The Housing Bubble

The San Francisco Chronicle reports from California. “Joann Gardner sat forlornly on her living room floor, waiting for the final step in her home’s foreclosure process. Most foreclosures nowadays are homes purchased just a year or two ago with no money down. But the Gardners’ home is different. Joann’s parents bought the two-bedroom in the Sobrante Park neighborhood in 1954 for $11,500.”

“But in recent years, Joann and her brother refinanced it several times for increasingly larger amounts. The final refinance at the end of 2006 left the family owing $454,000. The monthly payments of $3,362 exceeded the household income of $3,144.”

“What happened to the money from all the refinances? Gardner can’t quite say…What is clear is that the family has not made a mortgage payment since December 2006.”

“‘Goodbye, house. Gotta go, gotta go. I hate to leave. This is it; I can’t come back here no more,’ she said as she walked down the front steps. ‘I hope it helps somebody to read about this; they won’t be boo-boo the fool like I was.’”

The Napa Valley Register. “In the past 12 months, the median price of a Napa County home has fallen approximately $200,000, according to Trendgraphix, Inc. In June 2007 the median price for a Napa County home was $660,000. As of June 2008, the median was $446,000. The median also dipped in American Canyon, from $604,000 in June 2007 to $434,000 in June 2008.”

“‘I believe this is the largest loss in wealth for moderate and middle-income families in the history of the country,’ said Stephen Cogswell of Fair Housing Napa Valley.”

The Santa Cruz Sentinel. “Nearly 500 homes in Santa Cruz County have sold at foreclosure sales so far this year, a 300 percent increase compared to this time a year ago. David Biancalana, a local foreclosure specialist with 20 years experience, said he has never seen this many sales. Foreclosure sales have become an everyday occurrence.”

“Home values in Watsonville have dropped 30 percent, Biancalana said. Buyers — many with Latino surnames — bought homes in new subdivisions in Watsonville for $600,000 to $700,000 with loans that didn’t require proof of income.”

“Emilio Martinez, a private investigator running for City Council in Watsonville, said many Latino borrowers came to him claiming they had been cheated by their mortgage brokers.”

“But in reviewing the documents, he found that in a majority of cases, the incomes of the borrowers had been inflated to qualify for the loan. One example: a couple employed at a sandwich shop earning $35,360 bought a $628,000 home with 100 percent financing and no down payment.”

The Sacramento Bee. “Title companies usually don’t make much news unless they collapse. That happened July 29 when Financial Title closed 10 area offices.”

“Cameron Park real estate broker John Lockwood of Elite Properties gave two reasons. One is the decline of refinancings. Lockwood said those are a mainstay of title company revenue. But fewer owners are refinancing now that home values have sharply declined.”

“The second reason: Bank repossessions account for most of the rising sales. Banks use out-of-town title companies…Lockwood said. ‘The seller gets to pick the title company,’ Lockwood said. ‘The seller these days is banks.’”

The Guardian. “Stockton has become known as Foreclosure Town, USA. And it is not as if there isn’t some stiff competition for Stockton’s dubious accolade in other corners of California, and indeed the rest of America.”

“‘This whole state is in a terrible mess financially,’ Cesar Dias concedes as he prepares to board his Repo Home Tours bus.”

“Indeed, a walk around this once prosperous commuter town 130km north of San Francisco is a frightening reminder that social destruction on a grand scale can happen in the blink of an eye, even in suburban California. All too quickly the city became vastly overdeveloped, with so many empty houses and blocks of flats that the place started to feel like a ghost town.”

“The level of overdevelopment is evident in Stockton’s run-down marina area. Here, the Sheraton Hotel - the centrepiece of a regenerated waterfront quarter - is in receivership and the ‘luxury condominiums’ that were supposed to sell for $750,000 (£375,000) apiece are unfinished.”

The Monterey County Herald. “The cumulative value of Monterey County properties climbed 2.24 percent over last year, according to the county assessor. That’s despite declines of approximately $1.7 billion on about 13,000 residential properties, according to county Assessor Steve Vagnini.”

“Vagnini said there are homes in Salinas with values that have dropped by almost 50 percent. ‘If somebody bought a house for $700,000 at the peak of the market 2½ years ago, they may be getting taxed on $360,000, or $370,000,’ said Vagnini, ‘because that’s what the market bears right now.’”

The Salinas Californian. “A Fresno bank is poised to become the first lender to foreclose on properties at the financially troubled Monterra luxury development in Monterey. While the foreclosures are not final, the properties are set to be auctioned off on the steps of the Monterey County Courthouse on Aug. 27 unless Monterra owners Roger and Basil Mills can bring their payments current.”

“A spokesman for Monterra said the developer has not sold a single lot this year, and if the properties held by Mother Lode Bank are sold at auction, a new market price may be set.”

“‘This is obviously a concern,’ said Charles Chrietzberg, CEO of Monterey County Bank, who is leading a consortium of banks that may secure Monterra’s financial future. ‘If they go to auction, they’ll probably be sold for less than the appraised value, but not significantly below.’”

The Bakersfield Californian. “The unfinished McAllister Ranch development is headed to the auction block Aug. 22, something that could make Lehman Commercial Paper Inc. landlord of three square miles of dust, curbs and an unkempt Greg Norman-designed golf course in southwest Bakersfield.”

“Possible foreclosure of the loan is complicated because two other properties, both in Riverside County, are also tied to the original debt. All three properties are currently scheduled for auction the same morning.”

“The Riverside developments are McSweeney Farms in Hemet, a 1,600-home project on 673 acres, and the 3,683-home SummerWind Ranch community on about 2,590 acres in Calimesa.”

“The championship golf course was completed but never opened for public play. The clubhouse was never finished. In June, large weeds sprouted from the greens.”

