The Housing Bubble

The Tampa Tribune reports from Florida. “The three-bedroom, 1,484-square-foot ranch house needed some work, but it had a big family room and a large back yard. Most important: Javier and Esmeralda Arroyo qualified for a loan on the $166,900 home…after being turned down for loans five times in a year. About a year later, the excitement started to fizzle.”

“The Arroyos couldn’t have known how bad their timing was when they signed mortgage documents in July 2006 for the home in Plant City. That month was the absolute height of the local housing market. In August, prices in the Tampa Bay area started falling, and they haven’t stopped.”

“The couple were notified in December that the interest rate on their mortgage will adjust in September. The Arroyos, who speak primarily Spanish, say they didn’t understand they were signing up for an adjustable-rate mortgage.”

“‘I guess that’s why we qualified,’ Javier said, shaking his head.”

“Robert Ramirez awoke in the middle of the night to clanging metal and a rumbling moving truck in the back yard next door. Evicted neighbors loaded their belongings and fled the two-story stucco home.”

“They left doors and windows open, and trash and debris strewn across the lawn. It has been eight weeks, and no one has shown up to take care of it.”

“‘This used to be a really nice, close-knit community,’ Ramirez said. ‘Now, with that house here, there’s no way I could sell my house. I’m stuck, and my property value is falling.’”

“The effects of the foreclosure wave can be seen just inside the entrance to Lakeside. There are 16 homes with for-sale signs, and rent signs line streets. A pile of household trash and an old mattress are stacked at the curb in front of one house, the molding evidence of homeowners vacating in a hurry.”

“Signs advertise homes as ‘pre-foreclosure’ and ’short-sale’ deals.”

“Such scenes already frighten potential buyers who come looking for a deal on their next home. ‘We get a couple streets into the neighborhood, and the client asks me to turn the car around,’ said Frank Monte of Monte Real Estate.”

“When Ramirez bought his home in 2004, he said, all of his neighbors knew one another. Life was good for about two years. Then the housing market tanked as many of his neighbors absorbed skyrocketing payments from adjusting mortgage rates and rising insurance premiums. To avoid foreclosure, some sold their homes in fire sales. Others walked away.”

“The house next door to Ramirez’s went into foreclosure in December. Renters moved in shortly thereafter. Two weeks before they left in the night, he says, he found them stealing water from his garden hose.”

“Ramirez paid $140,000 for his house and recently had it appraised so he could refinance for a better interest rate. He was turned down.”

“‘The guy from the bank said I’m about $20,000 in the hole,’ Ramirez said. ‘He said I’d probably be OK if the house next door didn’t look so bad.’”

“The Tampa-St. Petersburg-Clearwater area had 4,773 foreclosure filings in May alone. That was up 15 percent from April and 29 percent from the same month last year.”

“Along with the construction of homes, the foreclosure spike is contributing to a housing glut that has depressed prices. The median sales price in the area was $176,100 in May, down 16 percent from $209,300 a year earlier.”

“The Greater Tampa Association of Realtors says there is a 15-month inventory of homes on the market in this area, compared with one to two months in 2004-05. One key to a housing turnaround would involve removing a big chunk of the 19,800 listings on the local market.”

“Returning homes to mint condition and targeting an audience of family owners and occupiers is a trend that has developed in recent years, says Robert Klein, CEO of the nation’s largest mortgage field services company.”

“‘You used to put signs out that would say ‘REO Foreclosure,’ hinting, ‘Hey, come on in and get a bargain on me,’ Klein says. ‘We’re now well aware that the answer is not simply to sell to a flipper. You sell to a flipper right now, and in three years it’s right back where it was.’”

The Herald Tribune. “Sarasota attorney John Yanchek has been found guilty by a Florida Bar referee of violating seven Bar rules, including engagement in dishonesty, fraud, deceit or misrepresentation.”

“Yanchek is best known for assisting real estate investor Neal Mohammad Husani in a series of real estate deals from 2004 to 2006 in which land prices were vastly inflated, enabling Husani and his partners to obtain tens of millions of dollars in mortgage loans.”

“Testifying on his own behalf, Yanchek said his misdeeds occurred during a short period of time when the real estate world was booming and he became overburdened with work.”

