The Housing Bubble

It’s Friday desk clearing time for this blogger. “To get a sense of the fears and frustrations of everyday people, WBUR invited a diverse group of Massachusetts residents to come into our studios and share their experiences. Helen Ramirez: office manager for Chelsea Police Department…is coping with having recently gone from a two-income household to a one-income household, and has been trying to sell her home for 200 days — without luck. ‘I’d like to see some relief, I guess,’ she says. She had hoped she could get some help from the new government programs, but her good record meant she wasn’t able to qualify for any mortgage relief.”

“She tried to refinance, but she’s lost all the equity on her house. Helen says she’s ‘hanging on by her fingernails.’”

“Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said federal and state measures restricting lending and expanding the rights of some borrowers have already resulted in tougher standards for home-buyers. Cuff said that means credit markets that were once backed by both private and public sources are now mostly the domain of government-backed loans.”

“‘Maybe that’s a good thing,’ he said, ‘But it’s not that good a thing if you are a first-time homebuyer looking for aggressive lending.’”

“The Housing Development Fund is issuing $150 million in bonds that will offer low-interest-rate mortgages to 1,000 to 1,200 families in West Virginia. Housing Development Fund executive director Joe Hatfieldsaid a family will be able to get into a house at a good interest rate, and up to $15,000 will be available to the borrower to cover any closing costs or down payments if needed. Plus, they would be eligible for tax credits, such as for first-time homebuyers.”

“‘It’s going to make available to the buying public the best opportunities to buy probably ever,’ Hatfield said. ‘Families are going to be able to buy homes more affordably than they’ve ever been able to buy a home.’”

“U.S. bankruptcy numbers are bad. Bankruptcy numbers in the Northern Panhandle of West Virginia are worse.Mike Sturm, the U.S. Bankruptcy Court Administrator for the Northern District of West Virginia in Wheeling, said Tuesday that the number of bankruptcy filings, regardless of chapter, in the 32-county district increased by an estimated 40 percent in 2009. Sturm said he can only guess what caused such a drastic increase.”

“‘Everyone asks (why), and no one knows,’ Sturm said. ‘Usually, we are right on the percentage point with the national average, but this year we were way above.’”

“‘Ask the REALTOR’ is a weekly column from the 3,500-member RealSource Association of Realtors, serving Northern New Jersey. Q: I currently rent, and was wondering if you would share with me some of the most important items to consider when buying a home?”

“A: ‘Congratulations, Robyn. As you may know, real estate is the single best investment one can make. There a quite a lot of considerations – emotional, financial and legal - that need to be made when buying what, for most, is the single largest investment they will make.’”

“In 2009, housing starts nationally fell to their lowest levels since the government started tracking them in 1959. Home building in New Jersey fell to the lowest point since World War II, with fewer than 12,000 housing units built. The results have been brutal for builders, said David Crowe, chief economist of the National Association of Home Builders. ‘Most builders are ready for cycles; they understand it’s part of the deal,’ Crowe said. ‘But not when it lasts this long.’”

“In 2010, construction of new homes is expected to slowly rebound from the extreme lows of 2009, economists say. Housing starts may rise by 25 percent. ‘That sounds good until you realize you’re starting from a deep hole,’ Crowe said.”

“December home sales in the Nashville area turned in their third straight month of sharp gains as 2009 ended, but industry analysts are split over whether it’s time to use the words ‘real estate recovery.’ ‘We’re hopeful this will be the beginning of a sustainable trend,’ said Terry Turner, chief executive of Nashville’s biggest locally based bank. ‘But the sales have been very low. My father used to say, ‘It’s hard to fall off the floor.’”

“Redmond-based Housing Works did not sell any of the 10 condos it put up for auction last month in its Putnam Pointe development in downtown Bend and will instead try to convert them into affordable-housing units, according to officials with the nonprofit. ‘Clearly, it was the timing,’ said Tim Cox, the agency’s chief financial officer. ‘This is a great project. It was just poor chance it was completed in the middle of an economic fiasco that hit Central Oregon the hardest in the state, which is one of the worst hit in the country.’”

“Sales of the Americana at Brand’s Excelsior condominiums have steadily grown since owner Caruso Affiliated dropped unit prices by as much as 40% this summer, with more than half of the project now sold, company officials said this week. Fifteen of the 100 units were sold before Caruso Affiliated launched an aggressive ad campaign in May, plastering banners on the walls of the Americana that promoted condos as ‘priced below cost.’”

