The Housing Bubble

It’s Friday desk clearing time for this blogger. “According to report from Beijing Morning Post, many investors in Shenzhen property market are paying at least 400,000 yuan in mortgages each month and at least 30 percent of them have lost all their earnings. ‘When the real estate sector was booming, every morning, the first thing I did was to think how much I’d earned. Now, the first thing I do is think how much I’ve lost,’ says Liu Bin, a Shenzhen real estate investor. ‘I’m in a very awkward situation. All I can do now is to rent rooms out for the money to pay bank loans.’”

“He still regrets his last investment in 2007. ‘I didn’t buy anything at the beginning of 2007 as house prices in Shenzhen rose to a degree I couldn’t understand. But I couldn’t help buying a house in June 2007. The decision was made only in a few seconds,’ he says.”

“‘I have a sense that the ‘winter’ has just began,’ Liu says.”

“As Canada’s housing market shows fresh signs it has exited the boom phase, Merrill Lynch economists are cautioning homeowners to expect a ’sustained downturn’ in prices.”

“Ken Glauser, associate broker at Henry Moulin Realty Inc, (is) rather relieved the market is losing some of its fevered pitch. Nowadays, ‘people can go home and think about their bids overnight,’ Mr. Glauser said. ‘Last year, they could hardly get back to their car to think about it.’”

“The demographics of the North Island aren’t encouraging. According to B.C. Stats, the population of the region in 2006 was 12,489. The region’s total population has fallen about 2 per cent a year over the last decade. The region has always been one of working towns that proudly paid their own way. Now the money is coming from outsiders who buy waterfront houses, sight unseen, for $300,000 — and then live in them for maybe a month or two every summer.”

“‘We’re seeing more price reductions in properties listed on the market, which is a levelling impact on the housing-price increases experienced at the end of last year and into the first quarter of 2008,’ Dave Watt, president of the Real Estate Board of Greater Vancouver, said in a news release.”

“‘”It’s a situation of supply and demand,’ Kelvin Neufeld, president of the Fraser Valley Real Estate Board, said in a news release. ‘Buyers are now in the driver’s seat in the Fraser Valley and we’re starting to see that reflected in home prices.’”

“Multi-family housing developers are trying to enliven Calgary’s sleepy market. A free trip anywhere in the world, a flatscreen TV, cash back or a Smart Car — all yours for free if you buy the right condo.”

“‘They’re hurtin’,’ said John Hripko, leader of the Ripco Real Estate Team, which specializes in condos. ‘A lot of the developers here overbuilt and they’ll offer a number of different incentives to try to lure the buyer in. However, I don’t know how successful they’re going to be.’”

“The boom in the Spanish housing market is in danger of turning into a bust, with many agents already reporting double-digit price falls, while others warn there is still worse to come.”

“Charles Weston-Baker, head of international residential at Savills, said: ‘Prices on properties that people are being forced to sell in a hurry are around 20pc to 30pc lower than last year.’”

“Mild weakness in O’ahu’s housing market continued last month with a 3.1 percent decline in the median sale price of previously owned single-family homes to $620,000, from $640,000 a year earlier. The small drop was the sixth in seven months this year, according to the Honolulu Board of Realtors.”

“Harvey Shapiro, research economist for the trade association, said sellers may have to make more concessions in the softer market, but prices are staying close to last year’s levels.”

“‘This year is going to be a slow but healthy year for real estate,’ he said. ‘If you’re expecting prices to go back to the $300,000 level, you’re dreaming.’”

“The resort-styled Marin condos are currently being constructed on Semiahmoo Spit and should begin to have residents moving in next month. Prices start at around $650,000 and go up to around $1.7 million. Shana Mitcham, license assistant for Marin sales director Chet Kenoyer, said that despite the current housing market, approximately 70 people a week come to Marin to look at model units.”

“‘It’s just one of those unique areas,’ she said. ‘Everyone’s just interested in what’s going on there.’”

“Homes for sale in Ashland had been on the market an average of 152 days as of Friday, according to Colin Mullane, the chairman of the Southern Oregon MLS Statistics Committee. ‘We’ve definitely seen a lot of people who are renting out their house because they can’t sell it,’ said Jennifer Crane, owner of Crane Property Management.”

“Renting out a home, especially at the high end of the market, is not the windfall it may seem. A $1 million home may only fetch $2,500 per month in rent payments, not nearly enough to cover a $6,000 monthly mortgage payment, Mullane said.”

“‘A lot of times people will say, ‘Well, gee, I’m just paying somebody’s mortgage,’ but you’re paying far less in rent than what it would be in mortgage payments, and you don’t have to do upkeep,’ said Everett Eichler, owner of Classic Property Management.”

