The Housing Bubble

The Press Democrat reports from California. “After selling just 16 homes in an entire year, Standard Pacific Homes is tired of waiting for a housing turnaround and aims to auction off the rest of its Santa Rosa subdivision in a single day. Today’s auction of 17 homes at Avondale is different in one respect: This is the first bulk sale of newly built houses in Sonoma County. Standard Pacific is resorting to an auction, in part because it must meet sales goals for shareholders ‘They have to make quarterly numbers and that’s obviously a driving factor. This is a strategy to move inventory,’ said Ken Stevens, CEO for the Danville auctioneer conducting the sale.”

“To deal with diminished demand, builders have cut prices as much as 25 percent to sell homes that have already been built. Builders now sell two to three homes a month, enough to possibly put a floor under price cutting.”

“‘The second half of 2007 was very dismal. But we’ve done what we needed to do to get houses selling again,’ said Rick Rosenbaum, VP of sales for Delco Builders, a Pleasant Hill builder with projects in Sonoma County.”

“By clearing its properties off its books, the builder stops the bleeding from mounting debt on loans to purchase land, develop sites and build homes, and other holding costs. ‘They couldn’t wait it out,’ Stevens said. ‘There’s six months worth of inventory sitting there and we can cut it off in a day.’”

“Standard Pacific would be pleased to get 70 percent to 80 percent of previous sales prices for its three-bedroom homes, which range in size from 1,284 square feet to 1,382 square feet, Stevens said. Homes are sold to the highest bidders once a minimum bid is reached. The minimums range from $195,000 to $215,000 for homes once priced at between $424,900 and $479,900.”

The Modesto Bee. “Modesto home builder Harinder Singh Toor hadn’t planned on being a landlord, but he’s become one because he hasn’t been able to sell what he’s built. Now he rents out eight custom homes, some as large as 5,400 square feet.”

“‘I built this house to sell, but I haven’t gotten a single bite on it in a year,’ Toor said about the empty five-bedroom, four-bath house on North Canyon Drive.”

“He had hoped to sell it for $1.2 million, but he’ll settle for $3,000 a month in rent, even though that will cover only about half of his carrying costs. Toor plans to rent out his properties until the housing market recovers enough to sell them. He’s not the only one.”

“There’s a flood of rental homes in need of tenants in the Northern San Joaquin Valley. One day last week, The Bee listed about 50 Modesto houses for rent, with rates ranging from $600 to $3,000 per month. ‘There certainly are a lot of good deals out there to rent a house,’ said Ben Sweet, who manages about 300 Modesto rental properties. He said many homeowners have started renting out property because they can’t sell. ‘We call them landlords by accident.’”

“Barbara Billington wishes more landlords were responsible. She owns 14 rental homes, and manages them herself. Her properties suffer when nearby rental homes are not managed properly.”

“‘I see Bay Area people who own property (in Modesto), and all they want is to put someone in the home,’ Billington said. Too often, she said, bad tenants aren’t screened out, which causes problems throughout the neighborhood.”

The Merced Sun Star. “A deep, dark, dirty swimming pool was abandoned in the backyard of a home in Merced. Pieces of cardboard and a decrepit soccer ball floated in its putrid water. But the worst sight was the carpet of tiny black creatures wiggling within it.”

“Pools have become a huge problem, especially this year. The rise in foreclosed homes, combined with people letting their own swimming pools fall into disrepair, has brought a large number of urban mosquitoes into Merced County, said Allan Inman, manager and entomologist for the Merced County Mosquito Abatement District.”

“The ongoing dilemma cities face is getting people to take responsibility for pools before they become stagnant. If someone still lives where a swimming pool has become a mosquito haven, the city or abatement district can contact the resident and tell them to fix the problem. But if a green pool is at a foreclosed home that has been empty for months — things get more complicated.”

City spokesman Mike Conway agreed that keeping the pools clean is the bank’s responsibility. But lenders aren’t often in the neighborhood to spot a potential problem. And banks can’t work with homes that have fallen into disrepair until they have legal possession of the property, said Andy Krotik, an agent for Gonella Realty in Merced and Atwater.”

“‘I get complaints on a fairly regular basis,’ he said. ‘By the time I show up, the house has already been foreclosed on and the pool’s already green.’”

“He submits a bid to the bank to get the pool clean, an approval process that can take weeks. ‘We are usually dealing with someone out of state with several thousand pools to clean up,’ Krotik said, adding that stopping the problem before it starts does not appear to be a possibility. ‘If someone’s losing their home, they are probably not going to take care of their pool.’”

The Bakersfield Califronian. “These days, areas of southwest Bakersfield subdivisions are works in progress. There are streets that look like construction zones; others, ghost towns. But as these snapshots reveal, go inside the block walls and there are people who don’t mind living a somewhat isolated existence.”

“Some residents who call these communities home like the elbow room. Carpenter Carlos Ortiz Castillo and his relatives moved to a home on a quarter-acre lot off McKee Road. He likes the quiet and, when he threw a big barbecue, nobody complained.”

“‘Where we lived before, the kids would play inside. They didn’t want to go outside hardly,’ Castillo said. ‘I think they feel more free.’”

