The Housing Bubble

KLUR 8 reports from Montana. “As a nationwide mortgage crisis causes housing prices to plummet, a Billings construction company is looking for a new way to determine what a house is worth. Kenmark Construction will auction off 13 properties Tuesday. When you think of homes being auctioned off, you usually think of old dilapidated homes that are in foreclosure. That’s not what we have here. ‘These are some of the finest homes in Billings is some of the choicest subdivisions,’ said Merton Musser, the Auction Manager.”

“‘We’ve not been affected like other areas of the country,’ said Dan Wagner, the President of Montana’s Association of Realtors. ‘But our market has flattened in the last few months, there’s no doubt about that.’”

“While it’s unclear how much these homes will bring in, the starting bids are just 50% of the list price of the properties. ‘It’ll be a meeting of the minds,’ Musser said. ‘It’ll bring buyers and sellers together and allow buyers to set fair market value for these homes.’”

The Flathead Beacon from Montana. “The Flathead real estate market in the first half of 2008 appears to be declining significantly from the boom of the last several years. ‘There’s some reality that we have to face up to,’ Bryan O’Connor, a real estate agent in Bigfork, said. ‘No two ways about it, our volume is down, but I’d rather be here than Las Vegas or a lot of other places.’”

“The Flathead Valley, including portions of Lake and Lincoln counties, has a record high number of homes for sale currently, with more than 3,300 homes on the market, and more than 7,500 total listings. That’s up from 2005 and 2006, during the peak of the boom, when there were usually around 4,000 total listings.”

“‘Our market is down 30 percent for 2007 any way you want to slice it,’ O’Connor said. ‘It’s a buyer’s market, and that’s not necessarily a bad thing.’”

“Jim Kelley, who runs a real estate appraisal and consulting firm in Kalispell, backs up O’Connor’s assessment, and anticipates the number of homes sold in Flathead County in August of this year will be the fewest homes sold in August - normally the largest month for residential sales - in 10 or 20 years, depending on what the final numbers reported for the month show.”

“The median price of homes sold in Flathead County also declined 4.8 percent in the first half of 2008, from $241,500 in the first half of 2007 down to $230,000, according to Kelley’s July report.”

Home sales in Flathead County were down 28.4 percent in the first half of 2008 from last year at the same time. Among the Flathead communities, the high end of the market appears to be taking the biggest hit. The two homes sold so far this year on Whitefish Lake mark an 83.3 percent decline from this time in 2007.”

“Cal Scott, president of the Northwest Montana Association of Realtors…said the main problem in the Flathead is that a glut of homes above that price sit on the market, when 80 percent of the population here can only afford homes in the $150,000 range.

‘We don’t have an adequate supply of housing here for our workforce,’ Scott said, adding that the tougher national slowdown also compels possible buyers here to wait. ‘They watch the TV, and they see what’s going on in Las Vegas,’ Scott said, ‘and they automatically apply that to here, and they freeze.’”

The Gillette News Record from Wyoming. “A recent survey found that median home values dropped in 11 Wyoming counties while increasing in 12 counties during fiscal year 2008. The survey showed that Teton County experienced the largest decline in median home values, with a drop of 9.1 percent. The median home value for fiscal 2008 in Teton County was $623,512.”

“Diane Nodell, president of the Teton Board of Realtors, said what may appear to be a drop in her county’s median value may actually be a correction in unrealistic prices. After a surge of home sales in early 2007, sellers boosted their prices for that summer. But sales weren’t as strong as predicted, she said.”

“Also, the Teton County market has moved away from single-family homes and toward townhomes and condominiums, Nodell said. ‘It seems like our market has shifted into less pricey properties,’ she said.”

The Casper Star Tribune from Wyoming. “College is an investment in a young person’s future. But a student’s college career can also provide an opportunity for parents to invest in real estate and thereby help pay for college costs.”

“Amber Pollock, a 20-year-old University of Wyoming music major from Casper, and her family were not happy with either the cost or condition of rentals they saw in Laramie. So they decided to buy a condominium.”

“That’s not as extravagant as it might seem. ‘For the prices they had down there on their rentals, for just a little bit more money we were able to get into this condo situation,” said Amber’s father, Bill Pollock. ‘It kind of made sense to get into an investment at the same time we were providing her housing.’”

“Parents buying homes for college students is not new. Fred Croci, developer of Sun Chase Village, said in Fort Collins, Colo., home of Colorado State University, hundreds of parents have purchased units for college students over the years.”

“When the Sun Chase Village project launched about five years ago, Croci said units sold for $120,000. They’re now selling for around $140,000.”

