The Housing Bubble

The Union reports from California. “Balloons and ‘open house’ signs dotted Nevada County neighborhoods over the weekend, as selective sellers hunted for bargains and looked to take advantage of low interest rates.The county’s March median of $360,000 was a drop of more than 13 percent from the year before but higher than the February median of $320,000, according to figures from MDA DataQuick. It’s difficult to say whether the local market could be reaching a bottom, three area real estate agents said Sunday. Although she had only seen one person at the high-end home she was showing on Freeman Lane, Realtor Pam Auld was optimistic. ‘I do not feel like we’ve bottomed out, but not all the houses will continue to freefall’ in price, Auld said.”

“‘There is a feeling the market is picking up,’ said Barbara Parrott, who saw ‘tons’ of people at an open house on Richardson Street. ‘One year ago I had no buyers. Now, I have buyers and they are making offers. Maybe we’re getting to the bottom; it feel like things are changing. What people need to understand, though, is this doesn’t mean prices will start going up.’”

“In the nine Bay Area counties, the median price for March fell nearly 46 percent to $290,000. In the six Southern California counties, the median price fell 35 percent to $250,000, DataQuick reported. Activity in those markets typically shapes the local market, as local buyers often come from those areas.”

The Mercury News. “Rene Williams and her husband are anxious to buy her parents’ house in Cupertino to save money and send their kids to better schools. Art Reese wishes he could recoup his investment in the Tudor home he built. To get on with their lives, though, they need to sell their homes in Willow Glen, one of San Jose’s most popular neighborhoods, where charming Spanish bungalows sit beside mini-mansions built at the height of the housing boom. They’ve waited. They’ve lowered their prices. But their higher-end homes won’t sell.”

“‘It’s like this limbo,’ Williams said.”

“These are the faces of the new American Gothic, where people who’ve worked hard and played by the rules are caught in an economic freeze frame — with a ‘for sale’ sign out front.”

“Eric and Valerie Negler want to retire to their 15 acres on an island in Washington’s Puget Sound. They listed their home last May for $2.4 million. But nothing happened. They lowered their asking price to $2.275 million. Still nothing. The couple began to bicker. ‘We started saying, ‘You should have done this,’ ‘No, you should have done that,’ Negler said. ‘You go through anger, frustration, uncertainty. Then you realize this is bigger than us.’”

The Press Democrat. “Empty storefronts and deserted office parks are stark evidence that housing isn’t the only troubled segment of the real estate market in Sonoma County. The commercial sector is taking a pounding as stores and companies go out of business, drying up demand for industrial, office and retail space while triggering a rise in foreclosures.”

“Jessica Ruderman, senior analyst for the market research firm Real Capital Analytics, said 14 buildings in the Marin-Napa-Sonoma market worth $123 million are in default or foreclosure. That’s up from seven distressed properties in the region four months ago, she said.”

“In the Bay Area, $2.6 billion in commercial real estate is on the brink, compared to $373 million in December, Ruderman said. ‘I think we’ll see more properties get into trouble before this is resolved,’ Ruderman said. ‘We’re waiting for federal bailout money to flow through, but we haven’t seen it yet.’”

The Sacramento Bee. “Downtown Plaza…the two-level shopping center, embedded into four downtown city blocks, is undergoing a severe midlife crisis. Familiar retailers have shut their doors in the past few years. A planned renovation designed to update and reinvigorate the center is on hold. By some counts, more than one out of every three storefronts is vacant.”

“The plaza’s challenges can’t be separated from other issues facing downtown Sacramento. Located between the K Street Mall and the massive railyard project, it is integral to the ambitious plan Sacramento officials have of turning the inner city into a regional attraction with shopping, dining, entertainment and homes.”

“But the renovation of the adjacent 700 block of K Street has stalled. Past and present tenants and city representatives cite several reasons for Downtown Plaza’s troubles, including competition from suburban retail outlets like the Westfield Galleria at Roseville and several stalled housing projects that would have brought thousands of new residents to the city center.”

“Those condominium high-rises would have been a shot in the arm for the mall, said City Councilman Ray Trethaway. Sacramento Mayor Kevin Johnson is trying to meet with Westfield representatives to get a read on their timeline for remodeling the plaza. ‘We can’t have them continue to sit on the property,’ Johnson said. ‘The down economy is not going to be the only excuse. This has been stalled for several years.’”

The Desert Sun. “Apartment rents are falling in the Coachella Valley, as unemployment kept a grip on the Inland Empire. Average rents in the Inland Empire declined 4.5 percent in the first three months of 2009, RealFacts noted, observing: ‘Average rents haven’t been this low since early 2007.’”

“The USC Lusk Center for Real Estate said in its Casden Forecast that the ‘falling rent’ trend is expected to continue this year. ‘In Los Angeles County alone, 41,000 people moved out of apartments last year, compared to the 29,000 who moved in over the past five years,’ said Delores Conway, director of the forecast. ‘The dramatic changes in the economy are taking their toll on landlords’ as they are reporting lowering rents or concessions to keep the units occupied.”

“Two new apartment complexes arrived in Palm Desert in 2008 — one next to a newly built school. The other, The Enclave, was originally built as a condominium community. When the housing market soured, The Enclave attracted tenants for luxury rentals with monthly rent starting at $1,105.”