“Life in nearby Windwood is ‘like living in the country and being in the city,’ said accountant Marianne Diaz, who was walking pups with her daughter across an empty field near Panama Lane and Buena Vista Road. When Diaz moved in around Labor Day last year, there weren’t many homes on her street for six or seven months. But she felt reassured because a security guard worked overnight, and that person was diligent about ensuring people in the neighborhood had a reason to be there.”

“There are likely residents living in newer areas with larger concerns than blowing dust. ‘I kind of view it as they may just be disappointed,’ Jim Eggert of the city’s planning department said. The housing market took major hits, and ‘the neighborhood they thought they were moving into just didn’t happen as quickly as they’d like. Obviously everybody wants to see the subdivisions built and people living in them.’”

The Daily Bulletin. “Nationwide foreclosure rates hit a record high the first quarter of this year - according to a Mortgage Bankers Association report released Thursday - and residents in San Bernardino and Riverside counties are living right in the middle of this phenomenon.”

“The news is good for some home buyers looking to scoop up deals, but others are feeling the harsh brunt of this troubled housing slump. Take Vicki Carpenter, for instance, a 17-year real-estate agent. ‘I’ve worked harder now than I ever have in 17 years,’ said the former president of the Riverside-based Inland Valley Association of Realtors. ”About 80 percent of my business is REO.’”

“REO is code for bank-owned, which happens after homeowners go belly up on their mortgages. Some experts say there’s another tidal wave of foreclosures will hit the market later this year, assuming it hasn’t already. It’s likely to push prices even lower, extending a vicious cycle.”

“Slumping home values are being blamed in large part for the rising tide of foreclosures. Troubled borrowers are left owing more to the bank than their homes are worth. They can’t sell without taking a huge financial hit, so they just walk away.”

The San Francisco Chronicle. “A cavalcade of the rich and famous is joining the Joe Six-Packs threatened with bank repossessions of their homes. Cheery TV sidekick Ed McMahon and former heavyweight champion Evander Holyfield this week became the latest celebrities ensnared in the worldwide credit crisis.”

“McMahon and wife Pamela ‘understand that they are in the same situation as hundreds of thousands of other hardworking Americans, and their hearts go out to them,’ a spokesman said.”

“From King of Pop Michael Jackson to Queen of Soul Aretha Franklin, plenty of superstars recently racked up real estate debts. Some played ‘make a deal” and got reinstated; some got kicked out; some chose to walk away.”

“She may not be a household name, but the California congresswoman represents the Golden State in more ways than one. Just like many constituents, she evidently bet big on the real estate boom - and lost. She’s had three houses in foreclosure proceedings in recent months. Her Sacramento home was sold at a foreclosure auction in March, while her properties in Long Beach and San Pedro went into default, according to press reports.”

“She caught up on payments for the Long Beach house and qualified for a loan modification on the San Pedro property. Richardson blamed the foreclosure on her lender’s ‘miscommunication’ and said she would pay almost $9,000 in back property taxes she owes.”

“Getting behind on his mortgage may be the most normal thing Jackson has done in years. His sprawling Neverland Ranch in Santa Barbara County, complete with train, merry-go-round and Ferris wheel, was due to hit the auction block this spring. In a last-minute reprieve, a private investment company swooped in and bought the loan. Press reports said the company wants Jacko to pay it back by staging an Elvis-style comeback in Las Vegas.”

“A couple of ugly divorces cost the former American League MVP some of the millions he racked up during his baseball career. Canseco could be a pitchman for walk-away homeowners. ‘It didn’t make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else,’ he said about his $2.5 million Encino home. ‘I decided to just let it go.’”

The Daily Breeze. “The foreclosure epidemic sweeping the United States has a silver lining - home prices have been pushed so low that charitable housing groups have been snapping up properties. Throughout Los Angeles, the Christian-based Habitat for Humanity, one of the best-known affordable housing nonprofits, has capitalized on homes that have hit their lowest prices in three decades.”

“‘We’re seeing opportunities to buy homes at less than what it would cost to build a home,’ said Erin Rank, CEO for the Greater Los Angeles chapter of Habitat for Humanity. ‘For the first time in five years, we’re seeing single-family homes listed for under $200,000.’”

“The local chapter of the ecumenical nonprofit, which finished building 16 homes in San Pedro in late 2007, purchased two existing homes in Lynwood. The organization is eyeing more than 50 other homes throughout the region, many of them bank-owned foreclosures, officials said.”

“Depending on the property and scope of the work, the organization will use volunteers to either refurbish the homes or tear them down and build new ones. ‘Some of these homes have sat on the market for well over 60 days,’ Rank said.”

“Home prices have plummeted about 21 percent in the Los Angeles region since March 2007, according to a report last month from the S&P/Case Shiller home price index. In some areas, prices have fallen as much as $100,000 over the past 12 months.”

“The San Fernando Valley Chapter of Habitat for Humanity is also closing in on a sizable piece of property in Pacoima, officials said. The low price stems from a developer selling off portions of the land at a reduced price because of the foreclosure crisis, said Donna Deutschman, executive director.”

“‘We probably would have never gotten this opportunity otherwise,’ she said, adding that the organization is watching the market for other deals.”