“‘If your unit has gone up in basically four years, that’s almost enough to cover the cost of the education,’ he said.”

The Portland Business Journal from Oregon. “Portland-area boat dealers are tallying up fewer new sales in an industry beset with used boats and banks that are less willing to turn boat lovers into boat owners. ‘We worked harder this year for the sales we got than we ever had in the past,’ said Matt Radich, general manager for Active Water Sports, which sells ski boats and wakeboard boats in Beaverton and Oregon City.”

“The boating industry was riding high along with the residential market in 2005, the year Ken Guerins and Tim Coleman formed an online business that specializes in buying and selling used boats. Models costing $20,000 and less sit unsold. ‘We can’t give entry-level boats away,’ Guerins said.”

“The collapse was probably inevitable in an economy beset by record increases in fuel prices coupled with falling home values and tightening requirements for all kinds of loans, especially for discretionary items such as boats.”

“Radich said home equity loans, once the financing mechanism of choice for new boaters, are gone. ‘I don’t think we did one this year,’ he said.”

The News Review from Oregon. “The housing market slowdown has affected some developers who were planning subdivisions in Sutherlin. The city granted final approval for two subdivisions, Forest Heights and Cooper Creek Estates, in the spring, but neither have begun building houses, said Sutherlin Planning Director Dan Huff said.”

“Gordon Avery, owner of Avery Construction, said he is trying to sell lots at Forest Heights, but isn’t having much luck. Not a single lot of the 58 in the subdivision has sold, he said. The company decided not to build spec houses either because of the risk associated with constructing a home without a buyer.”

“‘If you build them and they don’t sell it kind of takes the fun out of it,’ Avery said.”

The Yakima Herald Republic from Washington. “Nothing signals a slowdown in a real estate market more than the increasing number of ‘For Sale’ signs lining the many Yakima Valley streets. Just a little over a year ago, home sales in Yakima County increased 24.8 percent in the first quarter of 2007 from the same period in 2006.”

“According to a Selah-based firm that tracks historical housing trends, the number of all homes sold in July decreased 23.1 percent. ‘The market is not dead, but it’s certainly slowed down,’ said Doug Rich, broker in Yakima.”

“Brandi Berg and her husband have had their 2,705-square-foot home in Moxee on and off the market for a year. They’ve had a couple of viewings, but no offers. ‘It’s just been very slow,’ Berg said.”

“The median resale price for existing homes in Yakima Valley increased 4.9 percent during the second quarter from the same period a year ago, while statewide home prices decreased 7.8 percent, according to the Washington Center.”

“The slight price increase may reflect consumers who are able to purchase more house for their money as sellers try to get their homes off a crowded market, said Glenn Crellin, executive director of The Washington Center for Real Estate Research.”

“Indeed, in a sea of ‘for sale’ signs, nothing lures a buyer like a good price reduction.”

“‘If it looks like prices are still going up, the tendency is for the seller is to ask (for) more than the property will likely sell for,’ Crellin said. ‘That creates a situation that will lead to that property sitting on that market for a while.’”

“That was a situation Kristi and Mike Lewis could not afford when they put their 2,300-square-foot Moxee home on the market earlier this summer. Mike Lewis received a promotion that required the family to move to Spokane as soon as possible.”

“They initially listed the home for $205,000, but with several other homes in their neighborhood also for sale, it was clear that price was not low enough. Over several weeks, the couple would chop the price three times.”

“They eventually found a buyer, thanks to a friend, and the home sold for $189,000.”

“Despite the multiple price reductions, the Lewis family still came out ahead — the selling price was well above the $130,000 the couple paid in 2004. But Kristi Lewis knows that her family could have done better if they had sold the house a while ago.”

“‘It’s a bummer, but what can you do?’ she said. ‘We needed to get out of there.’”

“The Washington Center estimates that Yakima County had a 10.6-month supply of homes as of the end of the second quarter, providing enough units to sell on the market for more than 10 months if no additional homes are put up for sale. Two years ago, that supply was at 5.8 months.”

“Homes in certain price ranges suffered more than others. There were enough homes in the $500,000-plus range, for example, to supply the market for more than three years and enough homes in the $250,000 to $500,000 range to sustain the market for more than 16 months.”

“When the market was more brisk, it was not unusual for a potential buyer to forgo certain expectations if it meant beating multiple offers, Crellin said. But that’s all changed now.”

“While watching a show on HGTV this summer, Berg learned that putting on a fresh coat of paint may make a home more appealing for potential buyers. She took the advice and painted two bedrooms and a bathroom.”

“She wonders if the effort will pay off. ‘I don’t think that’s going to make it go faster,’ Berg said.”