The Housing Bubble

The Great Falls Tribune reports from Montana. “A subdivision slated to be developed on 58-acre piece of land fell through and the land is back on the market. A buyer from California was looking to develop a subdivision on the land, but the sale never came to fruition, said Dick Seim, the listing real-estate agent for the property. The land is listed for $1 million, and the ad says there’s room for 90 or more lots.”

“The land is a natural fit for homes…he said. The soon-to-open ice rink also will be nearby. ‘It’s a choice piece of property,’ he said. ‘It’s got some beautiful lots.’”

The Missoulian from Montana. “In the first half of 2008, local home prices have cooled slightly, there is greater inventory and homes are taking longer to sell, according to data compiled by the Missoula Organization of Realtors.”

“Jody and Brittany Tait listed their four-bedroom house west of Missoula for sale in early July. So far, they haven’t received any phone calls or inquiries about the house. The Taits, who’ve lived in their home for 23 months, wanted to try and sell their home themselves instead of paying fees for a real estate agent.”

“‘If we want to get any of our equity, then we have to sell it ourselves. So we’re trying this at first,’ said Jody Tait.”

“Don Cole, an agent and a loan officer, said he gets two to four people into homes each month with lease options. ‘With the lending programs changing, we just don’t have the options,’ he said. ‘Probably more than half of the people going into lease options could have bought the homes outright a year ago.’”

“Asked to characterize the local market, Cole said, ‘Missoula is not really in the dumps. It isn’t where it was, but nobody is. We are better off than many places.’”

The Idaho Statesman. “Real estate agent Janet Parsons is proud of the deal she wangled for her client, a 26-year-old first-time homebuyer. Parsons helped Brandon Beveridge through a seven-month process of buying home through a ’short sale.’ She said similar homes are selling for around $170,000; Beveridge got his for $133,500.”

“Beveridge, a computer programmer, is glad he waited. If housing prices continue to tumble, he said, he’s not going to worry much because he paid less than market value to begin with.”

“‘I had a bunch of friends who told me especially right now I would be stupid not to buy,’ he said.”

“In 2005, Jenni and Ryan Kroon traded the 1,100-square-foot, three-bedroom, two-bath home in Boise they shared with their two children for a 3,500-square-foot, seven-bedroom, four-bath home in Nampa that cost $200,000. Although financed with a 30-year, fixed-rate loan, the move still tripled their monthly mortgage payment to about $2,100.”

“That’s when the problems began. Jenni Kroon’s diabetes took a turn for the worse, requiring increased out-of-pocket outlays for doctor visits and expensive medicines. Then Ryan lost his job when his brother’s residential construction company folded.”

“‘With every month, it was more and more obvious that we had bitten off more than we could chew,’ said Jenni Kroon.”

“Today, the Kroons rent a four-bedroom, two-bath home in Nampa’s Royal Meadows subdivision for $895 a month. ‘My children and my husband hate it because it so much smaller, but I’m grateful for the cover,’ Jenni Kroon said.”

“Lance Churchill’s company…specializes in acquiring foreclosures. That door is likely to stay open awhile. Five-year ARM adjustments are still to come. Plus, there are homeowners who took interest-only loans, option-rate loans with payments that might not even cover the interest due, and so-called ‘liars loans,’ where borrowers’ income was never verified, Churchill said.”

“Originally, it was estimated that the five-year loans would not begin resetting until March 2009. That’s not the case anymore, Churchill said.”

“‘If the value of the home falls beneath what’s owed on it, the lender has the right to immediately adjust the interest rate and demand that you pay full price,’ he said.”

“As a result, some homeowners with five-year adjustable rate mortgages saw their payments begin to skyrocket as early as last April, Churchill said.”

The Daily Journal of Commerce from Oregon. “For the last year and a half, Herb Giffin has kept a steady stream of work flowing into his architecture firm. But with the economy slowing down, that might change soon. ‘Around this fall, we will be looking at beating the bushes and responding to more public RFP’s,’ said Giffin.”

“At Otak Inc., principal Dennis Haden said the firm’s condo design business ‘has slowed way down.’ Otak has worked on condo projects in some of the regions hardest-hit by the housing collapse - Arizona, Nevada and California.”

“Developers are ‘trying to figure out what’s gone wrong’ and re-assessing projects that are on the boards, Haden said. In some cases, they’re even switching condo projects to market-rate apartments.”

“‘The (Arizona) market went so far down, I don’t know how long it will take for it to come back,’ he said, referring to condos.”

The Bend Bulletin from Oregon. “The rise and fall of Bend’s real estate economy has resulted in foreclosure proceedings against The Shire, a village-themed concept in southeast Bend patterned after J.R.R. Tolkien’s ‘Lord of the Rings’ series.”

“The Shire concept originated with Ron Meyers, who sold his share in the development for an unspecified amount to Dr. Lynn B. McDonald - a former emergency room physician at St. Charles Bend. McDonald died July 7.”

“‘It basically destroyed my life financially, but that’s the price of a dream,’ Meyers said. ‘The development wasn’t able to materialize fast enough before the market crashed.’”

“”Jan McDonald is trying to sell the 14 developed lots, one house and additional land before the 6-acre property goes to public auction in December, she said. The family owes Umpqua Bank $3.4 million on the project, according to the default notice.”

“‘It was Ron’s concept, and it was a good one,’ Jan McDonald said. ‘Had the market not gone to where it went, it had the potential to be successful.’”

“The Shire began to unravel in summer 2007 when the subprime mortgage crisis began to dry up credit sources, Meyers said. ‘Banks were getting nervous,’ Meyers said. ‘They’re still nervous.’”

