The Housing Bubble

The Press Enterprise reports from California. “When Ryan Zimmermann last month arrived for a walk-through of the four-bedroom Corona house he had just bought at a bank auction, he got a big surprise. Someone else had moved in. David Dobbs refuses to leave. Neighbors said he showed up late one night a few weeks ago and unloaded his belongings from a small trailer. He filled the once empty swimming pool and spa and had cable hooked up to his wide-screen television. Police allowed him to stay after he showed them a rental agreement and what he said was the deed proving this landlord is the owner.”

“‘I have the legal documents to be here. That’s why I’m not gone,’ Dobbs said in an interview.”

“By filing deeds that cloud title to a house, someone can get free shelter and ‘hold a house ransom’ by demanding cash from banks that want to avoid the delay and expense of an eviction process, which can take 60 days or longer, said Pete Nyiri, owner of Top Producers Realty & REO, which specializes in selling bank repossessed houses. ‘This is going to be the next big wave of rip-offs because it is so easy,’ Nyiri said.”

“Zimmermann said he will try to get back most of the $25,000 down payment he made on the house in Corona but he still wants to keep the escrow open in case the bank can sell the house to him before he finds another. He said when he told his wife about the squatters, ‘She cried a while. … But then you have to laugh. It is like a crazy nightmare.’”

The Desert Sun. “Sue McCollum, president of the California Desert Association of REALTORS…and several other members were among the more than 20,000 Realtors attending the 2008 REALTORS Conference & Expo, ‘Destination Success ñ Full Speed Ahead,’ recently held in Orlando, Fla.”

“Richard F. Gaylord, NAR’s 2008 president, urged Realtors to help restore confidence in the real estate market by educating the public about the value of housing as a good long-term investment. ‘Homeownership offers immediate benefits and long-term value,’ said Gaylord.”

The Merced Sun Star. “Merced County and its cities are eligible for up to $7 million to buy up foreclosed homes and demolish ones that have become eyesores, the state announced Friday. The county’s foreclosure rate, 12.5 percent, ranks as the highest in California. In the Central Valley, about a quarter of the loans were high-cost. Federal agencies reckon that 5,913 homes within the county have gone into foreclosure.”

“While the money will help the problem, it’s far from a solution, as homes continue to go back to the banks. ‘This is true everywhere: It’s a drop in the bucket,’ Merced County Association of Government spokeswoman Candice Steelman said.”

“Last month, the county saw 315 more homes fall into foreclosure. Just under 500 houses were sold.

Councilman Bill Spriggs said he was frustrated to see cities such as Modesto and Stockton receive millions from Washington D.C., while others were overlooked. The growth of UC Merced and the city’s typical population growth, about 3 percent each year, will slowly chisel away at the mountain of vacant homes. Still, that will take at least a year or two to work through.”

“‘I’m still not happy,’ he said, ‘but at this point, you can’t say no to $1.4 million.’”

The Recordnet. “Foreclosure auctions first popped up in the Central Valley in summer 2007, when hardly anything was selling. Then the auctions basically evaporated as sales via local brokerage firms took off by year’s end and got ever hotter this year. A small auction this week that featured 35 houses in San Joaquin County and another next weekend of 32 houses marks a small burst in a record sales market as foreclosure home prices continue to drop.”

“But an unsuccessful auction attempt can convince the investors or bank that owns the foreclosure property that the price needs cutting, said Jerry Abbott, president and co-owner of Grupe Real Estate, Stockton. ‘They usually only sit because they’re overpriced,’ Abbott said. ‘The ones that don’t sell come back on the market at a lower price and usually sell quickly after that.’”

The Union. “A day before owners of the North Star project were to auction off their defaulted property on the courthouse steps, they filed for Chapter 11 bankruptcy protection, the Union has learned. Sandy Sanderson, owner of Sanderson Communities of Bend, Ore., and his partners in North Star/Grass Valley LLC owe Citizens Bank $2.2 million. The bankruptcy filing has bought the developers time.”

“Sanderson said he plans to secure financing for his project on 762 acres, one of four special development areas proposed on the outskirts of Grass Valley in recent years. ‘We’re not giving up. We’ll be the developers,’ Sanderson said.”

