The Housing Bubble

The Argus Leader reports from South Dakota. “Homes sales in metropolitan Sioux Falls dropped almost 12 percent in 2008, and the median sales price was down more than 4 percent. 2007 was the fifth-best year for home sales in Sioux Falls, said Barton Hacker, CEO of the Realtors Association of the Sioux Empire. ‘We knew we weren’t going to be able to sustain the type of record numbers we saw the last five years,’ Hacker said. ‘So a 12 percent drop was not surprising given what’s going on around the rest of the country.’”

“‘The $150,000 home is a first-time homebuyer moving into a house at that price range,’ real estate agent Todd Headrick of HJN Team Real Estate said. ‘It’s that segment in that $200,000 to $250,000 range that aren’t making the moves to the $400,000 house.’”

The Star Tribune from Minnesota. “For a busy executive like weatherman Paul Douglas, vacation means exploring the world with the comforts of home but none of the hassles of home ownership. That’s why last April he paid a six-figure sum to join the Lusso Collection, a destination club that offers most of its members unlimited access to dozens of multimillion-dollar getaway homes around the world.”

“Now, less than a year after he bought into the Eden Prairie-based club, a gray cloud hangs over Douglas’ next vacation. The Lusso Collection recently filed for Chapter 11 bankruptcy protection. Lusso isn’t the only high-end destination club or private resort to succumb to the sagging economy and the eroding real estate market. Several recently have closed, consolidated or reduced services as membership sales have fallen and their business models have been turned upside down by plunging real estate values.”

“Jim Pippin, managing director of a destination club adviser based in Colorado, said Lusso stood out among the competition because of its compelling set of services and benefits, but it suffered from bad timing. ‘It’s the same cause of so much financial hardship in the U.S. right now,’ Pippin said. ‘In boom times, the model would have grown and been sustainable for the long run. Their fatal flaw, if there is one, is that they didn’t predict the future.’”

“Mainstreet Bank of Forest Lake, one of Minnesota’s largest and oldest community banks, has received a cease-and-desist order from the Federal Deposit Insurance Corp., alleging ‘hazardous lending and lax collection practices.’ Like many community banks, Mainstreet is getting stung by loans it made to developers and builders during the real estate boom, when property prices were going nowhere but up. Now, those loans are souring at an alarming rate.”

“‘Real estate was booming, and we were there to support the development,’ said Karen Greisinger, chief marketing officer, of the bank’s focus on real estate. “It was a niche for us, and there was a need for it. of the bank’s focus on real estate. ‘It was a niche for us, and there was a need for it.’”

“‘It was the residential housing market that burst first,’ said Jennifer Thompson, a financial analyst with Portales Partners. ‘But all these home builders borrowed from someone, and those loans are starting to crack, too.’”

The Baraboo News Reporter from Wisconsin. “Home sales in Baraboo are down about 45 percent, about 30 percent of remaining homes sales are foreclosures and the average cost of a house has declined to the level of 2005 or 2006, representatives of the city’s assessment firm reported. About 25 - 30 percent of all homes now on sale in the city are involved in foreclosure, added Wisconsin Appraisal Manager Mark A. Link. From Jan. 1 through October of 2008, Baraboo had 105 regular, ‘open market’ home sales and 41 foreclosure sales.

“‘For 2007, for example, there were 189 home sales and I believe there were three foreclosures,’ Link said.”

The Journal Sentinel from Wisconsin. “Bankruptcy filings soared 35% in Wisconsin last year. Attorneys said the pace of people declaring insolvency quickened toward the end of the year, which could bode ill for 2009. Milwaukee bankruptcy attorney James Miller has noticed an increase in upper-middle class consumers among his clients. They are struggling to keep up with debt, including payments on houses that have dropped in value, he said.”

“‘Part of the reason we got into this mess is because all these people making $100,000-$150,000 a year were buying $600,000 and $700,000 homes they can’t afford,’ said Miller. ‘I’m seeing more people saying, ‘We are jumping off the treadmill,’ and filing.’”

The Bolingbrook Sun from Illinois. “A quick search on the Internet will reveal dozens of houses in Bolingbrook in some state of foreclosure. In fact, Will County was ranked first in the state last year in foreclosure filings, and that trend doesn’t seem about to turn around soon. Mark and Carol Weidinger have been living on the edge for some time. As a carpenter, Mark has seen work dry up because of the crisis in the housing industry.”

“‘Even my bosses had to go and work for someone else. They dissolved their businesses,’ he said.”

