The Housing Bubble

The Daily Camera reports from Colorado. “Tonja Ahijevych, a housing counseling coordinator for Boulder County, is on track to see a record number of residents seeking to avoid foreclosure this year. More than two dozen homes in Boulder County are listed as foreclosures and selling for more than $1 million. ‘We’ve seen individuals in homes around $100,000 and individuals in homes upwards of $800,000 or $900,000. The typical client is someone who thought when they obtained their loan that they could afford it, and now they’re finding they can’t,’ Ahijevych said.”

“DB Wilson, a Realtor who has 32 years of experience in the local market, said foreclosures among high-end homes are being caused by multiple factors. ‘It’s probably a little bit of everything,’ Wilson said. ‘What you’re seeing is that some are health-related, some are divorces, some are employment, some are speculation.’”

The Rocky Mountain News fro Colorado. “The once booming real estate market in Colorado’s resort areas has taken a hit along with the rest of the economy, with sales dropping by an average of almost 40 percent in counties that include some of the state’s toniest slopeside villages. One home in Aspen on Independence Pass has seen its listing price drop from $25 million to $14.5 million. The 11,500-square-foot home on 5 acres is owned by Alan Potamkin. He and his brother head a national chain of car dealerships.”

“One buyer in Denver, who didn’t want to be identified, said he and his wife both have jobs and strong credit histories. But their plan to buy a condo in Summit County fell apart a week before their closing date because the lender balked when it discovered they were purchasing a unit in a development that allows owners to rent to vacationing visitors.”

“Once the couple discovered they could get a loan somewhere else on far less favorable terms, they tried offering a lower price for the condo. When the seller balked, they decided to put off their purchase until conditions change for the better. The couple’s mortgage broker, who has been in the business 25 years, said the demise of the deal would have been unthinkable until recently.”

“‘It is shocking . . . this was a 20 percent down deal with excellent credit,’ said Mo Robinson, vice president at Kensington Mortgage in Greenwood Village.”

“‘Financing is an issue, I’ve never seen it like this before,’ said Joanne Hanson, who leads a team of brokers in Frisco. ‘They got way too lax now they’re swinging way too much the other way.’”

The Denver Post from Colorado. “My contractor friend Kirby, who specializes in upscale rural residences, had four houses under construction a year ago. Today he has only one, with nothing new on the immediate horizon, and he’s had to lay off most of his employees.”

“I asked a local realty agent. She said the financial collapse hasn’t visibly affected those very rich people who want to build mansions hereabouts. But once you move down the financial food chain, you see problems. ‘I’ve talked to a lot of people who had been planning to retire to the mountains,’ she said, ‘and now they’re telling me that their 401(k)s have tanked and they’re going to have to keep working, so they won’t be moving here anytime soon.’”

“And even if there aren’t many foreclosures here, she said, ‘we’re already feeling the pinch.’ And where there are a lot of foreclosures, ‘then there might be a solution to the affordable-housing problem.’”

The Gazette from Colorado. “Colorado Springs’ development community is reeling, thanks to a combination of factors. Developer Ray O’Sullivan closed his Realty Development Services in August and let go his staff of 16. Since then, O’Sullivan said, he’s unsuccessfully sought financing to jump-start residential and commercial projects.”

“O’Sullivan said he’s tried selling his properties, including the 6,420-acre Santa Fe Springs residential and commercial project east of the Springs in unincorporated El Paso County. But he hasn’t found any takers and expects to lose everything to foreclosure. When he came to town from California in 1990, opportunities were plentiful, O’Sullivan said.”

“Now, ‘the properties I have…I cannot finance them, I cannot ‘equitize’ them, I can’t develop them, I can’t build them. I’m going to basically lose all 20-some projects that I have,’ he said.”

The Daily Sentinel from Colorado. “Two companies in the same industry are taking different approaches to the slowdown they see coming. Bill Johnson, owner of CJ’s Cabinets in Grand Junction, has been down this road before. ‘A year ago, 95 percent of our business was in new construction. Today, less than 5 percent is in new homes,’ Johnson said. ‘We kind of saw the handwriting on the wall’ and changed his emphasis from installing new products to helping customers improve what they already have.”

