The Housing Bubble

The Missoulian reports from Montana. “Craig Siphers had a notion that the run on real estate in the Bitterroot Valley might be slowing during the summer of 2006. But the longtime real estate agent with Hamilton’s Exit Realty couldn’t have predicted then just how far it would fall. ‘The valley could only support internally so much of a price increase in real estate,’ Siphers said. ‘We found ourselves pretty much limited to outside sources. The market was pretty tough on the local guy.’”

“In 2007, there were 1,038 sales recorded in the Bitterroot MLS. In 2008, that number dropped to 583. ‘I think we all had to see it on paper to believe it,’ said Cheryl Smith of the Lambros office in Hamilton. ‘It’s quite a change. We’ve had 10 to 12, maybe even 15 years of appreciation on real estate here. … There are some agents who have not even seen a declining market before.’”

“Smith said it’s taken some time for people to fully appreciate the change in the market. ‘Everyone has been taking it for granted that real estate would continue to appreciate here,’ she said. ‘It’s been a slow market to figure out that it’s slow. … All markets are cyclical. All bubbles burst. The Bitterroot is still going to be a destination. People will save their entire lives to move here.’”

The Bozeman Daily Chronicle. “Montana homebuilders sought Thursday to drum up public support for a $150 billion package to rescue the housing industry. ‘It’s going to get worse unless something changes,’ Bill Simkins, owner of Simkins-Hallin Lumber in Bozeman, warned during a telephone conference call with reporters.”

“Simkins-Hallin has done a lot of work in Big Sky, but the market there has been ‘in a free fall,’ Simkins said. Homeowners in California, Florida and elsewhere can’t sell their homes, so they can’t build in Big Sky. ‘Thousands of contractors and suppliers are no longer working there,’ Simkins said. ‘The housing downturn is cascading through the whole economy.’”

Montana’s News Station. “For months Montana has escaped the dramatic downturn of the housing industry, but it seems the hardship has finally caught up with Big Sky Country. In a report just released by the National Association of Homebuilders, Bozeman, Great Falls, and Missoula have all seen a big drop ranging from 35% in Missoula all the way up to 65% fall in Bozeman.”

“But Billings has escaped the sharp decline, with only a ten percent drop as it continues to perform as one of the top markets in the country. ‘We didn’t overbuild. Some of those areas are somewhat overbuilt. And they will adjust, it’ll take a little more time. Billings is not done yet. We don’t have an overbuilt market. We have about a thousand residential properties on ML today. That’s not overbuilt for Billings,’ says Jeff Junkert, owner of Jeff Junkert Construction, Inc.”

“Junkert says there’s also a bright side for anyone looking to buy. ‘If there’s anybody out there that’s really been considering their profile to buy a new home, if they’re waiting because of national issues, I really feel that they’re going to miss an opportunity here in Billings because these are interest rates that you probably will not see for many, many years,’ he said.”

The CDA Press from Idaho. “With thousands of homes on the market and stagnant sales, it is still a buyer’s market in North Idaho, but a little creativity can help make the deal. ‘People won’t consider (buying) unless it is a steal,’ said Janette McKenna, an agent at Lakeshore Realty. ‘If the seller is not willing to work with them, buyers are not willing to work with them.’”

“Prices were reduced for the season to stimulate sales at Parkside, where condominiums start around a half-million dollars. ‘We had a lot of people coming in, through the worse winter and cold,’ said Tom Fisher at Century 21 Beutler and Associates, which picked up the sales contract for the project. ‘They were telling us ‘We don’t ever want to shovel snow again.’”

The Oregonian. “The Regional Multiple Listing Service report, a closely watched measure of the Portland market, shows that the median price for homes sold in December fell to $252,900. That’s a 16 percent drop from the August 2007 peak of $302,000. Since 1992, the Portland area has reported 10 months in which prices declined compared with the same month a year earlier. Nine of those occurred in 2008. The other was May 2001.”

“Listings have fallen 24 percent from last year’s peak of 18,200 in July. Even with the shrinking supply, the number of closed sales fell 46 percent, and pending sales fell 60 percent. In December, the number of closed sales reached their lowest level since February 1992. The number of pending sales fell to the lowest level since record keeping began in 1992. The result: The Portland-area market still faces a supply glut, with 14 months of inventory.”

“The unraveling of the nation’s financial sector hit Southwest Washington with bitter impact Friday when the Washington Department of Financial Institutions shut down the Bank of Clark County. Bank customers could lose nearly $40 million in deposits in the shutdown, as some accounts exceeded the $250,000 FDIC insurance.”

“The bank was heavily exposed to the faltering real estate sector through loans to builders and developers. Construction and development loans accounted for more than 36 percent of the bank’s total portfolio. Clark County has been particularly hard-hit by the real estate collapse. Heavy overbuilding helped create a huge surplus of homes. Median home values fell 11 percent on average in the 12 months ended Dec. 31.”

