The Housing Bubble

The Post Cresent reports from Wisconsin. “Darek Flanigan is giving himself a big Christmas present this year — a new house. The 21-year-old from Black Creek is scheduled to close on his purchase today. Flanigan got a great deal, too — a 920-square-foot, three-bedroom ranch home with a full basement on Appleton’s east side for $75,000. The home was a foreclosed property. ‘I’m feeling pretty nervous about the whole thing,’ said Flanigan, who works as a telecommunications installer in Green Bay. ‘I had been thinking about renting an apartment, but after looking things over, I figured I’d be paying as much for a mortgage as I would for rent, so I decided I may as well go for it.’”

“Flanigan also was enticed into the housing market by the government’s $8,000 tax credit for first-time buyers, though he didn’t think he’d meet the original Nov. 30 deadline. That changed when Congress approved — and President Barack Obama signed — legislation extending the sales deadline to April 30, with closings to be completed by June 30.”

“Flanigan is one of many buyers who are keeping Realtors and lenders busy during the traditional downtime for the housing industry. The thought of the government handing out free money is enough incentive for buyers to see what’s available, said Candace Kriner, CEO of Century 21 First Realty in Grand Chute. ‘Some people don’t know that the credit was extended,’ she said. ‘We still get questions, but what it has done is get people off the fence about buying a home. If you’ve got a stable job and don’t own a home, why not look into it?’”

The Green Bay Press Gazette in Wisconsin. “This recession was the worst the country has seen in 25 years, said Kevin Quinn, associate professor of economics at St. Norbert College in De Pere. Unemployment in Brown, Oconto and Kewaunee counties rose slightly in November, as it did in five other Metropolitan Statistical Areas across the state.”

“People lost retirement savings invested in the stock market, and foreclosures and a dive in housing values hurt pocketbooks, too. ‘All of this has made it a really nasty recession,’ Quinn said. ‘People will feel the pain for years to come.’”

“Nancy Rein of Green Bay lost her job at the state Department of Motor Vehicles in November 2008. She worked briefly for the U.S. Census, but otherwise has been unemployed. Rein owns the home she shares with her mother, and she’s afraid she’ll lose her unemployment benefits in January and may not make mortgage payments if she doesn’t find work.”

“‘I will do anything to make that house payment,’ Rein said.”

The Capital Times in Wisconsin. “As Madison rang in 2009, still giddy from the election of President Barack Obama, there was optimism the city could somehow avoid the economic fallout from the great recession. After all, the government town had survived previous downturns virtually unscathed thanks to the twin pillars of the University of Wisconsin and state of Wisconsin. As the year went on, however, it became increasingly clear that this economic downturn would be deeper, longer-lasting and more painful than anything since the 1930s. ‘Madison had sort of skated past other recessions but not this one,’ says David Ward, president of a local economics consulting and research group.”

“One reason for the unemployment gender gap was the slowdown in building and construction. Most activity slowed to a crawl with the combination of economic uncertainty and the credit crunch from the banking crisis. Mike Vilstrup, president of the Madison Area Builders Association, said he is hopeful that building activity will pick up, but he is not ready to proclaim the crisis over. There were just 410 building permits issued in Dane County through October 2009 compared with the 10-year average of about 2,000 dating to 1999.”

“Vilstrup estimates Dane County communities lost a total of $1 billion in economic activity this year based on the 10-year average. ‘As we suffer, so does the greater community,’ says Vilstrup, noting the loss in tax revenue to government from both falling property values and unemployed workers.”

The Journal Sentinel in Wisconsin. “For years Central States Mortgage Co. - a cornerstone of the collapsed business empire of Richard Jungen - was viewed by many as a jewel in the Milwaukee business community. Today, court filings portray the Wauwatosa mortgage broker as unabashedly violating basic rules of lending, committing many of the sins that plagued the national mortgage industry in the years leading to the 2007 collapse of the home lending market.”

“Milwaukee attorney Michael Polsky, the court appointed receiver, has uncovered countless red flags in the remains of Central States. ‘There are significant issues raised with respect to nearly every loan that was initiated by CSMC,’ Polsky wrote about the loans that remained in Central State’s portfolio when the company closed.”

The Chicago Tribune in Illinois. “Apartments in the Roosevelt Collection in the South Loop are filling up and a new theater has opened, offering a glimpse of what the major mixed-use project will look like when the retail portion is finished a year or so from now. Windows in the plaza’s storefronts now are covered with colorful vinyl murals, but eventually, said Lisa Balis, senior vice president of retail leasing and marketing, 300,000 square feet worth of retail space will be occupied by a mix of local and national chains.”

“There are 342 one- and two-bedroom loft-style apartments in two buildings with 97 percent of the east building being leased after units became available in August, Balis said. Pre-leasing for the west building began in November, with about 30 of 174 units taken, said Nancy Blanks, general manager of the lofts. Monthly rent for the remaining units ranges from $1,500 to $2,500, she said.”

“‘As fast as we are building them, people are renting,’ she said, after the decision was made to make the units rentals rather than condominiums out of fear that many buyers would have been unable to close during the difficult lending climate.”

