The Housing Bubble

The Sun News reports from New Mexico. “Kevin Romney has been trying to sell his house in Las Cruces since 2007. He believes he would have had an easier time moving the property had he put it on the market a little sooner. ‘We’ve had it on the market several times for about a year,’ the 54-year-old Las Crucen said. ‘We started selling ours right when everything was really starting to dip. We just got a late start on it.’”

“Real estate agent Gailen Hooper said different priced homes seem to selling at different rates. ‘The lower-priced homes are selling,’ he said. ‘It’s once you get up to $300,000 and $400,000, those are taking a while.’”

“Don Schroeder has a new house for sale on the East Mesa that he built with a partner. He said it’s been on the market for about six months. ‘It’s been slower than I would have hoped,’ he said.”

The Arizona Daily Sun. “Local homeowner Bill Cherry grew frustrated watching his home sit empty for more than nine months while it was on the market. His huge, sprawling house nearly sold twice last fall, but the deals fell through at the last moment. As snow began to descend on his empty driveway this winter, Cherry found himself regularly paying for a plow on the hope buyers might tour his home. ‘It is a little like hemorrhaging money,’ he said.”

“He turned to Matt and Ryian Brydenthal, a husband and wife Realtor team specializing in property management. Ryian said part of the demand for renting a home in Flagstaff is that it is cheaper on a monthly basis than purchasing.”

“‘They can rent a place, for instance, in Boulder Pointe for $1,650, where to purchase the same home in the high $300,000 to $400,000 range — their payments would be a lot higher,’ Ryian said.”

“For comparison, the average monthly mortgage payment for a $380,000 home with a 30-year loan at 6.5 percent interest would be $2,400. ‘People without a large down payment are able to get more house for their money if they choose to rent,’ Matt added.”

“For Cherry, his home is still listed for sale. He said he is unwilling slash the price of his home to force a sale. ‘I won’t have a fire sale,’ he said.”

The East Valley Tribune from Arizona. “Crashing home prices have sent dozens of units in a Scottsdale luxury loft development tumbling into foreclosure over the past year and a half. Since early 2007, lenders have foreclosed on 33 of the 84 units in downtown’s Third Avenue Lofts.”

“The project’s troubles mirror a Valleywide epidemic. Tens of thousands of properties have entered the foreclosure process this year with more than 3,000 actually being foreclosed on so far in June.”

“‘People were over their heads,’ Scottsdale real estate agent John Wake said.”

“Price drops at the lofts have been severe. In one case, a 905-square-foot unit was purchased for $369,277 in 2005, then resold a year later for $950,000, according to data from the Arizona Regional MLS. The property was eventually foreclosed on and sold in April for $289,900.”

The Arizona Republic. “A celebrity chef was planning the menus, brides were negotiating room rates and 250 staffers were on the payroll. But four months before Hotel Monroe was scheduled to open, its lender went bankrupt. It’s unclear what the future holds for the hotel and an entertainment district, two high-profile downtown Phoenix projects tangled in Mortgages Ltd.’s web of legal and financial woes.”

“‘This one hurt, bad,’ said Jonathan Vento, a principal at Grace Communities. The developer is also wrapping up construction on 44 Monroe, a 34-story condo tower a block away from the Hotel Monroe.”

“Developments that have ‘end users’ are easier to finance than housing, which involves more speculation, said Larry Lazarus, a veteran Valley development attorney working on the Jackson Street project.”

“Lazarus is also an example of how the Mortgages Ltd. debacle has permeated the region’s development circle. He invested in the firm, as did his parents, friends and some former clients, the lawyer says.”

“The economic slump has all but shut off the credit tap for many commercial projects, said Anthony Sanders a professor at Arizona State University. ‘I would love to see downtown Phoenix blossom,’ the professor said. ‘Right now, it’s not a sure thing that downtown Phoenix will be like downtown Manhattan.’”

The Review Journal from Nevada. “As a time clock set by Clark County runs down toward a Tuesday deadline for the Meridian Luxury Suites to cease short-term rentals, it appears the condo property is still taking overnight guests. The county says the Meridian is running an illegal hotel operation, and has ordered it to stop.”

“Two Meridian residents said the condo project is still operating as a resort, despite the county’s warnings. ‘It’s still renting. Bellmen are walking around and driving around. All the cleaning people are going unit to unit,’ Kathleen Mannix said.”

“Her permanent home is the Meridian unit she paid for in full before moving to Las Vegas in May 2007. Mannix said no one informed her at the time of her purchase that any of the units would be leased for periods of less than 31 days.”

“According to a county report, the Meridian has 678 units but only about 12 owners living in their units.”

“Most of the 50 or so people gathered May 18 around a Meridian swimming pool were short-term paying guests. Many praised the Meridian’s rates, which ranged from $119 to $169 for a two-bedroom ’suite,’ according to Kirk Wayne of Melbourne, Fla., who was in town for a convention.”

