,950. With standard features such as tile floors, maple cabinets, tankless water heaters, kitchen appliances, backyard landscaping and finished garages, the houses go way beyond what most first-time home buyers get.”

The Daily Press. “The housing slump has driven several local suppliers of construction materials out of business, and those who remain are hard pressed to find customers for their wares in the High Desert. Supplies of lumber, glass and cement have outstacked demand in the Victor Valley and Buck Byers, co-owner of Barr Lumber in Victorville, said the many unsold houses in the area are to blame.”

“‘Until that God awful number of unsold houses diminishes, I wouldn’t look for too much change in Victor Valley,’ said Byers, who started working in a lumber yard in 1974 and now owns six Barr Lumber locations.”

“Byers thinks the housing recession between 1991 and 1994 lasted longer in Southern California also because of unsold, overpriced houses.”

“‘There’s way more people to supply lumber than there are construction customers for lumber, so glass and windows have got to be in the same jam,’ said Byers. ‘Almost every segment of construction supply is.’”

“After closing its doors in Barstow and Hesperia, H&E Hardware closed its final store recently in Victorville, where All-Star Materials masonry yard also recently went out of business. This came as a shock to fellow Victorville hardware supplier Ron L. Reyes, owner of A&L Builders Supply since 1977.”

“‘Ever since the housing market failed everything went with it,’ said Reyes.”

“Byers expects building suppliers should dig in for low sales into mid-2009. ‘All of them seem to last about a year, but this time we pushed prices to an all-time high so it might last longer,’ said Byers. ‘We’re coming off of the best demand you’ve ever seen from 2004 and 2005, when people were begging for lumber and glass, and now you need to beg to ship to them.’”