“The Grand Valley, of late an island of prosperity in a national storm of economic woes, is starting to feel buffeted by the slowdown. Energy companies have hit the brakes on drilling plans as fuel demand slips worldwide, and the construction sector now is taking the brunt of the storm.”

“The speed at which the economy seems to have reversed has been head-spinning, said Diane Schwenke, president of the Grand Junction Area Chamber of Commerce. ‘This year we went from ‘Happy Days are Here Again’ as 2008 started, to end-of-year layoffs, she said. ‘We went from being the life of the party to the hangover in one year,’ Schwenke said.”

The Arizona Republic. “Fears of impending foreclosure drew about 110 people to Gilbert on Saturday for a workshop that addressed everything from budgets to last-resort loan options. One in Glendale drew 1,800 people.”

“Bob and Janet Pilon may be headed toward a foreclosure if their bank won’t agree to reduce their interest rate, they said. The Pilons, who plan to retire in a few years, want to make a large down payment to refinance the home at a lower rate but don’t know if that’s possible. ‘We can’t even sell and get out of it now,’ Janet Pilon said. Without the lower rate, the couple fear they may be facing foreclosure. ‘We’re headed that way, which is very scary.’”

“Kim Carter of Queen Creek (is) interested in a short sale. But if the bank doesn’t agree Carter says the house may go into foreclosure. Carter doesn’t want to renegotiate her loan because she plans to move out of state. Houses in her area are selling for about $120,000 but the Carters paid $195,000 for their home, she said.”

“‘We don’t want to be strapped in another loan,’ Carter said.”

From Forbes. “By 2006, it was clear the Phoenix real estate bubble had burst. Yet those who jumped back in during 2007 badly mistimed the bottom. Phoenix prices are down 20 percent this year, according to the National Association of Realtors. The result? That second wave of speculation has resulted in scads of newly trapped homeowners.”

“‘The same speculators that were partly responsible for the housing bubble and its subsequent popping are the same ones that are trying to replicate the 2003 [through] 2006 period,’ says Anthony Sanders, a professor of finance at Arizona State University. ‘As the housing market seeks a bottom, speculators and some well-funded hedge funds are jumping in the market but finding that the bottom hasn’t been hit yet. Hence, they jump back out again.’”

“This type of scenario is playing out nationwide. Homeowners selling their properties after less than a year now represent 17.3 percent of total sales in the U.S., reports Zillow. This is higher than at any point during the housing boom.”

“Las Vegas and Yuba City, Ariz., are leading the way for these sellers who mistimed the bottom. Respectively, 34.1 percent and 34 percent of these homeowners sold their homes in the third quarter of 2008, despite having owned the homes for less than a year.”

The Review Journal from Nevada. “It was going fairly well for Victor King at one point. His house in the southwest part of the Las Vegas Valley was appraised at $800,000 and business, at a company that tracks vehicles using GPS devices, was good. But business was tightly tied to the construction industry.”

“‘My mortgage was $480,000 and we were having difficulties making the payments, because my company’s business has dropped off 62 percent this year,’ he said Friday.”

“But he’s getting a break. ‘I got a forbearance,’ he said. ‘It allows me to pay about 25 percent of the total mortgage payment for four months, and then they’ll review.’”

“By then, he hopes that a public works program promised by President-elect Barack Obama will be getting started, which would “put us up far beyond where we were before. If not, it’ll still give him time ‘to know pretty much where the company is going to go.’”

“Joe Ramos and his wife will be able to stay in their Silverado Ranch home for now. Their adjustable-rate mortgage reset last year and added $700 to the monthly mortgage payment — which was still fine, until he took an $1,800-a-month pay cut. ‘That killed me,’ he said. ‘We got to the point where we had used up all our savings trying to make the payment.’”

