The Housing Bubble

The Santa Fe Reporter from New Mexico. “Kaziah Mraz, 34, has done everything society expects of a responsible citizen. She works full time, while attending college, raising two children, paying off a mortgage and trying to maintain her credit score. And yet when she hit a rough spot, society—represented by the New Mexico Human Services Department—told her it couldn’t help. When she broke into tears, society had a security guard escort her away.”

“Gross pay: $2,300 a month. Take-home pay: $1,800 a month. Mortgage payment: $1,480. That leaves $340 a month to feed herself, two kids and a Chihuahua, gas up her ’94 Toyota and keep the lights on.”

“‘I pretty much hit my breaking point,’ Mraz says. ‘I’m not trying to take advantage of the system; I just want some help while I get through this situation. At this point, if I was 30 pounds skinnier, I would go to Albuquerque and strip.’”

The Denver Post in Colorado. “The Residences at the Ritz-Carlton downtown are in foreclosure after the developer sold only one of the 25 units in the luxury condo community. A team led by Charlie Biederman oversaw the $75 million redevelopment of the property, which opened with fanfare early last year. But only one of the condos sold since presales started three years ago, forcing the property, including its gym, into foreclosure.”

“The lender on the residences, Goldman Sachs, is taking the property back and is attempting to reposition the condominiums. Goldman Sachs has upgraded the interiors of the units. It has also reduced prices on the units, which range from 1,140 to 5,550 square feet. Initially priced from $800,000 to $4 million, the units now are priced from $500,000 to $3 million.”

“A questionable location across from the Greyhound Bus station and the lack of balconies made it difficult to sell the condos, said Dee Chirafisi, a broker who had the units listed for about a year. ‘There’s a lot of competition in the luxury market,’ Chirafisi said. ‘People for 2 1/2 years have been extremely picky. Even with the quality and luxurious finishes and the Ritz-Carlton brand, if something’s missing, it doesn’t sell.’”

The Aspen Times in Colorado. “Workers looking to gain a foothold in Aspen are helping keep one piece of the local real estate market booming — affordable housing. Prospective buyers include individuals who own free-market housing downvalley, but are employed in Pitkin County and looking to move to Aspen, according to Cindy Christensen, housing operations manager. The hurdle for them is selling their free-market home in a depressed market — they have six months after they close on their worker unit to do so.”

“‘There are people out there who want our housing so bad, they price their free-market [place] to sell it,’ Christensen said.”

“Even though the housing authority essentially guarantees the loan on a worker unit — the agency has the right of first refusal to buy a unit in foreclosure and must do so to keep the deed restriction on the unit in place — lenders are skittish, she said. ‘The biggest problem is all the banks have to work with underwriters outside of Colorado, and they don’t get it,’ Christensen said.”

The Post Independent in Colorado. “A proposed development in Spring Valley, which has been on the local governmental radar screen for decades, is expected to go before Garfield County in December to file the final, formal documents for Phase I of the multi-phase project. Some version of the Spring Valley Ranch development has been in the works for three decades.”

“According to county records, Spring Valley Ranch saw its first attempts at development in 1977, by a partnership of local investors and one in Chicago. The next formal applications were filed in 1984 for Chenoa, an upscale housing development of 2,750 homes, a 150,000-square-foot ‘village center,’ and two 18-hole golf courses.”

“By 2003 the project was again known as Spring Valley Ranch, and by 2005 it had been downsized to 577 homes and 20,000 square feet of commercial space anchored by the two golf courses. It has been through a series of ownership changes over the years, that have included at different times a group of Saudi Arabian investors and, more recently, the Lehman Brothers investment banking firm, which went bankrupt last year.”

The Grand Junction Free Press. “A steep hike in the regional unemployment rate helped push apartment vacancies to the highest level in more than four years, state housing data showed Thursday. The vacancy rate for multifamily units in the Grand Junction market skyrocketed to 7.5 percent in third quarter ending Sept. 30. That was up from 2.4 percent in the same three months of 2008, the Colorado Division of Housing reported.”

“The regional jobless rate was up more than 4 percent in the same one-year period. ‘For the last several years the vacancy rate and the unemployment rate are tracking very similarly,’ said Gordon E. Von Stroh of the University of Denver, who authored and researched the report. ‘When unemployment goes up, vacancies go up. That is what happened in Grand Junction and in the Grand Valley.’”

The Arizona Daily Sun. “Local homebuyers last month found bargains in foreclosed and other types of distressed property. The median price among distressed homes was $35,000 less than among non-distressed properties — yet the former was 5 percent larger in square footage. For all homes sold in Flagstaff in October — distressed and non-distressed — the median price was $300,000, about equal to last month but down $32,000 from the same month a year ago.”

“Steve Brighton, a Realtor with Century 21 Flagstaff Realty, said the deals on distressed homes boosted overall sales in October to 87, the highest number for the month since 2005, when 94 single-family homes were sold. ‘That is what moving the market right now,’ Brighton said. ‘There are fire-sale prices out there right now.’”

The Arizona Republic. “Home-resale figures for October in the Valley show unseasonably high sales volume, but most of the activity was driven by foreclosures and distress sales, according to a report from Arizona State University. ‘Between foreclosures and resales of recently foreclosed homes in October, ‘foreclosure-related activity represented 66 percent of the recorded activity,’ said ASU realty-studies director Jay Butler.”