“Melanie Wilkinson decided to rent a condominium when she moved to Ashland from Boise, Idaho, to buy herself time to find her ideal house. ‘I think that real estate will always be a good investment, but you have to go in at the right time,’ she said. ‘Buying real estate should never be an impulse purchase. It’s not like buying a pair of shoes.’”

“Greg Neistat has built 20 homes in Northbrook, Glenview, Deerfield, Elmhurst and Lake Forest. Neistat said he has never seen a housing market on the North Shore as slow as it is now, and those who have been in real estate longer say they have never seen it this bad, either.”

“‘This is no shock,’ said Neistat, when told of the figures. ‘For new construction, the price is down, definitely, from what I am seeing. The builders who dealt with reality had to lower their prices. If they didn’t, and foreclosed, the lenders lowered the price for them,’ he said.”

“In an area of Northbrook bounded by Western, Techny, Shermer and Illinois, all the spec homes have been sold except those in the $2 million range, he said. Still, Neistat said he will not build any spec homes right now. ‘No lenders will lend for spec homes anymore. They stopped within the last year after getting burned,’ he said.”

“Assessed real estate values are decreasing for some Washington County residents due to drops in prices of neighboring properties. ‘The Assessor’s Office has to be commended,’ board Chairman Wesley Cannon said during the meeting. ‘I think in the long run the general public will appreciate it.’”

“In Northwest Arkansas, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, ‘we’ve certainly seen sales decline precipitously.’”

“‘Our problem was we hit that bubble,’ Washington County Assessor Lee Ann Kizzar said of the 2007 reappraisal, which followed the 2006 peak in the housing market.”

“There 101 new foreclosure filings in the greater Johnson City, Kingsport and Bristol, Tenn., region in June 2008, according to the Tennessee Housing Development Agency and RealtyTrac. That total represents a 52 percent increase over May for the Kingsport-Bristol Metropolitan Statistical Area.”

“Between 2004 and 2006, a fourth of all mortgage loans in 10 Southwest Virginia counties, Bristol, Va., and Norton were of the adjustable rate or ‘high-cost’ variety.”

“‘People are getting horrible loans that adjust every six months. I worked with one woman whose double-wide [trailer] payment was $1,025 and has gone up every six months, said Debbie Perry, home ownership program coordinator with the Eastern Eight Community Development Corp. in Johnson City, Tenn.”

“Perry said she also assisted a couple who switched from a fixed-rate mortgage to an adjustable rate, believing it would make their payments more affordable. ‘You want to ask them what were they thinking, but you can’t say that,’ Perry said.”

“‘It used to be Chapter 13 bankruptcy was a perfect vehicle for people in trouble to keep their home,’ said Maria Timoney, an attorney with the Southwest Virginia Legal Aid Society. ‘These [new] loans, we can’t solve.’”

“‘Home buying is associated with a stable job and stable health,’ said Twin City attorney Bernard Via. ‘In the current economic climate, with the price of oil and everything else that’s going on, housing is not a good investment. Renting is better.’”

“A lot of Americans, however, had grown rich while busily involving themselves in the racket of issuing mortgages to a whole lot of other Americans who could not afford them.”

“‘It’s dispiriting indeed to watch the U.S. financial system, supposedly the envy of the world, being taken to its knees,’ Gretchen Morgenson recently wrote in the International Herald Tribune. ‘But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors. This wasn’t the way the ‘ownership society’ was supposed to work.’”

“The lights on the rigs pierce the black West Texas night, illuminating mesquite shrubs and jack rabbits scampering across the flat landscape. Good times have returned to the oil patch.”

“Yet, the people of Kermit and other Permian Basin towns have learned that petroleum-based prosperity is too fragile to squander in wild exuberance. ‘I’ve pissed away three booms in my lifetime, but this time, no,’ said Gary Blue, who says his business preparing sites for drilling is turning down about as much work as it accepts these days.”

“Rodney Hayes, who owns Kermit’s only floral shop, said he and his neighbors haven’t forgotten what happened when oil prices plummeted in the 1980s and the town’s population dropped from 10,000 to its current 6,000 in a matter of months.”

“‘It was like a suitcase parade’ as companies and their workers left town, Hayes said.”

“Sales of existing homes in Marion County dropped by almost 40 percent for the first six months of 2008 compared with the same period a year ago. Times are tough for the county’s 1,800 or so real estate agents at the moment, said Karen Grider, president of the Ocala/Marion County Association of Realtors, but things are starting to look up.”

“‘We’re all very optimistic,’ she said.”

“The county’s median sale price in June, was $150,500, down 15 percent from the same month the year before. ‘I don’t think that prices are going any further down,’ she said. ‘We’re about as low as we’re going to get for the majority of properties in Marion County.’”

“‘They [buyers] need to stop waiting for the other shoe to drop,’ Grider said. ‘People are selling for reasonable prices.’”