The Housing Bubble

9 News reports from Colorado. “Jay Yake is a Realtor who has been in the real estate industry for more than 25 years. Yake says the local housing market, with more than 20,000 unsold homes, is picking up but ‘it could be a lot faster.’ Yake shared possible changes that may have to take place to lower the inventory of unsold homes. Perhaps the most unwelcoming option, is the lowering of home prices by sellers.”‘

“Sometimes the news isn’t good and you just have to bite the bullet on occasion. Nobody wants to hear that prices may have to come down. It’s just not the market where it was where a seller put a sign on their yard and wait for all the contracts to roll in,’ said Yake.”

The Denver Channel from Colorado. “Colorado mortgage brokers kept a close eye on the bailout debate going on in Washington, D.C. Then there’s the question if the government will offer help to homeowners struggling with their mortgages now. Denver mortgage broker Lainey had her doubts.”

“‘I don’t know how they’re going to come up with a program that is actually going to bail a person in foreclosure status or has too much credit card debt,’ said Hamrick. ‘I can’t imagine we’re going to see that happen.’”

“Still, Hamrick said the outlook for Colorado’s housing market looks good, and will continue to improve despite the market meltdown on Wall Street. ‘I still think real estate one of the best investments you can put your money into,’ Hamrick said.”

“‘The most important thing is to buy the right house,’ Hamrick said. ‘And make sure you’re not overpaying.’”

The Tucson Citizen from Arizona. “Median home prices in Pima County in August hit a 44-month low and posted their largest single-month fall off in more than a decade, according to data compiled by the Tucson Association of Realtors. The fall in home values could leave 1 in 3 county homeowners over the near term owing more on their home than it’s worth, according to the Southwest Fair Housing Council.”

“Steve Randles, a top Realtor at Coldwell Banker Tucson, bought an investment property in the Catalina Foothills. If he sold it now, he’d lose $40,000. ‘If I had to sell it now, I’d be in trouble,’ he said.”

“So, he plans to wait for the market to improve, prices to rally and to get his investment back. ‘Nobody thought we’d lose four years of value from the market,’ Randles said.”

“Most homeowners who bought during the middecade boom will be able to refinance their homes at an extra 2 percent interest rate, said Mike Hannley, president of Bank of Tucson. On a $200,000 home, under a 30-year mortgage at 5.5 percent interest, the monthly payment would be about $1,130. At 6.5 percent, the payment would be $1,250. That’s only an extra $120 a month to stay in the home, he said.”

“‘The people who will be out of their house shouldn’t have been in their houses in the first place,’ he said.”

The Arizona Daily Star. “Throughout Central and Southern Arizona…prevalent risky-mortgage lending helped people stretch themselves too far in their real estate purchases. Maricopa real estate broker Shawn Schlegel said almost all of the resales in the area are distressed or foreclosed properties, and property values have plummeted since the high point around 2006.”

“‘The same house I sold at the peak for $265,000, I sold for $110,000 four or five months ago,’ he said.”

“Looking strictly at total dollar values, without taking population into account, Maricopa County was the country’s second-highest-grossing county in high-rate loans made from 2005 through 2007, according to the data. About $42.7 billion in high-risk mortgages were made in Maricopa County during those years.”

“Los Angeles County took the top spot with $96.4 billion. Pima County was No. 53 with about $5.2 billion.”

“Anthony Sanders, an Arizona State University finance professor, traces the rash of risky lending back to government initiatives to increase homeownership among lower-income families. ‘We opened the floodgates for this and had absolutely no damage control,’ Sanders said.”

“Maricopa Mayor Anthony Smith said he simply thinks ‘it was greed’ by everyone. ‘The practices just seemed to be doomed for a collapse,’ he said.”

“Local builder Pathway Developments Inc. and its president, Michael F. Teufel, filed for liquidation bankruptcy Sunday, according to bankruptcy court records.”

“Preliminary filings indicate that the debts of Teufel and his companies could range from $55 million to more than $150 million. The documents also state that there will likely be no funds available for unsecured creditors.”

“Potential creditor David Blair said he lost $125,000 invested in Pathway project Stone Crossing. Blair, who was initially the owner of the site and sold it to Pathway, said he selected Pathway because he liked their work.”