“The median price for a single-family Valley home in October was $140,000, down 20 percent from the October 2008 median price of $175,000. Butler said significant recovery in the housing market still appears to be some distance away despite the federal government’s recent decision to extend the first-time homebuyers’ income-tax credit.”

“Usually, housing recovery happens in conjunction with a growing economy and declining interest rates, Butler said. ‘However, the current economic recovery is limited with the possibility of higher rates and a continuing weak job market,’ he said.”

“Real estate used to be all about location. Now it’s all about jobs. ‘The 800-pound gorilla is job creation,’ said Steven Tanger, president and chief executive office of Tanger Factory Outlet Centers, speaking at a conference of the National Association of Real Estate Investment Trusts.”

“Jerry Davis, UDR’s senior vice president of property operations…described metro Phoenix as the weakest of the 20 metro areas where UDR has apartments. He predicts Southern California will be weakest next year. UDR’s Valley apartment complexes are relatively upscale, especially its new Stadium Village complex in Surprise, and higher-end apartments are faring better, Davis said. Soft housing prices have discouraged apartment dwellers from leaving to buy homes.”

“‘A lot of people want to make sure prices have bottomed,’ Davis said. ‘Nobody wants to catch a falling knife.’”

From AZ Biz. “Considering the state of the economy in general and real estate in particular, 2010 might not seem to be the optimal year to become president of the National Association of Realtors. But that’s not the way Tucson Realtor Vicki Cox Golder sees it. Which is good because she was installed Nov. 12 as the new president.”

“‘When a market is strong, anybody can be a leader then. But when it is not strong, you have to develop creative solutions and programs,’ Golder said prior to leaving for her installation in San Diego. ‘I’m on the street and see it every day, that gives me excellent insight. I bring in a perspective others don’t have. I understand the market stress and strains and that will help me educate and move members along.’”

“One of her priorities is to increase political influence of the National Association of Realtors — the nation’s largest trade association — at the federal, state and local levels through lobbying. Embracing an ‘On the Rise’ theme, Golder is upbeat about leading the 1.2 million member organization.”

“‘On the Rise’ is more than just a theme. It’s an attitude, a positive outlook, a belief that we can strengthen our markets, our industry and our businesses,’ Golder said in her speech to inagural attendees. ‘It is a statement that real estate is moving, accelerating toward a prosperous time.’”

The Las Vegas Sun in Nevada. “The 30 percent drop in condo prices at CityCenter is going to cost Realtors in commissions. Bob Hamrick, CityCenter’s broker, met with about 70 preferred agents (those who have had a sale) Nov. 6 at the development to inform them about the new commission strategy and give them a tour.”

“When CityCenter cut its prices by a half-billion dollars to help buyers close on the condos, Hamrick says it was only natural that commissions be cut as well. So far, 95 percent of the 227 units at Mandarin Oriental have been sold. Two-thirds of the 670 units at Veer have been sold and just under 50 percent of the 1,543 units at Vdara have been sold, Hamrick says. Closings tentatively start Jan. 1 at Mandarin Oriental, Feb. 1 at Veer and March 1 at Vdara.”

“Despite the price drop, an attorney representing some prospective buyers says the cuts don’t ‘reflect market realities,’ and they are unwilling to accept that offer and want even more cuts. He also says CityCenter is requiring buyers to give up legal rights despite the construction problems that plagued the project.”

“‘Given the realities of the market, and issues with this project specifically,’ MGM’s offer to reduce prices by 30 percent is woefully inadequate,’ says Mark Cannot, an attorney with Hutchison & Steffen. ‘MGM has recently taken a write-down of well over 30 percent of the value of its interest in CityCenter, yet has only offered a 30 percent reductions to purchasers of condos in CityCenter.’”

“Homebuilders and Realtors are counting (on) an extension and expansion of a homebuyer tax credit to boost to the housing market through mid-2010. ‘The credit has definitely impacted positively our home sales in Southern Nevada,’ said Monica Caruso, Southern Nevada Home Builders Association spokeswoman. ‘We are usually not amenable to government intervention. However, in this case it has worked, and for an industry devastated by the economic conditions, it is a short-term boost for the industry. But what we really need to see are some long-term improvements.’”

“Dennis Smith, Home Builders Research president…won’t call the continuation of the tax credits a cure-all for the housing market. The best cure is jobs, he said. ‘We still have problems with foreclosures,’ Smith said. ‘How does this help people stay out of foreclosure? It doesn’t do anything for that.’”

“In October, the Realtors group reported 3,535 single-family home sales, a 5.3 percent increase over September when 3,358 homes sold. Median prices rose 1 percent to $139,100, the highest since July’s $138,800. Sales of condos and town houses fell 1 percent in October to 850, but median prices rose 6.5 percent from $65,720 to $70,000, the group reported.”

“It credits investors and first-time buyers for boosting demand for homes. Cash buyers accounted for 42 percent of home sales in October. The sales of foreclosed homes declined in October, falling to 64.5 percent of the total. It was 67 percent in September. The Realtors’ group tracks sales only on the MLS. It reported 20,998 homes are listed at the end of October, about 1 percent higher than September. It said 8,075 homes are listed without offers, a 2 percent increase over September.”

“In October 5,482 homes were new listings, an 11 percent increase over September.”