The Housing Bubble

A report from Oregon Public Radio. “In the last several years high-end resort communities have sprung up across the West. But those destination resorts are suffering big time under the housing slump and credit crunch. Vast tracks of land sit idle without buyers. Resort club houses are ‘closing for the winter.’ And several developments are trying to fight off foreclosure. Charlotte McGinness is a Realtor for Zillah Lakes — a second-home development just east of Yakima, Washington. She’s eager to point out all the special features of this lake-side home she’s selling.”

“Still, owners of this resort have 650 homes to sell. So far, they’ve sold about 20. And many of those sales have been to McGinness’ own friends and family.”

“Charlotte McGinness: ‘I’m committed to it. Otherwise my dear mom wouldn’t be buying here if I didn’t think it was a good place to buy. And my sister wouldn’t be buying here if I didn’t think it was a good place to buy. And my boyfriend wouldn’t be buying here if I didn’t think it was a good place to buy.’”

“From Colorado to Oregon chalets stand empty, resort hotels are closing down and large developments are in jeopardy. These resorts were begun in happier times: Well-off Baby Boomers were looking for vacation homes. Getting credit was easy and there was a huge rush in real estate investment. Gregory Kolb is a resort development research analyst based in Colorado. He says the second-home market was oversaturated and now those once numerous buyers have gone away.”

“Gregory Kolb: ‘While there would have been demand two years ago, there isn’t any anymore. Because people who might have bought that stuff don’t qualify can’t get that lending so they can’t buy. And that’s where you see people left with this glut of development.’”

“Pronghorn Resort near Bend, Oregon has also laid-off people, closed its Bend sales office and reduced its winter operations. And Moonlight Basin Ranch in Montana is battling rumors of bankruptcy. Steve Robertson: ‘It’s the worst.’”

“That’s Steve Robertson, the developer of Illahee resort in Walla Walla. The project is now on hold, after millions of dollars were invested. Steve Robertson: ‘You would be silly to move forward in that environment building up additional financial obligations that there are no buyers for because there is no lending capacity at the bank level even if they wanted to buy your house, the banks not going to help them do it.’”

The Oregonian. “Consumers slapped shut their wallets in October, helping drive the unemployment rate to 7.3 percent in Oregon, which lost 14,100 jobs since September — the worst seasonally adjusted monthly decline since February 1981.”

“‘Consumers are going on strike,’ said Michael Parks, publisher of a Seattle-based economic bulletin. ‘It’s no wonder, because their housing prices are going down, their job security is eroding, and by the way, have you opened your 401K statement lately?’”

The Register Guard from Oregon. “Nothing about the past five months has been easy for Thomas Henderson. An assembly line worker at Monaco Coach Corp. in Coburg, the 39-year-old divorced father of three was among the temporary layoffs in June, leaving the family with no steady source of income to pay bills or the mortgage on their five-bedroom home in north Eugene.”

“Henderson held a garage sale, took in a boarder and accepted any job he could get — including one as a caller for a collection agency — one of the few booming businesses these days. ‘Try going home and having calls from people trying to do the same thing to you,’ he said, noting the irony.”

“‘I’m struggling — if the economy doesn’t shape up in the next six months or so, I don’t know if I’m going to be able to keep my house,’ Henderson said.”

From MarketWatch. “Faced with selling his house in a slow economy, George Tran decided to do something creative, while benefiting Habitat for Humanity, Best Friends Animal Shelter, and Citizens for Health at the same time. He is giving away his house in Oregon to the most worthy family via the Internet. Users are asked to pay a $19.95 registration fee to be in the running. Tell him why they should receive the house and have the Internet decide.”

“The story with the highest number of votes will receive the house (or $100,000) as a Christmas present. Proceeds above $300,000 will be donated. This is a first-of-its-kind giveaway as it uses the Internet to select the winner; prior contests are judged by the operator.”

“Tran said, ‘We bought the house in 2005 for $250,000, and had a horrible tenant that trashed the place. As a result, we spent $40,000 to renovate the place. We were told by our agent, Jody Draper, that it may take 11 months, or more, to sell in this market. As Internet marketers, my wife and I thought, why not use social media and see if we can give it away? We also want to make the offer relevant to more people as not everyone wants to move to Oregon, so we decided to award the winner with their choice of the house or $100,000 cash.’”

The Associated Press on Idaho. “It seemed like a no-brainer: build swanky homes around a Jack Nicklaus-designed golf course above scenic Lake Pend Oreille, all in the shadow of the Schweitzer Mountain ski area. But it turned into a nightmare for Sullivan Homes Idaho. The luxury builder recently went out of business after going an entire year without selling a single home despite being the ‘preferred builder’ at The Idaho Club.”

“The economic meltdown is having a special impact in the remote Idaho Panhandle, where construction of vacation and luxury retirement homes amid the lakes and mountains has made this one of the fastest growing regions in the country for the past decade. ‘In the last few weeks, the world’s changed quite a bit,’ said Mike Meldman of Gozzer Ranch, a 395-home development on nearby Lake Coeur d’Alene.”

“Kathryn Tacke, an analyst for the state Department of Labor, said about 200 real estate agents have recently left the business in the Coeur d’Alene area alone. In the Sun Valley area, the 421-unit Sweetwater Community has been suspended after 49 town homes were built and none were sold.”