“‘It was just me and two secretaries,’ Yanchek said. ‘I couldn’t keep up with it all. That probably had something to do with it.’”

“Yanchek added that by signing letters saying he was in possession of escrow money he did not have, he ‘destroyed’ his life. ‘I’ve lost almost my entire practice,’ Yanchek said. ‘If there was a way for me to erase the past two and a half years, I would.’”

“Since March, the number of homes listed for sale in the Sarasota MLS has dropped by 12 percent, or nearly a thousand homes. That still leaves more than 7,000 homes on the market, about three times the normal number.”

“As recently as December 2007, however, the Sarasota MLS showed a glut of about 140 weeks of inventory on hand. As of early June, that figure had dropped to 82 weeks and kept falling.”

“Helping fuel sales is more realistic pricing on the part of sellers, who appear to be getting the message that the boom is dead and buried. Buyers are looking, but many are looking for deals, and all are being discriminating about price. Adding to the mix is a wave of foreclosure sales that are further bringing prices down.”

“In 1994, the median price in Sarasota-Bradenton was just $94,000. Two years later, it crossed the $100,000 threshold, rising to $102,000. By 2000, it had grown to $138,500. The year-end median sales price in 2003 was $189,700, according to Florida Association of Realtors data.”

“By the end of 2004, it had skyrocketed another 29 percent to $244,100. The bubble had arrived.”

“The biggest jump was yet to come. In 2005, the median price rose 32 percent to $322,700.”

“‘It wasn’t a lot different than the dot-com bust,’ said Jody Hudgins, executive VP of First National Bank’s Florida region. ‘It was greed; it was unsustainable. You had easy, irresponsible mortgage money leading to an inflated demand, and you had people who were able to buy and sell their homes for profit without even trying. People were drinking the Kool-Aid.’”

The News Press. “While a slumbering economy has only exacerbated the problem of a housing market riddled with oversupply, the byproduct for golfers has been one of the most attractive golf summers in recent memory.”

“Magnolia Landing, which opened in February 2007, did not advertise for public play in its first summer of business. This summer, though, like many other clubs, it’s taking outside play for as little as $30 while also waiving its $5,000 membership fee in 2008 for home buyers.”

“‘We were trying to sell exclusivity, but it’s hard to sell people on a notion if they haven’t seen the product,’ said Magnolia Landing general manager Jim Whitmore. ‘For us it’s definitely about exposure. We are real estate driven as opposed to membership or golf-revenue driven. Our goal is to sell homes.’”

“A seasonal resident from Michigan, Rollin Bondar has seen firsthand the effects of the slumping economy in the Detroit area.”

“‘I have so many people who have gone out of business it’s scary,’ said Bondar, who lives in Burnt Store Marina but is looking to move if he can sell his condominium. ‘The economy is terrible up here. It’s affected the golf. The country club I belong to here is probably one of the finest in the state. It’s gone from $50,000 to join (to) $5,000.’”

“Back in Florida, he’s seeing the same results of a slowed housing market and glut of golf course communities.”

“‘The economy has affected everything,’ said Bondar, who similarly bounced around a half-dozen private courses in the area before settling on Magnolia Landing to buy a membership. ‘The price was right.’”

“A growing sense of unease, caused by fallout from the current economic slump and the struggle to make ends meet, is seeping into the middle class. In Florida, the uneasiness can be seen in the June drop in the state monthly consumer confidence index to its lowest level. The previous low was in December 1991.”

“Dawn Blauvelt of south Fort Myers feels the uneasiness. ‘My husband and I are in the construction industry and therefore we are affected a lot by the economy the way it is, and have had to make drastic lifestyle changes in order to survive,’ she said.”

“The couple’s business is surviving, but they cut their employees from 130 to 20. ‘You almost turn numb over time,’ she said. ‘It was a big blow. When we went south we went fast.’”

“They still have their home. But they sold extra vehicles like a car and boat. They took their three children out of day care. Blauvelt became a stay-at-home mom, because it’s more economical. ‘We plan to do whatever it takes,’ she said.”

One positive aspect is that when people share a universal cause or condition, their depression and stress can be eased by the knowledge that they’re all in this together, said Dr. Frederick Schaerf, an area psychiatrist.”

“That helps Blauvelt. ‘To know we’re not alone - it’s comforting,’ she said. ‘It’s nothing we did wrong. It’s been out of our control.’”