“Raw land that sold for upwards of $100,000 an acre during the boom has come back to earth in hard fashion, results of a county assessment review indicate. Prime parcels are now worth about $35,000 an acre, with less desirable sites pegged at $20,000, said Tony Ansolabehere, assistant assessor for Kern County.”

“‘This is the first time we’ve ever been through anything like this,’ Ansolabehere said of the widespread reductions.”

“The office expects additional declines next year. For now, smaller plots are on the menu. ‘This week, I’m looking at mobile homes,’ Ansolabehere said.”

The Ventura County Star. “Sometimes, it just seems easier to walk away. Tired of living in dread, a number of homeowners are mailing their keys instead of mortgage payments to their lenders.”

“‘It is a rising trend, unfortunately,’ said Dustin Hobbs, a spokesman with the California Mortgage Brokers Association. ‘It’s a fairly new phenomenon.’”

“Surprisingly, not all of these homeowners are in trouble. Some are ‘perfectly capable’ to continue making payments, said Michael Szakos, a Realtor with Re/Max Gold Coast Realtors. But in these uncertain times, people might want to reduce their costs by renting.”

“‘It’s an untold story,’ Szakos said.”

“Some homeowners might be current on their mortgages, but are tired of squeaking by every month while home values tumble. Others are on the brink of ruin.”

“A Moorpark woman who did not want to be identified got behind on her mortgage after losing her job and is facing foreclosure. She said she also tried to do a short sale and received four offers, but the prospective buyers eventually moved on because the bank took too long to review them. In spring 2007, she stopped making mortgage payments.”

“She’s sought help from the U.S. Department of Housing and Urban Development, Hope Now and several other organizations, but to no avail. Her home is scheduled to be auctioned at the end of this month.”

“‘I can understand why people walk,’ she said, adding that she offered to turn in her key but the lender refused to take it.”

The North County Times. “Carlsbad builder Barratt American could lose ownership of its City Square project in Escondido —- a development that hints at a financial crisis for Barratt and is a small part of a contentious fight between home builders and lenders across the country.”

“Four of the City Square town houses, brand-new properties at Second Avenue and Centre City Parkway, will be sold by a court-appointed receiver.”

“Michael Pattinson, president of Barratt, in a phone interview from London, where he was on a business trip…is blaming the banks for Barratt’s hardship, more than a real estate downturn that has seen prices decline almost 30 percent from a 2005 peak. He said banks created the boom and subsequent bust by concocting exotic mortgages and now have intentionally pulled out of residential lending.”

“Mark Connal, sales director for a builder in Escondido…said he can understand why lenders are freezing lines of credit and limiting new loans. ‘We rely on credit —- every builder does,’ Connal said. ‘But if I’m a bank right now and I see the huge losses out there, you have a responsibility to say, ‘Let’s put on the brakes.’”

“Similarly, Alan Nevin, director of economic research at MarketPointe Realty Advisors, based in San Diego, said a slowdown in lending is necessary.”

“‘You can’t go in and ask a Bank of America to lend money in a situation where there’s a substantial chance of them not being paid back,’ Nevin said. ‘The stockholders of B of A would be absolutely irate.’”

The Union Tribune. “After nearly 16 years of marriage and months of soul-searching, Dan Wahlberg and his wife decided to go their separate ways. They hired attorneys and put their three-bedroom Paradise Hills house up for sale.”

“Neither could afford to move out. They owe $290,000 on their house at a time when nearby homes are listed for as much as $80,000 less. They’re behind on the mortgage and are trying to avoid foreclosure by selling the house for less than they owe. They have little money to set up new households, pay off credit cards and cover divorce attorneys’ fees.”

“‘It’s very hard,’ said Wahlberg. ‘I want to move on. I know she wants to move on. But you really can’t if you’re tied down by the home itself.’”

“Even when one spouse is willing to buy out the other and remain in the home, tighter credit means banks often refuse to refinance mortgages on properties with little or no equity. ‘They used to fight over who was going to keep the house,’ said Marc Angelucci, a family law attorney with the Men’s Legal Center in downtown San Diego. ‘Now they’re fighting to get away from the house.’”

“As the economy has worsened and home prices have dropped, so have divorce filings. From July 2007 to March, 10,224 couples filed for divorce, down 5.7 percent from the same period in 2005-06.”

“‘Though it’s too early to say definitely, I would not be surprised at all to return to a situation such as we had during the Great Depression, where even though you see an increase in marital breakdown, you don’t see an increase in marital break-ups,’ said Stephanie Coontz, director of research for the Council on Contemporary Families and author of ‘Marriage, a History.’”

The Press Enterprise. “They weren’t in line for a new phone or a movie premiere. About 1,500 people waited Thursday hoping for a job — any job — that Target could offer them.”

“Applicants outside Mt. San Jacinto College in Menifee on Thursday and Friday hoped to land one of almost 300 jobs at the new SuperTarget the retailer is opening in Menifee, said Eric Mosser, manager of the store Target is planning in Indio.”

“Michelle Lovato, a resident of Pinon Hills wasn’t optimistic after having stood in line Thursday from 8:30 a.m. until 1 p.m. She eventually filled out an application, took a personality test and was told that she would get a phone call if she was hired.”

“On the brink of losing her home, the 44-year-old freelance writer and mother of three daughters is caught up in the region’s housing crisis.”

“In June 2007, she lost her job as a marketing director for a local mortgage company, and her husband started flipping houses as the market began to drop, she said. They now own four properties, including two they rent. They owe $200,000 on their own house, she said.”

“She said her lack of retail experience is a likely shortcoming, but she is willing to do anything for a steady income.”

“‘I’ll stock shelves, I’ll unload trucks,’ she said. ‘I will mop the floor. I just want a job.’”