The Sacramento Bee. “Home Front listened in this week when area building industry reps gathered to hear what their consultants think. San Diego-based Sullivan Group Real Estate Advisors held the floor and tried hard not to scare a paying, vulnerable audience half to death. Beyond, the statistics – fairly bad, such as a 14-year supply of new home lots in Yuba and Sutter counties – here’s what’s really going on in real estate.”

“The next generation of home builders will probably not learn a lesson from today’s housing meltdown. Tom Jacobs, Western region chief of Kimball Hill Homes (which filed for bankruptcy protection last April), said, ‘I think the next generation of home builders will make the same mistake.’”

From CBS 13. “No too long ago, Elk Grove was booming with growth. In fact, it was fastest growing city in the country at one time. Tonight, it’s forced to pay the price for the nation’s faltering economy. The city took a big hit today with another dealership closure.”

“The place that made headlines as the fastest-growing city in the country two years ago, now finds itself with an empty lot for its town center mall, and has empty spaces where developers had planned to build new homes.”

“Curt Cook just bought his brand new house next to a dirt lot on a short sale. ‘I think its going to be a while before the market picks up before they can really start building again,’ said Curt.”

The Danville Weekly. “Developers from throughout Northern California are joining together with a Danville-based firm to hold a massive auction next weekend of new home properties both in the Bay Area and beyond. Accelerated Marketing Partners Co.-founder Ken Stevens said the event will feature 150 new homes in more than a dozen communities. ‘These are all brand new homes with warranties. They’ve never been lived in and in some cases are set up where the buyers can still pick out options,’ he said.”

“Homes will be sold throughout the Bay Area, including San Jose, Vallejo, Hayward, Martinez and Walnut Creek. In most cases, the opening bid is 50 percent of the original asking price or less. Vacation homes will also be on the docket. Stevens said they have homes in a golf community in Copperopolis that run two to four bedrooms and will have opening bids of $295,000.”

The Mercury News. “The first fiscal bomb hit the Bay Area last week when the Gilroy City Council voted to fire about a sixth of its workforce. Other cities battling dwindling municipal funds are fooling themselves, Gilroy officials say, if they think they will avoid similar layoffs and severe cuts in services. ‘I would say that we’re six to eight months ahead of the curve,’ Gilroy Mayor Al Pinherio said. ‘But I guarantee you that lots of other cities will be in the same boat.”’

“Added Gilroy City Administrator Tom Haglund: ‘Anyone who doesn’t believe that is whistling past the graveyard — and they shouldn’t be doing that.”’

“Only last spring, Gilroy officials had calculated that the city would take into its general fund $2.6 million from engineering, planning and building fees. Now they project they will receive only $800,000 — a nearly 70 percent reduction. The reason is that developers figure that building homes in a depressed market is a losing proposition, or they can’t get financing because credit markets have dried up.”

“‘We have developers who would love to build,’ said Gilroy’s finance director, Christina Turner. ‘But they can’t get a loan.’”

The San Francisco Chronicle. “Sun Microsystems said Friday it will eliminate 5,000 to 6,000 jobs, or more than 15 percent of its workforce, becoming the latest Silicon Valley firm to suffer from the widening economic downturn. Many startups have also cut jobs as the economic slump that began in housing and infected the financial sector undermines tech niches from chips to computing.”

“Jon Fisher, a Silicon Valley software entrepreneur and business professor at University of San Francisco, predicted more layoffs in tech and the general economy but said these future job losses are unlikely to ignite an irreversible spiral because government intervention has stabilized the financial system.”

“‘I believe a recovery in housing and financial services will offset the economic destruction caused by future job losses,’ he said.”

From KCBS. “One of the last markets hit by the housing crash is finally seeing prices fall. Developers are finally slashing the prices of luxury condominiums in San Francisco because of the slow market. Symphony Towers is having a closeout sale, $100,000 off. The Potrero is selling its last nine units at a discount. The second tower of the Rincon Hill development isn’t even going to be built because of the slow market.”

“‘Sometimes it’s a la carte,’ said Alan Mark, CEO of the Mark Company which sells and markets some of the city’s top condo projects. The deals, Mark explains, often run something like this. ‘Here’s $20,000 or more and do you want it towards home owners dues? Do you want it towards closing costs, or upgrades or towards prices?’”

“He believes prices will rebound in about two years when there is another condo shortage.”