The Pioneer Press in Minnesota. “When you can’t sell a home that you’ve priced at $1, what’s your next step? Cut the price to 50 cents? Try paying someone to take the house for a buck?”

“St. Paul officials have learned some disappointing — but not surprising — lessons four months into a project to sell a cluster of city-owned homes at prices ranging from $50,000 all the way down to a buck. As the number of foreclosures has skyrocketed in recent years in the Twin Cities and across the country, cities like St. Paul have taken on the role of buying houses to address a sharp increase in vacant properties.”

“Better marketing would help the Fourth Street project, agreed Chuck Repke, executive director of the Northeast Neighborhoods Development Corp. But there have been other challenges. Many recent buyers of homes under $120,000 are investors looking to rent the properties or sell them following rehabilitation. The city wants to sell to buyers who will live in the properties.”

“Repke said he agreed with the city’s focus on owners who will be residents, but noted that those buyers constitute a much smaller group. Another challenge: Potential buyers are having trouble finding loans to finance the extensive rehab projects that are required to live in the Dayton’s Bluff homes.”

“‘I think you can stimulate people to buy St. Paul,’ Repke said. ‘Before all of the markets collapsed everywhere, we were finding people making that decision to come back to the urban core. … If the credit market changes on some of this stuff, I think there will be buyers.’”

The Indianapolis Star in Indiana. “By all accounts, this recession caught Indiana midstride, in slow transition to a high-tech New Economy, while the larger Old Economy endures as the only option for 298,000 laid-off men and women.”

“Tim Blaker once wheeled a shuttle bus filled with travelers around the parking lots of Indianapolis International Airport. But these days, on the mornings a $284-per-week unemployment check pops into his checking account, he wheels a shopping cart through the aisles of the grocery store.”

“A generation ago, Blaker could have followed in the footsteps of his late father, one of the 90,000 steelworkers laboring in Indiana’s Lake Michigan steel mills. Today, 80,000 of those steel jobs have vanished into what the professors call post-industrial America. ‘What gets me is the increasing disparity between the haves and the have-nots,’ Blaker said. ‘The middle class is getting ax-murdered. The opportunity to buy a house has just stopped.’”

The Indianapolis Business Journal. “It started with a bursting bubble and ended with a bursting bubble. In between, the decade witnessed a massive terrorist attack, two wars, and a building-and-buyout boom fueled by easy credit. The city skyline added an airport terminal, a football stadium, a library expansion, a massive downtown hotel, three shopping malls, four hospitals and myriad medical buildings, as well as countless condos and housing developments.”

“Homebuilders soared and then swooned when Wall Street’s bundling of subprime mortgages created a credit crisis throughout the world. C.P. Morgan and Davis Homes went the way of Bear Stearns and Lehman Brothers. A deluge of debt created a similar boom-bust cycle at local commercial developers Premier Properties (gone) and Lauth Property Group (bankrupt).”

“The new decade dawns on an economic downbeat: One in 10 Hoosiers is searching for work.”

The Livingston Daily in Michigan. “Livingston County’s economy started off stinking in 2009. The county saw longtime companies and a real estate publication close, watched its unemployment rate double from 2008, and continued to brace for declining property values. Empty buildings with ‘for lease’ and ‘for sale’ can easily be spotted along Grand River Avenue or in the downtowns of Brighton or Howell.”

“Michigan’s unemployment rate reached 17 percent in the early 1980s, and was last reported at 14.7 percent, about 5 percentage points higher than the national average. The main difference between the two eras is the recession between roughly 1980 and 1982 demonstrated a dip in the business cycle, and the current recession resulted from the loss of jobs every year since 2001, said Xuan Liu, SEMCOG’s data center manager, who compiled the report.”

“‘This one is not a normal down cycle of the businesses. It’s much more fundamental changes happening,’ Liu said. ‘What were facing is really historical. It’s really a structural change,’ he added.”

“SEMCOG anticipated a decline in the economy in 2007, but didn’t foresee the collapse of the housing market and banks that followed. ‘Nobody could have thought the recession could have been this bad,’ Liu said.”

“‘Today, if you need your bathtub caulked, I’m there.’ Longtime custom homebuilder Julie Fielek laughed when she said that, but she wasn’t completely joking. The Green Oak Township builder used to put up $400,000 to $1 million custom homes, but the last one she built in the county was 2006.”

“These days, the former president of the Michigan Association of Home Builders makes her living constructing new residences on the site of a former housing project in Detroit. How ironic is it that a local builder must look beyond a county once dubbed the fastest-growing in Michigan?”

“Five years ago, the county was teeming with builders, and palatial homes costing $500,000 to $1 million sold easily. Today, the number of builders has dwindled sharply as new home construction has slowed to a trickle. Instead of putting up large homes, builders are taking on projects they wouldn’t have dreamed of taking on in the past. They are grabbing whatever job they can get, such as small remodeling jobs, finishing basements and building garages, or doing general maintenance. Others have become real estate consultants.”

“‘A lot of my friends are out of the business,’ Fielek said. ‘They’ve gone bankrupt. Some of my friends have moved out of state.’”