“More condominium towers are under construction in nearby areas like downtown Los Angeles, which could put further downward pressure on overall prices because many new properties are having trouble drawing buyers at rates that have proven to be much higher than what market conditions have dictated, experts said. ‘There is no guarantee that prices are not going to drop further,’ said Robert Bridges, professor of real estate finance at the USC Marshall School of Business. Vacancy rates of about 10% used to be a signal of stability in similar developments, ’so 45% vacant is not indicative of health,’ he said.”

“Ken Nitao, a broker in Alhambra, has tapped into the lucrative market of ‘flipping’ REOs, or bank-owned properties, in areas like Barstow and Bakersfield. ‘I’m getting stuff that’s 10 cents on the dollar,’ he said. ‘Everyone got wiped out. Property values in the San Gabriel Valley have dropped about 20 percent but values are holding up pretty good. Prices are too high to do that here.’”

“”Staggering increases in vacancy rates — both for homes and commercial buildings — are revealed in a just-issued University of the Pacific economics report. ‘The California real estate bust is a story of a price bubble and foreclosures, not a glut or oversupply of housing units as in Nevada, Florida and other parts of the U.S.,’ the report concludes.”

“MariCatherine McCombs, Greater Bridgeport Board of Realtors president, said towns such as Easton in eastern Fairfield County have suffered because prices have dropped in communities closer to the job centers in Norwalk, Stamford and New York City. ‘Our high-end market has been impacted because people can now get homes closer to where they work then they could in the past,’ she said.”

“McCombs said the days of rampant speculation in the real estate market are over for now. ‘We’re back to times when people buy homes to live in and not as a short-term investment that they try to flip to make money,’ she said. ‘It’s back to the basics, like the quality of the schools and neighborhoods.’”

“Why should Congress give the Federal Reserve more power, as it has asked, when the Fed and its chairman Ben Bernanke didn`t foresee the housing bubble that precipitated our economic collapse? That is the question David Leonhardt raises on the front page of today`s New York Times…But the newspaper should go further. It should ask itself on its own editorial pages why The Times didn`t foresee the bubble and its spectacular pop.”

“If it was the Fed`s job to take precautions, it was certainly the job of the press to sound alarms and keep sounding them until either something was done or a mighty embarrassment arose in Washington. Neither happened.”

“The media, print and electronic, had been garnering handsome advertising revenues from predatory lenders and developers, and the media business offices didn`t want their news staffs to do anything to interrupt that flow of revenue. I think Mr. Bernanke and the Fed may have failed to act for the same reason: they didn`t want to put a lid on the profits made by powerful interests in banking and real estate. And I think the same Congress that is now blaming them for the disaster turned a blind eye on the developing situation for the very same reasons.”

“We admit mild surprise that corrupt Democratic Sen. Christopher Dodd would quit his re-election race before it really began (but not before taking in $7.4 million in campaign donations, more than a half from the financial industry and almost of third from political-action committees). By giving up so easily, he tacitly admits all the charges swirling around him involving his sweetheart mortgages, his collusion in the AIG bonus scandal, his Irish cottage, his shakedown of brokers and bankers for campaign cash, etc., are true.”

“In retreating from the first real fight of his political career, Sen. Dodd implicitly confesses his complicity in the collapse of the housing industry, the financial markets and the economy, and the high unemployment, foreclosure and bankruptcy rates, record government debt and general misery they spawned.”

“If Americans have learned anything, it’s that change in government comes not from electing a gifted orator and his shifty acolytes, but by faithfully holding their elected officials’ feet to the fire and regularly turning them out before they can get too comfortable.”

“Few living Nevadans remember a time when the state was not growing in population. But now they may all be experiencing it. Bob Fulkerson, director of the Progressive Leadership Alliance of Nevada, said government should focus not on encouraging growth but on serving a stable population with sustainable use of the available resources, particularly water. Indeed, he said, the lack of prosperity now was produced in part by assuming that growth was the key to prosperity, an assumption that does not work when premises like cheap gasoline and a monopoly on gambling change.”

“‘First, workers and their families have endured extreme hardship as a result of the downturn,’ he said. ‘That downturn was the inevitable result of terrible public policy on the state and local level that depended on seemingly endless growth; cheaply built but expensively sold houses in ugly suburbs sprawling into the desert, where you had construction workers building homes for construction workers; and cheap oil to bring us the tourists to sustain our only real industry, especially in Southern Nevada.’”

“Ed Abbey said ‘growth for its own sake is the pathology of a cancer cell. Now that the cancerous growth of urban sprawl has been slowed, we should talk alternatives to the current way of making money that depends largely on desecrating our wild and open spaces with housing tracts. Why do we insist on the growth-is-good paradigm? Who chiseled that into stone? … We can retool our thinking, and then our communities, to be based on sustainable and renewable business practices.’”