From WINK News. “Joseph Cardona has lived in his Habitat home for the past three years. ‘It’s a great deal. The house is very comfortable,’ Cardona said.”

“Cardona helped build his own Habitat home, as well as the Habitat house next door. That home is now empty because its in foreclosure. ‘It’s pretty bad,’ Trisha Goins, Habitat for Humanity of Lee County said.”

“Goins says tenants are losing their jobs and not paying their mortgage, so the agency has no other choice but to foreclose on the owners. The price of a Habitat home is in the low one hundred thousands. The monthly mortgage rate is 30% of the owner’s yearly income.”

“In exchange for the hours worked, the owners get a 0% interest mortgage, but Goins say even that has become tough to pay. ‘It’s very scary to see that families are put in a situation where they can’t even pay on a zero interest mortgage,’ Goins said.”

The News Journal. “They offer potentially lucrative returns. But sales of tax certificates — property liens for late taxes — have dragged this year in Volusia and Flagler counties.”

“In Volusia County, more than 2,200 certificates were unsold after two online sales. In 2007, a single sale left only two of 14,911 certificates unclaimed.”

“‘It’s a trend that’s not just with Volusia County,’ said Sally Bruner, Volusia County’s revenue tax manager, of this year’s number. ‘It’s statewide.’”

“Flagler County Tax Collector Suzanne Johnston said she thought large-scale institutional investors had less money to spend this year and were less likely to buy vacant parcels. In Seminole County, Tax Collector Ray Valdes said smaller investors hadn’t been prepared to move into the vacuum created when big players came in with less cash.”

“Still, although almost 1,000 certificates were unclaimed after the county’s first sale, all but a dozen or so were bought in the second, he said. ‘This is my 20th year,’ Valdes said. ‘We’ve never had to do more than one sale.’”

“Roseann Javurek, a Daytona Beach-based Realtor who has been investing in tax certificates for years with her husband, said returns appear to have slowed and investors are leery.”

“‘I still think it’s a great investment, but I think the economy truly has taken its toll,’ she said. ‘I don’t think people have the extra income, if you will, or don’t want to spend the extra income on certificates, even though they are a good return.’”

The Destin Log. “Last week, Destin developer Peter Bos sat down for an interview with the editorial board of the Northwest Florida Daily News. Over the past three decades, Bos has been at the center of a number of upscale developments on the Emerald Coast.”

“BOS: ‘I think we’ve had some horrible growth in the last 25 years. I think what happened was this spike in demand, where a second home became everybody’s entitlement, and financing was readily available.’”

“‘And we had an explosive mark at rental, too, which helped subsidize the carrying cost of these homes for people. I think we ended up with a lot of people developing who really shouldn’t have been in the development business.’”

“‘If you could pre-sell something, and it’s all sold, the next decision after the sales were done was to sit down and decide what you could take out of the building, because it wasn’t promised, because it would fall right to the bottom line. ‘We didn’t promise the pool furniture - outta here. We didn’t promise them tile in the hallways - outta here.’”

“‘We ended up with a whole lot of development that in my opinion was extremely low-quality development.’”

“DN: Real estate sales along the Emerald Coast have plummeted from where they were in 2004 and 2005…Has it been as tough for you as it has for everyone else in real estate?”

“BOS: ‘I think that whenever everyone stopped smoking dope or smelling ether or whatever was going on driving 30 or 40 percent appreciation numbers, all of us knew that would not sustain itself.’”

“‘However, we did not anticipate the pullback and the speed with which it pulled back. We were all making changes and adjusting, but we never anticipated the speed at which everything would literally stop. It didn’t slow down; it stopped.’”

“DAILY NEWS: Where do you foresee the trough, the point where (real estate) hits bottom or starts going north?”

“BOS: ‘I need to put this into context. If you asked me last year, I would have thought we’d already been there. I was absolutely convinced of it. Now that I’ve destroyed my credibility on predicting, it’s my opinion there’s a lot of signs out there that we’re already there.’”

“‘I don’t think ‘there’ - meaning at the trough - is a constant, though, across the board. I think there are products out in the marketplace that are going to be very difficult to sell going forward and I don’t know how low they go, because their only way to compete is price.’”