The Housing Bubble

The Orlando Sentinel reports from Florida. “More than 2,100 homes in Lake County have fallen into foreclosure through the first half of 2008, making this a record year for mortgage defaults in just six months. The unofficial total of 2,191 foreclosure filings through the end of June shattered the county’s previous 12-month mark set last year, when lenders foreclosed on 2,080 properties. And it’s getting worse.”

“When the onslaught began last year, many of those defaulting on mortgages were ‘flippers.’ But more recently, people receiving foreclosure notices are victims of the economy — they have lost a job or can’t afford gas and still make the house payments, said Shannan Buttner, whose company, based in Umatilla, delivers foreclosure notices.”

“‘I had a woman tell me she’s working two jobs but just can’t make it anymore,’ Buttner said.”

From TC Palm. “Nearly 1,800 Treasure Coast homes went into some state of foreclosure in April, according to RealtyTrac. Every Treasure Coast community has seen a home left neglected because of foreclosure, but more than 80 percent of the foreclosures were in St. Lucie County.”

“Meanwhile, the flood of foreclosures has clogged the court system so badly it sometimes takes a year or more for the bank or lender to take possession of the house. Finding someone to take responsibility for the house in the intervening months is a challenge.”

“Even when banks care for the property, they still are absentee landlords and the problems of neglect often reoccur. SunTrust Mortgage, for example, cleaned up the home at 11 Cache Cay in Vero Beach early in the year. But by February, the same code violations - tall grass, green pool - were back to irritate neighbors.”

“‘Obviously, the banks want to put as little money into these properties as possible because they’re looking to get rid of them,’ Martin County Code Building Official Larry Massing said.”

The Palm Beach Post. “Reggie Capiro had reached his breaking point. Gas prices were climbing ever higher, and his 200-mile round-trip commute from Palm City to Miami had become too costly and too grating.”

“So in October, he and his wife decided to move south and put their three-bedroom, three-bath Palm City dream house on the market.”

“They hoped to find a buyer willing to pay at least as much as the balance on their mortgage. The Capiros paid $406,000 in 2003 but owed about $440,000 after refinancing to pay down credit card debt. They got into a bigger hole than expected when Reggie’s commissions as a Martin County boat salesman dried up after the 2004 hurricanes.”

“He and his wife petitioned their lender for a short sale. About six months later, Wells Fargo Home Mortgage and its servicing company have yet to accept an offer. Instead, the Capiros’ home is on the brink of foreclosure and scheduled to be auctioned on the courthouse steps July 15.”

“‘If one or more of these stakeholders says the offer price is below fair market value - or the minimum amount they are willing to accept in a short sale - Wells Fargo has no choice but to communicate the offer is denied,’ the bank said in an e-mailed statement.”

“Reggie Capiro worries about the blemish a foreclosure will leave on his record. The lease on his car is almost up, and he fears he won’t be able to qualify for a new vehicle.”

“He and his wife are now renting a home in Miami for $1,600 a month. Capiro still has keys to their empty house in Palm City, but he and his family never make the drive back. It’s too painful.”

“‘This is devastating,’ said the father of two daughters. ‘I tried my damnedest to keep my house up there…because I loved it.’”

“Despite the standing-room-only crowd and live music, a recent auction of 22 properties in Port St. Lucie’s tony Tesoro community didn’t yield a single sale. It’s not that no bids emerged at the June 28 event - it’s just that none of them were high enough for the owners of the 16 lots and six homes.”

“One four-bedroom home listed for sale at $3.75 million attracted a high bid of only $1.2 million. Another, a three-bedroom, fetched a $450,000 high bid, though it’s on the market for $2.15 million, according to Scott Powell, a Stuart-based appraiser who attended the auction.”

“‘It was very sudden, and it was a surprise,’ he said. ‘Everybody thought they were going to come back to the homes, and then they went on to the lots.’”

“After taking four high bids on the 16 lots, the bidding stopped again.”

“What happened at the Tesoro auction is consistent with what agents are seeing around Florida, said said Jose Boza, a spokesman for the auctioneer. ‘Buyers are continuing to look for steep discounts, and sellers are looking for top dollar,’ he said. ‘Until sellers readjust their asking prices, there will continue to be an overhang of properties in Florida.’”

“In March 2006, when the real estate market was still near its peak, city leaders broke ground on a development they said would give teachers, firefighters and other workers the chance to own a home.”

“MerryPlace was meant to bring new life to a long-neglected neighborhood full of renters, dilapidated houses and vacant lots. But two years later, many of the lots that were supposed to sprout with condos and townhouses are still empty.”

“And in the worst national housing downturn since the Great Depression, even government-sponsored affordable housing is proving to be a tough sell.”

“Today, buyers can find better deals in the free market, said Marc Schoen, the first real estate broker hired to sell the development. Some older condos are selling for less than $100, 000 in the Villages of Palm Beach Lakes. In CitySide, across from the Palm Beach Mall, several nearly new units with granite counter tops and amenities including a pool recently sold for less than $200,000.”

“‘There are much nicer properties in gated communities at lower prices,’ Schoen said.”

The News Press. “The historic, preliminary assessment of Lee County taxable property values stumbling about 12 percent - possibly the first time this has happened since the Great Depression - remained about the same in the final numbers that will go to the state for approval.”