“But not all investors want the hotel operation halted. Las Vegan Ron Chapman, who with his wife owns two Meridian units, has contacted fellow owners by e-mail in support of the hotel, to urge them to protect their investments. Both his units are in the pool for short-term rental.”

“Chapman, a real-estate agent, also has clients who bought at the Meridian as an investment.”

“Almost 6 percent of the units at the Meridian are either in foreclosure, are being sold at foreclosure or are being sold ’short,’ said Michael Mackenzie, president of the Meridian Private Residences Homeowners Association.”

“The Meridian units are now worth only about 50 cents on the dollar, Mackenzie said.”

“In his e-mail, Chapman said the Meridian fell victim to the real estate downturn. ‘It’s no secret,’ he wrote, ‘that the Las Vegas real-estate market has given back most if not all of its gains, and that homeowners’ equity …. over the past two years, including Meridan’s, has vaporized.’”

“In another indication of economic hard times, Vestin Group’s two mortgage loan real estate investment trusts announced that they are suspending their dividends because of weak financial results. The two REITs, Vestin Realty Mortgage I and II, together have $393 million in assets and typically make short-term commercial mortgage loans to developers willing to pay double-digit interest rates.”

“Under law, the REITs must pay out 90 percent of their taxable income, but the announcement indicates that the REITs’ income is being reduced by nonperforming loans, loan write-downs and the expense of defending the company in lawsuits. Analysts say realty loan problems pervade the financial markets in Southern Nevada.”

“‘The whole entire country, real estate, is having a tough time,’ said Mike Shustek, CEO of Vestin Group. Shustek said he has been investing about $40,000 a week in Vestin shares and is increasing the amount to $50,000. Over the last year, he estimated he has invested more than $2 million in the shares.”

In Business Las Vegas from Nevada. “Las Vegas’ land market has crawled to a virtual standstill and prices continue to fall. Only two of 15 properties on the block at the June 17 Bureau of Land Management auction received offers, and the winning bids reflect how far the market has fallen.”

“Nava Properties paid $252,000 for 2.5 acres of residential land near Blue Diamond Road, a price of $100,800 per acre. The going price per acre in that area two years ago was $650,000, land analysts say.”

“Also near Blue Diamond Road, Phil Davis paid more than $1.9 million for five acres of commercial property. The $385,200 per acre is well below the market price two years ago when similar land would fetch more than $1 million an acre, said Craig Cherney, head of West Coast operations of American Land Fund, a private real estate acquisition fund.”

“‘It shows me the direction we are headed,’ Cherney says.”

“In May, one residential land sale is believed to be helping set the market. DBSI, an investment group, reportedly paid $289,000 per acre for 21.7 acres zoned for 15 units an acre in Providence, Focus Property Group’s master-planned community in north-west Las Vegas.”

“That’s a dramatic swing in prices - buyers were paying more than $750,000 to $850,000 two years ago, Cherney says.”

“There are even fewer deals in the pipeline now, says Derek Rafie, CB Richard Ellis’ first vice president.”

“The land market could be facing its own foreclosure problem just like the housing sec- tor, Rafie says. Property owners are negotiating with banks to delay payments or extensions, but banks are starting to take control of properties with the hope they can sell to foreign buyers, he says.

Property owners are arguing that the market is down, and banks should wait for it to improve to recoup money rather than take it over and try and dump it. Property owners are telling the banks they know their sites best.”

“But that argument may not be winning over lenders that appear ready to take back land and sell it to get it off their books, Rafie says.”

“The poor shape of the housing market will continue to wreak havoc with land sales, Rafie says. With concerns that housing foreclosures will continue to rise into 2009, that will dampen the need for raw land to build homes.”

“‘It has been extremely slow. The only buyers looking out there are those who can purchase it heavily discounted,’ Rafie says. ‘They are taking their time to see what’s going to happen in the market. They think, ‘Why buy now when it may go down more?’”

The Salt Lake Tribune from Utah. “Zions Bank now owns the 3,000-plus acre SunCrest project atop Draper’s Traverse Ridge. A judge late Thursday afternoon approved the bank’s $25.3 million bid for the bankrupt property despite a long list of concerns from an attorney who argued that the property could garner more cash and better repay its investors.”

“Though he acknowledged that the mountaintop project’s value has likely declined in the midst of a bad housing market, creditors’ attorney David Leta argued SunCrest had surely not lost $25 million over the six months since a December 2007 appraisal, which pegged the scenic property at $51.6 million.”

“SunCrest consultant Bruce Baird testified that a foreclosure sale could mean the SunCrest Clubhouse would never open, the SunCrest Market would close shop, and it could mean the demise of the entire mountaintop project.”

“The developer’s Dallas-based bankruptcy attorney Bill Wallander said nobody is pleased that the sale did not cover the debts, but he praised property marketer Gary Nelson’s 71-day effort to attract bidders. ”

“Zions does not plan to develop the property itself, said spokesman Rob Brough. ‘It’s likely to take a bit of time for that to happen,’ Brough said. ‘But now that the judge has ruled and the sale is final, our primary objective is to get it sold. We’d like to do that as quickly as we can.’”