‘Mike Worthy, the bank’s CEO, said in early 2008 that the collapse of the residential sector was stunning in its speed, made worse by the widespread presence of speculators with hopes of flipping houses for big bucks. But he voiced confidence at the time that his bank would weather the storm.”

“‘The last number of months the bank had significant losses in its loan portfolio, which resulted in unacceptably low levels of capital,’ said Brad Williamson, director of the Washington Division of Banks.”

The Columbian from Washington. “Several top Bank of Clark County executives, including President Mike Worthy, were relieved of their positions on Friday.”

“The bank grew quickly as it aggressively courted business borrowers and developers during Clark County’s building boom. But when the housing market soured, so did its finances, as did the finances of most other banks in the region. Until recently, it was clear that the Bank of Clark County had lost money on construction and development loans, but not how bad things had become.”

“Bank of Clark County was launched in 1998 and opened its doors in 1999 with $8.6 million from more than 400 investors. ‘The shareholders are last in line,’ said Roberta Valdez, ombudsman with the FDIC. ‘Uninsured depositors have to be made whole before creditors or anybody else will get any money.’”

“Home sales in Clark County dropped by 32.6 percent in 2008, reflecting a year-long stalemate between bargain-hunting house hunters and sellers who refused to lower their prices. More than 4,650 homes were listed for sale in Clark County through November, according to RMLS, a Portland-based listing service. The supply had nearly doubled from the same period the year before. It would take 16.9 months to sell off the inventory if no new listings are added.”

“Last year’s sales were the slowest in at least the past 15 years. ‘I am hopeful that by mid 2009, we’ll see some definite signs of improvement,’ said Sandy Hendrick, executive director of the Clark County Association of Realtors.”

“However, Hendrick and others expect lenders will continue to enforce strict requirements on borrowing. It is a dramatic change from the loosening of standards practiced during the most recent housing boom, which ran through 2006. ‘We’re back to conventional lending now,’ Hendrick said, although he and other industry experts believe Clark County’s housing downturn will be shortlived compared with other parts of the country.”

“‘Let’s face it, with our population growth, the demand (for houses) is not going to go away,’ Hendrick said. ‘We’ve had a downturn, But it was much less severe than in places like Arizona, California and Nevada.’”

“The number of Clark County houses that entered foreclosure in 2008 grew 81.8 percent from 2007. A total of 2,541 houses in the county entered some stage of foreclosure last year, up from 1,398 foreclosures filed in 2007, according to the first full look at 12 months of foreclosure figures released by RealtyTrac.”

“In December, 291 foreclosures were filed in Clark County, up 87 percent from the same month in 2007. The situation continues to send troubled homeowners to the local foreclosure counseling center, said Teri Duffy, executive director of the Community Housing Resource Center. ‘All I can say is it hasn’t stopped,’ said Duffy, who blamed local job losses and the sluggish housing market for Clark County’s surge in foreclosures.”

“‘In many cases, people were relying on two incomes to make a mortgage payment. As long as those folks had those jobs, they were able to make it,’ she said.”

“Weaker home values also exacerbated the problem here, Duffy said, as today’s homeowners often can’t sell for a price that will pay off what they owe on a mortgage loan on the homes. She said many of their homes are in newer neighborhoods in Ridgefield, Battle Ground, Camas and Washougal. ‘In some cases, we’re seeing up to 15 percent less value,’ Duffy said. ‘We’re seeing homes that were bought two or three years ago, in which people really borrowed the maximum amount.’”

The Seattle Times from Washington. “Home foreclosures continue to soar across the country and are picking up speed in the Puget Sound region, despite record-low interest rates, loan-payment assistance programs and other attempts to stem a rising tide of cash-strapped homeowners unable to pay their mortgages.”

“The number of homes in some stage of the foreclosure process has doubled in King, Snohomish and Kitsap counties since 2006, according to RealtyTrac. That number nearly tripled in Pierce County.”

“Washington State University real-estate researcher Glenn Crellin, put it this way: ‘I am going to presume [the foreclosure rate] is among the worst that we’ve seen.’”

“Crellin, director of the Washington Center for Real Estate Research, forecasts more to come, as adjustable-rate mortgages on homes bought at the market’s peak reset to interest rates that might as well be in the stratosphere — as high as 30 percent in some cases, he says. ‘That tells me some of those loans are going to move from being current to being delinquent to moving toward foreclosure throughout 2009,’ said Crellin.”

“Locally, the Seattle office of the Federal Housing Administration has seen a record number of customers, nearly half of its clients, refinancing their mortgages to lower their payments, said spokesman Lee Jones. Just a few years ago, the federally insured mortgages seemed a quaint afterthought compared with the creative credit available.”

“‘Subprimes come out, and everyone decides nothing down, nothing forever is a promise they can believe in,’ Jones said.”