The Housing Bubble

It’s Friday desk clearing time for this blogger. “The construction industry has been hit particularly hard. Sites that were once vibrant areas of future planning are now just desolate fields with a lot of people out of work. And the construction industry is one that Barbara Hartman, of the Career and Service Center of Southwest Florida, says stands out. ‘The other person in that family is required to get back to the work force to earn money,’ said Hartman.”

“Marijah Gruszewski hasn’t worked in seven years. She said for a while, it was all going just fine. Now, she’s ready to team up with her husband in the working world to get it all back. ‘We had a house, we had a brand new car, and we actually lost it all last year,’ she said. ‘We’re taking it day by day. Hopefully something will come through for us.’”

“Ivy Hernandez once had a job in the mortgage industry. About three years ago, after living in Norwalk her whole life, Hernandez bought her first home in Ansonia - with the help of a subprime mortgage. She is eight months behind on mortgage payments and facing foreclosure.”‘

“It’s hard,’ said Hernandez. ‘I have four kids.’”

“The average price of a single family house in New London and Windham counties dropped more than $67,000 in the second quarter compared to the same time last year, according to the Eastern Connecticut Association of Realtors. The past three months saw the fewest units sold for the least amount of money than during any other second quarter in the past five years.”

“Broker Camille Taylor said bringing buyers and sellers together has been tough lately. ‘Buyers are hesitating and they’re making the biggest mistake when they hesitate,’ she said. ‘They think every seller will give their house away, and they won’t.’”

“Bob Zarnetske, a Norwich real estate attorney and member of the City Council, said he’s had few closings on his schedule and plenty of clients seeking protection from foreclosure.”

“‘It’s obviously a lot more fun to work with people who are realizing a dream,’ he said, ‘than to work with people who are fighting to keep it from dying.’”

“The real estate bust has cut sharply into the revenue of the Martha’s Vineyard Land Bank for a second successive year. Eleanor Wilson of a multiple listing service, said the land bank numbers are consistent with what Island real estate agents are seeing.”

“‘The Brazilians were shoring up that bottom end,’ Ms. Wilson said. ‘But a lot of them are leaving. I’m showing a 21 per cent drop between the first quarter of 2007 and 2008 in sales.’”

“Agent inventories were down over the year by 11 per cent, from 550 unsold properties to 449. ‘Those were the people who just put their properties out there, hoping someone would be dumb enough to pay the asking price, saying ‘I’m not going to sell my house if I can’t get absolutely top dollar for it’ she said.”

“Austin realty companies say the city’s market is still strong despite a dragging national real estate market. Starting this fiscal year, there has been an increase in the housing surplus in West Campus, said agent Mike Bolduc.”

“‘Every year in the last three years, there’s been 1,000 or more new units,’ Bolduc said. ‘This year, there’s probably more like 2,500 new units, and suddenly there’s a lot of leftovers.’”

“The Australian Bureau of Statistics figures showing slumping building approvals have sparked fears of a price and rent explosion that will price even more prospective buyers out of the market. The ANZ’s senior economist, Paul Braddick, said yesterday that Australia faced a critical and potentially chronic shortage of housing.”

“‘A growing housing shortage is setting the scene for the mother of all housing booms,’ Mr Braddick said. ‘Underlying housing demand is already outstripping new supply, and the gap is set to widen sharply, driving pent-up housing demand to record levels.’”

“There may be rumours of a condo slowdown in urban Toronto, but just west of the city a new demand for urban-style projects is changing the skyline and the landscape. Last week, Amacon developers released both of its new buildings as part of the Parkside Village project in what it says is an ‘unprecedented move’ to sate the appetite for urban living in Mississauga.”

“‘People were standing out in the rain waiting for them,’ said said Debbie Cosic, sales broker for Parkside Village. ‘Amacon didn’t want them to come in just to see a sea of red dots, and think that everything had been sold.’”

“There has been an ‘unprecedented’ number of houses going on the market in Saskatchewan in recent weeks, according to the Canadian Real Estate Association. ‘Record numbers of new listings are creating more balanced resale housing markets in many centres, and nowhere has this trend been more evident than in Regina and Saskatoon,’ the association said.”

“It’s a different market than it was a few months ago, agrees Gord Archibald, the executive officer of the Association of Regina Realtors. Buyers in Regina are now rarely bidding up above the asking price, Archibald said. Even if the overall number of sales is down, it isn’t necessarily bad news for sellers, he said.”

“‘The average price is holding, so we’re not seeing a retraction as far as property values are concerned,’ he said.”

“A survey real estate company First National New Zealand suggests more homeowners are choosing to rent their properties rather than sell them and receive a low price.”