“Blair said he has not filed a lawsuit because he suspects Pathway does not have the funds to repay any of his $125,000. ‘Going after Mike Teufel does no good,’ he said. ‘If they don’t have the money to pay you, they don’t pay you.’”

The Spectrum from Utah. “In the throes of a nationwide economic downturn, unemployment in Washington County continues to rise. Data indicate Washington County is experiencing its highest rate of unemployment in more than four years.”

“Mark Knold, chief economist for the Department of Workforce Services, said Washington County has lost more than 2,000 construction jobs this year, a product of a county-wide construction slowdown.”

“The slowdown, he said, came as a result of the dramatic disconnect between housing prices and wages. Many have been forced toward foreclosure, he said, as prices jumped 75 percent over the previous five years, culminating at the height of the housing boom.”

“In contrast, Knold said wages increased only 25 percent over the same five-year period. ‘The market isn’t going to get back to life until prices and affordability meet each other,’ he said. ‘Unfortunately, it could take years for those prices to come down.’”

The Review Journal from Nevada. “The Las Vegas housing market is ‘moving along’ and eating through excess inventory of foreclosures, which now account for about 80 percent of resales, a local housing analyst said Monday.

“Dennis Smith of Home Builders Research reported 829 new- home sales in August and 3,051 recorded resales. New-home sales are down 48.3 percent from a year ago at 7,324 units, while existing-home sales are down only 2 percent at 18,720 through August.”

“Median home prices continued to slide. The new-home median was $256,000 in August, a 3.4 percent decline from the previous month and a 24 percent decline from the same month a year ago. The resale median price dipped to $200,000, down 4.8 percent from July and down 27 percent, or $75,000, from August 2007.”

“New-home permits fell to 485 in August, compared with 668 in July and 802 a year ago, Larry Murphy of SalesTraq reported. Overall, permits are down 55 percent for the year at 4,216.”

“Murphy’s seeing an increase in high-rise foreclosures, including five at SoHo Lofts and three at Panorama Towers in August.”

“‘Qualified buyers are still out there,’ Smith said. ‘I’ve talked to brokers who are very busy with foreclosures, getting them ready for sale, and I’ve talked to a few people investing in distressed properties. Las Vegas’ housing market is not going to die and blow away. There are many respectable economists around the country that have said Las Vegas will be one of the first markets in the country to turn around, but not tomorrow.’”

“Las Vegas-based Applied Analysis reported 1,282 new foreclosures during August, which remained consistent with preceding months. Las Vegas had 1,266 new foreclosures in July and 1,294 in June, the research firm reported. Foreclosures are down 12.9 percent from the same month a year ago.”

“The current foreclosure pace represents about 41 home take-backs every day. The number of homes in foreclosure also remained high at 4,827 units.”

“Developer Rich MacDonald understands the challenges of the local real estate market, yet he’s proceeding with an estimated $160 million to $180 million in new-home construction and community enhancements at MacDonald Highlands.”

“About 40 custom homes are under construction in the 1,200-acre master-planned community off Horizon Ridge Parkway in Henderson, carved into the hillside of the McCullough Mountains. Most of them are in the range of $3 million to $4 million.”

“‘People are starting to combine lots here,’ MacDonald said as he showed a $9 million mansion being built with a waterfront view on DragonRidge Golf Course. ‘You see how modest it is.’”

“When MacDonald started selling one-third acre lots in 1999, they were priced from $85,000 to $130,000. ‘Those were the days,’ he said. ‘Now they’re $135,000 to $700,000 and $800,000.’”

“Military historian Jim Hinds blames the housing bubble and mortgage lending practices for triggering the economic slump. It was foreseeable that making loans to individuals with bad credit records would lead to loan delinquencies, he said. ‘There was a certain recklessness that was involved,’ he said.”

“Southern Nevadans are panicking and considering extraordinary steps to avoid losing more money in the stock market, real estate and even bank savings accounts, according to Peter Atkinson, president of Black Mountain Rock Community Bank.”

“Harvey Cohen, a retired senior executive, also singled out the housing and mortgage industry blow-ups as a catalyst for the country’s current economic and financial woes. No one will buy homes now, he said, because they think prices are going lower. As a result, more people are losing their houses to foreclosure and the supply of houses is increasing, driving prices lower.”

“He also blamed rampant mortgage loan fraud. Two years ago, ‘every criminal trying to buy my house was looking for a mortgage-fraud deal,’ he said.”