The San Gabriel Valley Tribune. “Southland economist Nancy D. Sidhu, in a speech at the San Gabriel Valley Economic Partnership’s Economic Outlook Breakfast, said the economy may begin to pick up by the end of next year, and that by 2010, we should be well on the road to recovery. ‘The storm will be severe through the next six to nine months with gradual clearing and sunny skies by 2010 and 2011,’ she said. ‘Watch for housing upturns.’”

“Los Angeles County home prices fell 35.3 percent in September, according to a recent report by the California Association of Realtors. But sales - fueled by those lower prices - rose a whopping 82.9 percent. Industry experts say foreclosures account for a significant portion of Southland home sales. ”

“Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora, said 30 percent of the transactions her office handles are either home foreclosures or short sales. ‘That’s the highest it’s been for us, but I don’t think we’re through,’ Rodriguez said last month. ‘I think that could probably get up to 40 percent … and maybe even 50 percent.’”

The Voice of San Diego. “Meet David Cleveland, a house-hunter trying to navigate the San Diego housing market. He recently moved from Denver and is trying to find a house to buy. He sleeps on a boat and showers at the gym, and his wife and kids stay with family in Orange County, while the Clevelands try to navigate the local housing market.”

“Here’s Cleveland, in his own words: ‘I would have to agree that we haven’t seen the end of the mortgage mess yet…What I am seeing here in San Diego is a continued feeding frenzy. Yes some are losing their houses, but there are people out there that are bidding up the prices of homes that are in short sale or are foreclosed thinking they are getting a great deal.’”

“Say you bought a house in 2005 and you’re wondering when your home might again be worth what you paid for it. Norm Miller, real estate professor at the University of San Diego, has an answer: He’s projected out local prices for the next decade or so. And even under the most optimistic scenario he and his colleagues came up with, the median price of a detached house in San Diego won’t return to the 2005 price peak until at least 2016, or ’sometime way off the distance,’ Miller said.”

“Mark Riedy, the center’s executive director, said while perpetual optimism is a hallmark of most real estate pros, most are in ’survival mode’ these days. ‘They’re saying, ‘Don’t tell me how to remodel the house when it’s burning down, and don’t tell me where to put the sprinkler system. Tell me how to get out of the house and not die,’ Riedy said.’

“Riedy said he wants the school to be a place where any opinion has room. ‘If somebody has an opinion that the market’s in the toilet and is going to stay there ’til 2020, that’s their opinion,’ he said. ‘I might not always agree, but it’s going to be a tough time, and there’s no pressure from me or anybody else to say otherwise.’”

“Riedy said he recently spoke to a group of high-end residential brokers in La Jolla. He described what he sees as the future for the real estate market — ‘that the manure was going to hit the fan’ — and many gave him a hard time about his analysis.”

“But afterward, a handful of brokers approached Riedy. ‘They said ‘We think you’re absolutely right, it’s just not in our nature to agree with that,’ he said. ‘And that’s why they’re good at what they do — they always think it’s going to get better.’”

The Press Democrat. “Jobless ranks could hit 10 percent and home prices will continue to fall across California, with Sonoma County feeling its share of the worsening downturn, according to an economic forecast released Friday. The worst recession to hit the state and nation in more than two decades could extend beyond next year, sapping consumer spending that drives the economy and extending housing’s decline, said Chris Thornberg, an economist who studies California.”

“In Sonoma County, where two out of three home sales are of distressed properties, the median home price could sink below $300,000 before finally flattening, Thornberg said. Home prices have already fallen 42 percent from the peak of $619,000 three years ago, and Thornberg’s projection would take off an additional 20 percent or so.”

“‘Do I think prices have farther to fall? Unfortunately, I do,’ he said. ‘The fact is prices will hit a level where people can afford them.’”

“Thornberg and other economists said the downturn was overdue, and the steep fall reflects how far prices were out of line with incomes. Surging home sales in recent months do not indicate a recovery, but rather demand for discounted properties flooding the market, he said. ‘That just reflects the overall stress on the system,’ Thornberg said.”

“Consumer reliance on credit and home equity for spending that sustained economic growth for more than a decade can’t be counted on to pull the economy out of recession, Thornberg said. ‘We’ve been partying like madmen,’ he said, ‘and Americans have just woken up from 12 years of partying with the mother of all headaches.’”