“The fall in occupancy has led to creative deals to entice tenants. Typically, ‘Stay free for a month’ specials roll out across the valley in June and July. Other deals popping up here have offered up to five months off on rent, $99 to $300 move-in specials and paid utilities.”

“For all renters, lower leasing rates is a welcome reprieve. Rents skyrocketed by as much as 22 percent between 2003 and 2007 when real estate boomed and apartment prices were a fraction of a new home mortgage. ‘It’s brought balance back into the market,’ said Caroline Latham, CEO of RealFacts. ‘When rents were going up at the rate of 2 to 5 percent a year, it became steadily more a landlords’ market. That trend has been reversed.’”

The Orange County Register. “Home sales in Coto de Caza and Trabuco Canyon increased in the first quarter of 2009, but the prices of the homes that are selling are lower. ‘I think the increase in home sales is significant because it shows the homes are selling,’ said Mike Ameel of Mike Ameel Real Estate Services. ‘The low median selling prices along with the surge in sales indicate a substantial increase at the bottom end of the market.’”

“Ameel primarily sells homes in Coto de Caza. He said the prices of homes sold in the gated community so far this year were primarily on the low end of the scale. The median price of homes sold dropped 27 percent to $564,000, according to Data Quick statistics.”

“‘This is good news for sellers in the upper end of the market because it is the pressure created from lower end sales that eventually begin to benefit higher end home sales,’ he said.”

The North County Times. “In an effort to kick-start the local economy and revive home construction, Riverside County supervisors are considering a fee rebate program to buyers of new houses. Earlier this week, supervisors directed county staff to research whether giving part of the fees to buyers would be enough of an incentive to induce people to buy new homes again.”

“The recommendation for the reduction came from the county’s Red Team, composed of county executives, city managers and other experts, formed last year to find cures to the county’s foreclosure epidemic. Their report to supervisors recommended reducing fees on new houses, which average $42,000, the county said.”

“If half the fees were rebated to the buyers, that could be $20,000 or more. In their report, the Red Team suggested a rebate of between 25 percent and 50 percent.”

“John Husing, vice president of a Redlands-based consulting firm, says the county could be on to something with the idea of giving money to buyers of new homes. ‘(Rebates) would be a good idea —- it would lower the effective cost of the house,’ Husing said. However, he added, for rebates to be attractive, about 60 percent of the fees would have to be rebated, or about $25,000.”

“Invoking retail analogies, 3rd District Supervisor Jeff Stone said the county needs to have a sale on (housing) fees. ‘It would be a loss leader,’ he said, referencing a strategy stores use to sell some items at a loss to boost sales of other items.”

“Stone’s comments came after a line of builders pleaded with supervisors earlier this week to cut the fees or do something to revive home construction in the county. Although supervisors approved exploring the issue, they said they’re wary of again becoming too reliant on home construction as a driving force of the region’s economy.”

“‘I don’t see any discussion of the realities —- we need to confront our overdependence on housing,’ said 1st District Supervisor Bob Buster. ‘We bet the store here on housing and we fell off a cliff.’”

The Voice of San Diego. “This is a big week for Vantage Pointe, downtown’s biggest condo building. Next weekend is circled on the calendars of as many as 72 contracted buyers there, people who signed up in 2004 for a chance to own a piece of the then-hypothetical high-rise.”

“That’s the date — Saturday for a couple, Sunday for the rest — that comes 42 months after they reserved their condos with 5 percent deposits in 2005. If the developers fail to make their units ready for move-in by then, some buyers could walk away from their contracts, their deposits in hand.”

“The nearly 300 buyers and the project’s Canadian developers are locked in stalemate as the deadlines loom. Buyers say they’re waiting for clear assurances for the developers that there will be price discounts, financing available and a completed, safe building before they sign their paperwork. The developers wonder how many of the buyers will actually go through with their commitment to purchase units several years — and one housing-bubble bust — later.”

“It is unclear even yet what effect the building’s opening will have on the rest of the downtown real estate market, already weighed down by more than 850 finished unsold units, according to MarketPointe Realty Advisers. The homes at Vantage Pointe and another 148 at another under-construction project downtown will double that number.’

“For months, lenders have told buyers that there is no way to finance the building, citing issues with the number of unsold units. Brad Willis, moderator of a Vantage Pointe message board that he started five years ago, said the developers haven’t yet told the buyers even about the conditional Fannie Mae approval. He said it was one more example of the developers communicating poorly with the buyers, like him, who have deadlines rapidly approaching.”

“‘This whole process has been like a train’s been coming down the tunnel at you since December,’ he said. ‘The developer’s had the option to change tracks, or tell you about the train, and they’ve just kept coming. They’ve just been whistling. Now with barely a week to go, they haven’t really addressed the issues.’”

“Brian Luternauer, who’s slated to close on a unit on May 22, works in the finance industry and said he hasn’t been able to track down a loan. ‘There is zero financing available,’ he said.”

“Luternauer said he’s still not sure if he’ll go through with his purchase of a two-bedroom unit on the 8th floor. He said he would consider it if his monthly payment with taxes, insurance, and $450 homeowners association monthly payment would be what he could rent the unit for. Based on those fees and a mortgage for his $392,000 purchase price, he thinks his monthly cost will be double the cost to rent a unit.”

“‘There’s somebody else that would have my same unit for half the price who has no (ownership) bond to it, either,’ he said.”