The Housing Bubble

It’s Friday desk clearing time for this blogger. “Surprise, like nearly every city in the Valley, is seeing its neighborhoods and home values wracked by foreclosures. Rochelle Swenson bought her Legacy Parc house for $300,000. Now, she said, it is worth only about $195,000. Amid predatory lenders and mixed messages, options can get confusing, she said. ‘I’ve got people coming up to me, and I don’t know what’s right and what’s wrong,’ she said.”

“Arizona Treasurer Dean Martin said Arizona is facing hard times due to a combination of factors. What made matters worse with the Arizona economy, Martin said, was the popping of the housing bubble.”

“‘The guy who parties the hardest will have the biggest hangover,’ he said. ‘We estimate 67,000 homes were built in Arizona that didn’t have population living in them. Basically, we built a ghost town.’”

“Martin said the state should take measures in the face of a slow economy. Any new course, he said, is better than the one the state’s on right now. ‘When you’re in a hole, stop digging,’ he said.”

“Two residential developments are under way in Van Buren as the city tries to regain ground during the housing market slump. Having a residential subdivision that includes higher-end homes likely will mean slower development, but (developer) Jan Whitt said he believes builders are ready to get back at it.”

“‘We’re starting to see a lot more interest, and I anticipate builders coming in with the next three or four months and building some (speculative) houses,’ Whitt said. ‘Their inventory of spec houses is slowly going down. That’s what they do for a living is build houses.’”

“U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance homes. There are 3.9 million unsold existing single-family homes, the most since at least 1982, according to the National Association of Realtors.”

“‘The chickens have come home to roost,’ said Jim Croft, founder of the Mortgage Asset Research Institute.”

“Since the government seized control of Fannie Mae and Freddie Mac, mortgage rates have dropped sharply, but there are questions about what it means for the housing slump. Donna Vella, a Realtor with 21 years in the business, said dropping rates will help, but probably not immediately.”

“She believes that the Conejo Valley market is at the bottom, but many people are waiting to buy. ‘People think it’s going to drop, drop, drop,’ she said. She believes otherwise. She’s buying investment property now. ‘Within this year or next year, if they don’t buy, they’re going to be foolish.’”

“While some have said the federal government’s takeover of mortgage giants Freddie Mac and Fannie Mae will help real estate by making mortgages less expensive, economist Keith Hembre said he didn’t agree.”

“The problem with residential real estate now is oversupply, he said. Credit has tightened since the housing-market collapse, but it isn’t really mortgage availability that has been keeping people from buying homes.”

“‘What we really need to see happen is for home building to continue to decline, and for sales to pick up,’ he said.”

“Peter Lansing, head of Universal Lending in Denver, said that while he welcomes lower rates, he is worried that the government may loosen underwriting guidelines too much in order to spur home buying. ‘Isn’t that what got us into trouble in the first place? It’s a tough problem,’ Lansing said.”

“Mervyn King…the Bank of England governor, acknowledged the City was in its worst state since the 1930s, but that pouring public money into the mortgage market was fraught with risks. Mr King said the notion that there was a ‘magic solution’ to this credit collapse was ‘an illusion.’ Heavy government intervention is a risky path to take, he warned. ‘What that would do is totally undercut the incentive of private sector banks to get their own balance sheets back in order,’ he said.”

“There are opportunities for good buys in Burleigh Waters and Varsity Lakes, as booming property prices settle down, according to PRD Nationwide Burleigh principal Mark Smith.”

“‘Since November, prices have come down 10-15 per cent and market activity has come down 50 per cent,’ said Mr Smith. ‘It hasn’t just happened in our patch. It has happened across Australia and across the world.’”

“A slump in sales in Vancouver dragged the average price of an existing home in Canada lower last month. ‘The drop was pretty serious, especially coming on the back of a big sales drop there the month before. When you’ve got sales for your most expensive city falling like that, that’s going to knock the stuffing out of the national average,’ said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.”

“Some mortgage brokers and loan officers urged borrowers to inflate incomes, exaggerate job titles or increase loan size because lenders could profit by selling riskier Alt-A loans to investors, said Jim Croft, founder of Mortgage Asset Research Institute. ‘When homes prices were going up, people were saying, ‘If I don’t buy now, I’ll never be able to buy,’ Croft said.”

“When Linda and Mark Pavlick bought their three-bedroom house in West Deer, Pennsylvania, 16 years ago, they paid $68,000. They now owe $105,000. The house was recently appraised for $80,000, Linda Pavlick said. ‘The decision to redo the loan was probably the worst decision we ever made,’ said Pavlick.”

“‘We went three months without gas,’ she said. ‘I used an electric plate to cook. But heating up the water for a shower, to wash your hair, that was the toughest. I’ve learned a lot of lessons, but this isn’t one I’d wish on anybody.’”

“A friend of mine has a saying that the only thing worse than being out of a job in the Verde Valley is trying to find a new one. I still laugh when I think back to an ad I saw from a national pizza chain that was looking for assistant managers in Cottonwood, but you need not apply unless you are career-minded.”

“I personally am enjoying this period of basically no growth in the Verde Valley. I’m sorry but it’s hard to be sympathetic for struggling developers and contractors who would have exploited every square inch of this valley if given the chance, all for the love of money.”

“For those of you that had construction jobs at one time and now find yourselves unemployed, you may want to brush up on your communications skills before you hit the job trail. So repeat after me, ‘Would you like hot or mild sauce?’”

“I guess I’ll just keep livin’ with Mom and consider a corporate position making a general nuisance of myself harassing tourists in Sedona trying to sell them a Time Share.”

“Following the work of a research group into what Beatles’ songs evoke the most memories from the past, perhaps some of them could be used to describe Ireland’s current economic climate.”

“After all, the State finances seem to be ‘Here, There and Everywhere’. The Government seem to be saying that ‘We Can Work It Out’ by ‘Fixing A Hole’ in the Exchequer funds with severe cutbacks. ‘I’ve Got a Feeling’ we should all be wary of the ‘Taxman’ after next month’s Budget, when all of us may be singing ‘Mailman, Bring Me No More Blues’.”

‘The Government is being urged to intervene in the housing market to halt falling prices, but many commentators are advising them to ‘Let It Be’.”

“Their rationale is that we saw the debt-fuelled housing boom last a few years, but ‘All Things Must Pass’. It will clearly be a ‘Long and Winding Road’ for the economy to ‘Get Back’ to where it used to be, and things are going to be getting worse before they will be ‘Getting Better’.”