“‘Some people were turned off by living in ‘Disneyland,’ he said. ‘It’s more of an artists’ community for a certain market segment that wanted something different. There’s been enough people that have come through that would say, ‘What a wonderful concept.’ But then the market crashed, and everyone (went) home.’”

The Bellinham Herald from Washington. “Last week Gragg Miller of Coldwell Banker Miller-Arnason released his mid-year report about the state of local real estate. What caught my eye, however, was his comments at the beginning of the report. The biggest challenge these days, he said, is pricing a home.”

“‘For this area, I don’t think we (the industry) are doing a good enough job with pricing. It’s a little less challenging now, because new sellers understand that the market is different now and are not insisting on the price appreciation their neighbor may had seen a couple of years ago,’ Miller said. ‘Still, it’s important to look at how comparable homes are sold a week ago; looking back six months or more won’t cut it for most homes.’”

“For used or existing homes, the Meridian area has 20 months of supply, while the Deming area has 8.5 months of supply. In Bellingham neighborhoods, Happy Valley has 12.5 months of supply.”

“In the second quarter of 2008, there were 1,206 overall properties sold in Whatcom County, continuing a downward trend from the peak in 2004, when there were 2,587 sold in that same quarter.”

“Listing a price too high is much more a problem in the current climate, he said. The buyers have much more to choose from in every home price level, so if they think it’s too high they can keep browsing. There is no competition among buyers for houses viewed as overpriced. Once the seller starts reducing the price, buyers are in a position to wait to see how far the price will fall.”

The Olympian from Washington. “A new Honda scooter, a trip to a Caribbean destination and a chance to win free gasoline are just some of the incentives that South Sound real-estate agents are using to entice prospective buyers in a slower housing market.”

“Tamera Strawn of Riley Jackson Real Estate is working with a Tacoma builder giving away Honda scooters for sales at The Overlook, a new 138-lot development at the top of Tumwater Hill, she said. ‘We’re just looking for something new and out of the box,’ Strawn said about the promotion.”

“Real-estate company John L. Scott offers visitors to its open houses the chance to enter a drawing for a trip to a Caribbean destination or Hawaii, said Eric Shull, broker of John L. Scott’s Olympia office.”

“Although the Thurston County housing market has slowed to the point where incentives are common, the market is nowhere near as slow as it is in California, he said. Shull said some homes in California are being marketed with BMWs.”

“Homeowner Karen Scherf of Chehalis and her husband, Scott Mattoon, each owned a home before they got married. Mattoon sold his house in Rainier, and Scherf still is trying to sell hers in west Olympia with real-estate agent Mark Plowman’s help. Today, she and her husband live in Chehalis, Scherf said.”

“She said she is grateful they’re not paying three mortgages, but Scherf still is eager for a sale.”

“Her 3,000-square-foot house has been on the market since April, and she’s hoping to sell it before she has to drop the price again. She also is considering renting the house, although Scherf added that she’s not particularly interested in becoming a landlord.”

The West Seattle Herald from Washington. “Area 140’s biggest economic downers over the last year were not home prices but rather inventory, and its troubled twin, ‘Days on Market.’ ‘I sometimes feel like a taxi driver showing property around,’ said Jennifer Suemnicht, with Re/Max Metro Realty in Seattle. ‘Buyers are shopping around more than a year ago.’”

“Of course, feng shui and accent pieces only help if the potential buyer has the money for the home in the first place. ‘You’d be surprised how many people don’t have any savings,’ said Ginny Lee of a privately owned mortgage bank near Safeco Field.”

“‘Lenders want to see you spend no more than about 36-percent of your net household income on your mortgage payment,’ said Kevin Ehlers of Cobalt Mortgage, Inc., in Kirkland, who specializes in ‘Area 140′ homes.”

“‘The average-priced West Seattle house the first five months of 2008 was $465,000,’ he said. ‘Your total payment at that price would be about $2,700 with 20-percent down with a 6.25 (percent) 30-year fixed rate. You’d need to net $90,000 a year, about one Microsoft salary. I realize that’s a lot of money. And if you only put 3-percent down with an FHA your monthly payment goes way up.’”

The Seattle PI from Washington. “Michelle Miran didn’t realize that there was something wrong with her mortgage until the interest rate reset last year. Her truth-in-lending statement noted a 30-year fixed rate with monthly payments of $1,311 for 359 months. But two years into it, her monthly payment shot up to about $1,700, and she and her husband fell behind.”

“They’re now fighting foreclosure on their Tacoma home and fighting back in court, suing the mortgage broker and lender.”

“Deb Bortner, head of the Department of Financial Institutions’ consumer services division, said the agency has been able to scrutinize lenders better over the past two years because of an increase in enforcement staff and examiners, along with a shrinking field of consumer loan companies.”

“And more charges are in the pipeline, she said. ‘I see more problems coming up. There’s a credit crunch, so I think each mortgage broker and each consumer loan company is struggling to maintain their business,’ she said.”

“Ari Brown, the Mirans’ attorney, and others say the increased oversight comes too late for thousands of borrowers who were duped by unscrupulous lenders and brokers.”

“Miran said the loan officer rushed her through the closing process, sending her a 2-inch- thick stack of documents while she was out of town on business. Miran signed the documents alone in her hotel room, and not in the presence of an escrow agent, even though an agent’s signature appears on the documents, according to the lawsuit.”

“Miran and her husband were able to make the mortgage payments on their three-bedroom home until the loan rate reset. The increase of about $400 a month, coupled with a maternity leave, made it difficult for them to keep up with payments.”

“‘I’m worried, knowing that I’m going to lose my house,’ said Miran, who works two jobs. ‘It’s going to be very hard for me.’”