“He is grateful that his wife still has her job, but he needed to find a part-time job at a local restaurant to help make ends meet. That still hasn’t solved their problems, though. Earlier this month, the family had their water turned off because of difficulties paying the utility bills. Mark Weidinger woke up Jan. 19 to hear his water heater hissing and popping like it was about to blow because the water had been turned off. The couple paid the $1,000 water bill, after getting a loan from his father-in-law, he said.”

“They had no choice but to borrow the money for the bill, he said, because the bill had been growing since the fall even as their income was dropping. ‘But for all of 2007, and every year before, we had a zero balance every month on our water bill,’ he said. ‘We are just the quintessential average Joes. It’s the lower income people that are affected most. It’s so hard to lose everything. I don’t want to lose everything.’”

The Courier News from Illinois. “Marisol Rojas did not appear convinced by Realtor Bonifacio Mondragon’s pitch. She glanced around the living room of the four-bedroom, three-bath St. Charles Street home in Elgin. It needs a bit of work, Mondragon said as he walked through the kitchen with its stained walls and floors.”

“The former owners purchased the home in 2006 for $225,000, then tried to sell it last year for $237,000, reducing it to $229,000 for a short sell. It recently went into foreclosure. Now the home is on the market for $92,000. ‘”Basically, there are great, great deals,’ Mondragon said. ‘Properties right now are priced at least half of what they were in 2005.’”

“‘”I’m working with clients right now who are tired of the stock market and they are looking to buy land and just sit on it for 10, 15 years,’ Anthony said. ‘Land is always valuable. I have a couple of listings right now that are way below market value that I know will definitely appreciate.’”

The Daily Herald from Illinois. “‘According to figures released by the Illinois Association of Realtors, prices throughout the state have dropped,’ said Mike Drews, president-elect of the Mainstreet Organization of Realtors. ‘October, 2008 prices were down 8 percent from October, 2007. In November they were down 16 percent over the same month the previous year. In December, that figure was a 32 percent decrease. And the number of transactions statewide in December were down 25 percent over the previous year.’”

“‘I just went to a seminar where they were saying that even in Chicago the condominium market is totally saturated right now and until inventory decreases, that will be the case. It is the whole supply and demand thing,’ he said.”

“In the suburbs Drews monitors, the same is true. They saw transactions in the condominiums and townhouse market decrease 30 percent in December because they, too, are saturated. ‘The problem is that many of the association fees on these places are so high - $180 to $200 per month - that it is cheaper for people to buy a roomier single-family home,’ Drews said.”

The Journal Gazette. “Last May, Joe Wyss lost his job making truck trailers for Strick Corp. in Monroeville. Then in December, Wyss’ wife, Lucinda, was laid off from her job making RVs in Decatur. The Wysses – along with thousands of families in northeast Indiana – have been swallowed by a global recession that has ravaged the regional manufacturing base. Now, with two kids to support, they’re wondering what their next move is. ‘It’s never been this bad,’ Joe Wyss said last week.”

“With six northeast Indiana counties posting double-digit unemployment figures for December, WorkOne offices have reported long lines, long waits and overtaxed resources. Their phone systems have been so overwhelmed, they recommend that clients go to offices in person despite the waits they may face there.”

“A slowing economy, a burst housing bubble, summer’s spiking gas prices and collapsing credit combined to stifle demand for the cars, trucks, RVs and homes that support the region’s manufacturers…Home sales and prices will be slow to recover. And without equity to borrow against, homeowners will find it difficult to buy.”

“Tamara Nightingale and her husband, Brian, are owner-operators of two trucks they use for long-haul freight. She explained that as the economy slows, so does the need for trucking. ‘Business has gotten so bad, all we can do is pay for our trucks,’ said Nightingale, 51, of Fort Wayne. ‘We’ve parked our trucks, and we’re seeing if we can do better being greeters at Wal-Mart or something.’”

The Saginaw News from Michigan. “Saginaw County foreclosures reached a record 1,130 last year as a hard-biting economy put more people out of their homes and businesses, records show. ‘This is the most we’ve ever done in the history of Saginaw County,’ said Register of Deeds Mildred M. Dodak.”

“The number of people who leave their homes or other mortgaged properties without telling lenders also has risen sharply, she said. Affidavit of abandonment filings, filed by lenders, reached 334 last year compared to 244 the year before, 160 in 2006 and 71 in 2005, statistics show. Abandonment numbers are included in foreclosure statistics, she said.”