“And Cape Coral took the hardest hit with a 25 percent fall, although that was down from the original estimate of 26.6 percent. Lehigh Acres took quite a hit too, a 16.3 percent decrease.”

“Pat Foote, who owns a house in southeast Cape Coral, said she is being careful with improvements she makes because she doesn’t want to risk the value dropping more, and losing the money she put into the house in the first place.”

“‘I’m redoing the bathrooms, but I’m not touching the kitchen until the value goes up again,’ she said. ‘I think that will happen sooner or later.’”

“The assessed value of Foote’s home was $133,620 in 2004, when she bought it. It peaked at $218,480 in 2006, then dropped to $212,590 in 2007.”

“Vicki Ferrazzano, who owns Greater Cape Realty, said the lower property values are generating some activity. But she said the quick boom and then sharp bust Lee County has experienced in the last several years has been painful for some people.”

“‘I know of a person who had a $250,000 mortgage,’ Ferrazzano said. ‘When the bank foreclosed, they put the house back on the market for $125,000.’”

“Despite the increased house-buying among investors, Ferrazzano said too many homeowners are ‘upside down’ in their mortgages. ‘I think there is more (in the downturn) to go because there are a lot more foreclosures that are going to happen,’ she said.”

The Bradenton Herald. “Open up the phone book and look under real estate appraisers and odds are if you select a few numbers at random, nearly half of them have been disconnected. ‘The volume of available work has decreased by about 40 percent,’ said Debbie Dietz, owner of Alliance Appraisal Associates in Sarasota.”

“As a result, the last cycle of license renewal for appraisers in 2006 found the numbers of appraisers across the nation cut nearly in half, Dietz said. ‘On one hand, I think it’s good. The industry shakes out,’ Dietz added.”

“During the housing boom, there were many ways less-than-reputable appraisers took advantage of the system, local appraisers say. Some used trainees to do the work and didn’t check figures while others allowed unscrupulous mortgage brokers to influence their appraisals.”

“‘They (the mortgage brokers) didn’t really care what the house was worth, they just wanted the loan to close,’ Dietz said.

“‘I turned down five or 10 appraisals a week at times,’ said Jeff Deuitch, owner of Manatee Appraisal Service in Palmetto. ‘Generally the requests came from small mortgage companies from out of state.’”

“Some of these requests would have attached notes that told an appraiser if the home’s appraisal exceeded a certain price, they should proceed with the order. ‘The pressure was out there all the time,’ he said. ‘It’s a violation to accept an assignment contingent to a certain value.’”

“Overinflated appraisals have led to an influx of reviews requested by lenders. Dietz and Deuitch have both been hired to review other appraisers’ work. ‘I’d say 99 percent of the reviews I am looking at, I disagree with the value,’ Dietz said.”

“Not all appraisal errors were intentional, Dietz stressed. Inexperienced appraisers inadvertently made errors in some cases. ‘So many people got their license as second jobs and were looking to make a quick buck,’ Dietz said.”

“‘For five or six years all you really had to have was a number in the phone book,’ Deuitch said.”

“‘There’s not too many of us anymore,’ said Gerry Russell, owner of Bradenton-based Realty Appraisal Services of Southwest Florida. One of Russell’s newest residential appraisers is delivering pizzas at night to supplement his income.”

“Where the lenders might have asked appraisers for three or four comparable houses in the past, now some lenders want six or more. ‘They have to do more to appease FHA and they have to do more to appease the lender,’ said Pete Minarich, vice president of CTX Mortgage of Bradenton.”

“With slower sales, appraisers have to get creative because there haven’t been any traditional home sales in the community for six months or more. ‘Some of the properties, you just can’t get newer comparables,’ Minarich said.”

The St Petersburg Times. “When Heidi and Harry Oelgart went online and saw real estate prices dipping in this vast retirement community, they hopped on a plane to Tampa. An agent showed the New Jersey couple a three-bedroom, lakefront home in the ritzy Renaissance section.”

“The garage was big enough to hold their two cars and Harry’s hot rod. ‘My husband saw the garage and said, ‘Let’s make an offer,’ Heidi Oelgart said.”

“They did: $345,000 on a 2-year-old house that once listed at $458,000. The couple had made three previous offers on places in Sun City Center, but they never got a call back.”

‘At 7 that night, the doorbell rang where they were staying. It was their agent, with a smile on her face and a bottle of champagne in her hands. ‘You got the house,’ Heidi Oelgart remembers her saying.”

“Thanks to plummeting prices - some condos go for as low as $37,000 - desperate sellers and buyers with money to spend, Sun City Center’s sales are on the rise.”

“Janet Johnson and her husband have visited friends in Sun City Center for years. The Maryland couple was attracted to the community’s clubs and activities. About a year ago, the retired business owners sought a place of their own with plans to keep the Maryland house.”

“‘I wasn’t going to just buy anything,’ Janet Johnson, 72, said. When she found something she liked, the price was perfect.”

“In early June, she signed a $130,000 contract for a 1,500-square-foot house with two master bedrooms, a two-car garage and a lanai. The house had once listed for $200,000.”

“‘(The price) is what made me decide,’ she said. ‘I’m afraid they are going to start going up again.’”