“In some ways, the drop in stock prices is good for developers, because it drives investors into looking for harder assets like homes, Meldman said. ‘You are investing in family and able to enjoy it and use it and have a hard asset,’ Meldman said. ‘As long as you don’t have to sell the house, you are not going to lose value and it is not going to disappear on you.’”

From Local News 8 in Idaho. “Eastern Idaho’s housing market is flooded with homes, and buyers aren’t buying as much as they used to even though real estate agents say it’s more of buyer’s market. Sales have declined by about 30 to 40 percent for the months of September and October.”

“Most listing agents across the Snake River valley will put homes up for sale between November 17th to the 23rd. They plan to take a recommended 5 percent off the price of homes. It’s an effort to encourage nervous buyers.”

“If you’ve considered selling in today’s market, you might have run into some obstacles. ‘Sellers are having to do more, whether it’s be a little more aggressive on the price, whether it’s improving the condition to get it sold. You’re seeing more negotiation when the offers do come in,’ says Steven Taggart, a Broker in Idaho Falls.”

“Not all houses on the market are for sale. Stephanie Laird and her husband Ryan are the owners of a rental company in Rexburg. While the economy is hurting nearly every business across the nation, theirs seems to be thriving. Stephanie Laird said, ‘People can’t sell their home, so they turn to rent. People are renting like crazy because they can’t get mortgages.’”

“We’ve seen the signs in nearly every neighborhood, but as the economy continues to struggle, many home owners are looking for a way to hang on to their equity. The owner of Rentmaster in Idaho Falls is seeing an increase in not only his rentals, but the number of empty houses. Rentmaster owner Michael Baird said, ‘Usually there are more apartments, but now there are more empty homes.’”

“While a third of the nation rents, the economy could be pushing a different crowed towards the rental market. ‘We’re talking doctors, lawyers, it’s not just your average renters anymore’ explained Laird. ‘It’s people you would think would have money, and they’re renting.’”

The Daily News from Washington. “Cowlitz County’s housing market nose-dived in October, with homes sales and the median selling price down nearly 20 percent. The county’s median price was $159,500 last month, down from $195,000 in October 2007 and the lowest in three years, the Northwest MLS reported.”

“‘The real estate marketplace doesn’t have buyers in it,’ said Gerry Flaskerud, broker in Longview.”

“At the beginning of the month, Flaskerud’s agency took a bold step to attract buyers by cutting the prices of nearly half of their listed homes by 10 percent. Participation by sellers was strong, Flaskerud said. But buyers, frightened by news of collapsing investment banks, high unemployment and the erratic stock market, mostly stayed on the sidelines, he said.”

“‘It is psychological. It’s not that they don’t have credit or can’t get it. They’re not even thinking about trying to,’ Flaskerud said.”

“Longview developer Charles Blevins had big dreams of creating jobs, homes and profits. When a large bank loan fell through this year for a subdivision he was poised to build at the foot of Mount Solo, Blevins’ dreams died. The ripple effect of losing that loan caused his other business and real estate ventures to implode. He owes money to several local companies. If he can’t work out deals with his creditors, he may have to file for bankruptcy, Blevins said.”

“‘I lost everything,’ he said, citing losses that amount to millions of dollars.”

“‘It all snowballed so fast. I was throwing good money after bad left and right,’ Blevins said. ‘If I would have been smarter, in retrospect, I would have pulled the plug’ at the first sign of the market slowdown, he said.”

“Blevins couldn’t be reached for Sunday’s story. Neither city officials nor his former business partner knew where he was. City Development Director John Brickey said he assumed Blevins was abandoning the project because he hadn’t heard from him since the city approved it in November 2007. Yes, the project is kaput, Blevins confirmed. Blevins, who now lives in Vancouver, saw the article online and came to The Daily News office Thursday to explain what happened.”

“‘People need to know I didn’t just leave town and take the money,’ he said, adding that he wants to apologize to anyone in town who lost money as a result of his failed business ventures.”

“After the city approved the Mount Solo subdivision, Blevins said, he and his brother went to Cowlitz Bank and learned their loan for the development’s infrastructure had been cancelled. ‘After two years of making very high payments, we were obviously in the same boat as every other developer. So we had to put the brakes on everything,’ said Blevins, who had partnered on the deal with his half-brother and his wife. The lender who’d financed the partners’ purchase of the 77 acres at Mount Solo now owns the land, Blevins said.”

“In addition to the Mount Solo Project, Blevins was forced to sell his share of Park Place mall, a retail development he and another business partner built on Oregon Way. He’s lost his two rental homes, plus 10 acres of property on which he’d intended to build a house for himself. He no longer has a cell phone, and his Hummer SUV is for sale. ‘I’m just down to the basics,’ he said.”

“At heart, though, he’s a developer. And when the market improves, he hopes to return with a different approach — one where he’s not overexposed and overextended. This has been a lesson learned, Blevins said. ‘I have a Ph.D. in loss,’ he said.”

“Blevins, who once owned a mortgage company, is working on forming a non-profit organization to help victims of the mortgage crisis to repair their credit. ‘This economy is maybe a blessing in disguise because it makes people realize the power of savings and the power of being frugal,’ he said.”