“Even as the numbers rise, Dodak said she’s noticed fewer people arriving in her office to ask for information about keeping their homes. ‘We don’t even get that anymore,’ she said.”

The Kalamazoo Gazette from Michigan. “It’s a trend repeated across Southwest Michigan: the bursting of the housing bubble and increase in foreclosures have pushed down home values, and assessments are slowly catching up. Eighteen of the 19 municipalities in Kalamazoo County will either hold flat or decrease their overall residential State Equalized Valuations this year, according to Kalamazoo Gazette calculations.”

“Home prices may be falling precipitously in many parts of Southwest Michigan, but most homeowners here are unlikely to see a decrease in their property-tax bills. Instead, many may see one of the largest increases in their tax bills in recent memory, local assessors say. The reason: a provision in Proposal A that held property-tax bills artificially low during the housing boom of the late 1990s and early 2000s.”

“While housing prices in many areas increased by double digits, tax bills grew no faster than the rate of inflation — generally not more than 2 or 3 percent in most years. During housing booms, it protects homeowners from steep increases in their annual property-tax bills by keeping property taxes from increasing by no more than 5 percent, or the rate of inflation, whichever is less.”

“But as the market turns, like it did in 2007 and 2008, a dark side to Proposal A emerges: It can take a long time for tax bills to decline because of the gap between SEV and taxable value that can build over time. ‘Just because your assessment goes down, if there’s a gap, the taxable value must raise up until its equal with the SEV,’ Kalamazoo City Assessor Connie Darling said. ‘The city has no control over that. I can’t stop mine, and I can’t stop theirs from doing the same thing. So please don’t shoot the messenger.’”

The Columbus Dispatch from Ohio. “With investigators closing in, a 63-year-old Bexley man…put the barrel of a .32-caliber revolver in his mouth and pulled the trigger. It was 2004, and a massive mortgage fraud was beginning to unravel. The suicide would further complicate a thicket of real-estate transactions, far-flung millionaire investors and loans totaling tens of millions of dollars that were suddenly pouring into run-down Columbus neighborhoods.”

“Authorities think it was the largest mortgage-fraud case ever prosecuted here. Details are only now becoming clearer, as several prepare to be sentenced Wednesday. Many other people were involved — victims and dupes, innocent bystanders and street hustlers, suspected criminals and secret informants.”

“‘With a lot of fraud cases, you look at the victims sometimes and wonder, ‘What were you thinking?’ said Assistant U.S. Attorney Daniel Brown.”

“Red flags quickly began popping up….Ohio Bar Title Insurance stopped closing loans connected to Stillwater. ‘It was a lazy scam,’ Samuel J. Halkias, then president of Ohio Bar, recalled in a recent interview. ‘Everybody with half a brain could see it.’”

The Beacon Journal from Ohio. “Summit County home sales plunged by 9.5 percent compared to already low sales in 2007 and the lowest total in at least six years. The average price per home also fell to $130,153. That was a 10.5 percent drop from the 2007 average of $145,349.”

“Gary Stouffer has been selling real estate since 1979. Stouffer said he bought four repossessed properties in just the last four months as his own personal investments. ‘I’m going to buy as many as I can,’ he said. The bargains are along the lines of 40 percent discounts, meaning homes in the area that once sold for $100,000 can now be had for $60,000, he said.”

“Cindy Slabaugh, the 2009 president of the Akron Area Board of Realtors, said a combination of factors in the past seven years led to the current situation. Buyers were able to get loans, including adjustable rate mortgages, with no money down, she said. ‘People overpaid for homes,’ she said.”

“A lot of people who bought early in the decade thought their incomes and housing prices would keep rising, with those expectations fueled by a growing economy, Slabaugh said. But it all came crashing down when the economy slowed, energy prices rose, incomes dropped and more and more jobs were cut, she said. Many people found out they bought more home than they could afford, she said. Instead of the best happening, the worst hit, she said.”

”’We had an exceptional market for years,’ Slabaugh said. ‘Now we need to get realistic. We’re just fixing what happened the last 10 years.’”

The Norwalk Reflector from Ohio. “While sales figures are lower than previous years, prices are lower as well. Area Realtors remain optimistic about the opportunities available for buyers in the current economy. ‘Right now, we’re looking at prices that are more in line with prices from the 90s’ — shortly before the market took off, said Frank Van Dresser Jr., of Remax.”

“But, he said, that’s not a bad thing. Before the downturn, housing prices were rising much faster than wages and salaries. ‘Without a market correction, there’s no affordability,’ Van Dresser said.”