“Rowan O’Connor…the Auckland-based owner of three rental properties said he first had his three-bedroom Langholm house on the market at $274,000. But after dropping $20,000 from the asking price and still getting no joy, he decided to hang on to it ‘for the time being.’”

“‘We had some tenants in there who left it in a pretty average condition and [we] did it up really nicely,’ he said. ‘We figured it was better to sell than get tenants in to do the same thing again but it just didn’t happen.’”

“A property investor who bought a flat for £175,000 at the height of the housing boom has ended up in a negative equity nightmare after its value nosedived by almost 50%. Maurice Conroy, who owns a string of buy-to-let flats, bought the studio in Pimlico last summer.”

“”It’s like being hit in the stomach,’ he said. ‘It’s the biggest drop I’ve heard of and I scan all the property news. A £95,000 drop - that’s 50%. Even if it sold for £100,000 that’s 40%. I questioned the agents and they said they cannot value it at more than £1,000 a foot.’”

“The flat is 120 square feet. Mr Conroy and partner Caroline Faulkner secured it after a bidding war last August. Its original asking price had been £150,000.”

“‘Two bids came in at £160,000 and because we wanted it we decided to go for £175,000,’ he said. ‘At that time it only meant an extra £20 or £30 a month on a mortgage. I had it valued soon after and was told it could make £225,000.’”

“Sean Williams, assistant manager of Hamptons in Pimlico, said Mr Conroy had been a victim of last year’s overheated market. ‘Things got rather silly last year. I am amazed there were even bidding wars going on for that property at that sort of level,’ Williams said.”

“As much as Kelly Moriarty and her daughter Riley love looking at flowers in their front yard, the family is still trying to sell their Eagle-Vail home. Living in a resort mountain community near Vail, the Moriarty’s thought housing prices there wouldn’t be affected by the national housing slump.”

“However, after putting their house on the market this winter, like many other homes in Eagle County, it has yet to sell. ‘Nothing is really moving,’ said Moriarty. ‘We started around $700,000 and dropped it to $685,000 and now when it’s by owner we dropped it down to $619,000.’”

“Now, the plan is get the home to sell faster so they can move nearer to family, preferably where there are still some flowers. ‘If we don’t have flowers were not going to do well,’ said Moriarty.”

“Why is it that nobody in Vancouver is willing to admit that housing prices are starting to drop? The growth cycle that housing has experienced over the last seven years is in no way sustainable, given the household income of people in Vancouver.”

“Personally, I put the blame on realtors for lulling everybody into a fantasy world in which home prices will always rise. There are countless cities where you can buy a beautiful 2,500-square-foot home for well under $400,000, while the same home in Vancouver would cost more than twice as much.”

“To all of the buyers out there in the market, please don’t make things worse. Don’t be afraid to under-bid. We’re no longer in a sellers’ market. Don’t let pressure from your realtor force you to pay prices from six months ago.”

“The former BBC economics editor Evan Davis said yesterday that journalists could have done more to warn the public about the credit crunch that triggered the current housing price crash.”

“Davis, now a presenter on BBC Radio 4’s Today, said the media may have helped to drive up the market by over-reporting statistics on rising house prices in the runup to the credit crunch crisis.”

“‘I do ask whether we did our best to warn people of impending problems during the upswing of the [economic] cycle,’ Davis said at the Radio Festival in Glasgow. ‘My line is, ‘My God, we tried’, but when everything is going well people don’t want to hear it.’”

“The rapid job growth that prompted thousands of families to move to Northwest Arkansas during the past several years has slowed significantly during the past year. It makes it harder to sell homes in an already weak real estate market.”

“‘We used to talk about how Northwest Arkansas was recession-proof or insulated from what happened nationally,’ Jeff Collins of Streetsmart Data Services said. ‘It’s just obviously not the case.’”

“‘Back in 2004 and 2005, we were noticing the disparity between supply and the number of houses that could be absorbed that could reasonably be absorbed,’ Collins said. ‘Some folks argued that the reason (for the region’s housing woes ) was because we were spreading bad news.’”

“America’s birthday party might be a little gloomy today. By many measures, it has not been a good year for her. She suffers from a bad economy brought on by a lingering housing crisis, lost jobs and rising unemployment.”

“Yet, it would be wrong of her not to celebrate. Today commemorates the birth of a grand experiment, the notion that people living in freedom are happier, more productive, more innovative, and better able to reach their potential.”

“America should draw comfort and hope from both its past and its present. She has overcome much greater problems before. And she has a wealth of resources to battle today’s.”

“The most important of those resources are her people and her freedom; a freedom that was declared 232 years ago today. No matter her predicament, America must always celebrate that.”