“His lender rolled back the increased interest rate so that the payment is the same as when they first took out the loan in 2001. ‘It’s going to keep us in the house until hopefully the economy turns around,’ Ramos said.”

“It just went from bad to worse. Nevada gaming revenues tumbled 22.3 percent in October, the single largest monthly drop in state history and the 10th straight month gaming revenues have fallen in the Silver State.”

“The gaming revenue results were no better throughout Clark County. Casinos in North Las Vegas saw revenues decline almost 35 percent, downtown casino revenues fell almost 20 percent, gaming revenues were off 28 percent on Boulder Highway, and casinos in Laughlin saw revenues decline nearly 21 percent. ‘When you compare this month to a year ago, it shows you how far we’ve fallen,’ said Frank Streshley, senior research analyst for the Gaming Control Board. ‘It was just a bad month all around.’”

In Business Las Vegas. “Sales of single-family detached homes accounted for 81 percent of all new-home sales in October, according to Hanley Wood Market Intelligence. Overall new-home sales were down 42 percent from September and 80 percent from October 2007. Ladera Crest by KB Home and Newcastle at Highlands Ranch by American West Homes were the two best-selling communities in October. Both had nine net sales. The homes are being sold as low as $91 and $99 per square foot, respectively.”

“As for condos, the firm notes sales increased 250 percent in October compared to September because of 31 units sold at auction at Monterey Las Vegas Country Club. Newport Lofts, which hadn’t had any sales for the year, had six in October.”

“The cancellation rate for homes was 48.6 percent in October, up from 37 percent in September. It was 36.6 percent in October 2007. There was a 54 percent cancellation rate of condos in October. It was a whopping 170 percent in September and 21.5 percent in October 2007.”

The Nevada Appeal. “New subdivision work has come to a standstill in Carson City. Not one home has been built in any of the projects approved in the last three years. The 10 subdivisions the city approved since 2005 make up about 1,150 of the 1,900 empty home lots in the city.”

“City Planning Director Lee Plemel said developers are afraid of paying for infrastructure costs to get their subdivisions started without knowing if they’ll be able sell the properties and cover their costs. ‘They’re pretty up front saying it’s because of sales,’ Plemel said.”

“One of the owners of the 94-home Mills Landing subdivision, Landmark Homes and Development Inc. of Reno, lost its contractors license in November. Landmark had been one of the largest home builders in Northern Nevada. The reason for the slowdown in subdivision building in Carson City is simple, said Dwight Millard, one of the owners of the delayed 201-home Summerhawk development.’

“‘There’s no buyers,’ he said. ‘Nobody’s buying.’”

The Reno Gazette Journal from Nevada. “The past 12 months have been rough on Northern Nevada. Foreclosures crowd the housing market. Jobless rates, once among the lowest in the nation, have ballooned to levels not seen since the 1980s. ‘We’re not used to this,” Tom Fitzgerald, CEO of Nevadaworks, a federally funded work force development program in Reno, said of 7 percent-plus unemployment.”

“‘It creates a panic situation in the minds of people who lost their jobs,’ he said. ‘We’re seeing people walk in and say, ‘I’m desperate. I need a job right now.’ But no agency can help someone that fast.’”

“Tom Cargill, economist at the University of Nevada, Reno, blames lax federal regulatory oversight of lenders and over-reaching congressional pressure promoting home ownership in the past decade for the housing debacle that’s at the root of the recession. ‘That all fueled the bubble. A herd mentality took over (the home-buying market),’ Cargill said. ‘It feeds on itself, and there was no stopping it. By 2006, it was clear it was unsustainable, and it began to collapse.’”

“Brian Kaiser, a housing and real estate analyst at the University of Nevada, Reno, recalls a ‘frenzy’ of home-buying in Northern Nevada where everyone, it seemed, was trying to cash in and not be left out. ‘It’s the ‘bigger-fool’ theory,’ he said. ‘I may be a fool, but I’m banking on the fact that a bigger fool will come along. Ultimately, you run out of fools.’”