The Housing Bubble

The Miami Herald reports from Florida. “The government threw a $1.5 billion lifeline to unemployed and underwater homeowners on Friday. Florida and four other states that have seen home prices fall by at least 20 percent since their peak will be eligible to apply for the funds. Since the end of 2006, Florida home prices have dropped 37 percent, according to the Federal Housing Finance Agency. Almost half of all homeowners in the Miami-Fort Lauderdale metropolitan area are underwater. And statewide, homeowners have lost hundreds of billions in equity.”

“With needs so great, it’s unclear what can or will be accomplished with the new funding, said William Hardin, a professor of real estate at Florida International University. ‘It sounds like a lot of money, but relative to the problem we have, it’s just a drop in the bucket,’ he said. ‘My initial impression is that [Obama] is just pandering to voters.”’

“For some, Friday’s initiative seems too little too late. Richard Feldman bought his Sunny Isles Beach condo five years ago for $270,000. Now it is worth less than half that. For more than a year he has been trying to save the property by getting a loan modification. ‘I have been calling my bank religiously every two weeks, I have been calling hot lines, I have been talking to nonprofit people,’ he said. Four months ago he gave up and quit making payments on the loan.”

The St Petersburg Times. “Kevin Parker (is) a flight attendant who bought this St. Petersburg house in 2007. In 2008, Parker was out of work for months. His lender, Bank of America, allowed him to skip payments on his home for 90 days. But when Parker sought a permanent loan modification, he began a journey as bumpy as anything he had encountered in the air. Five months and some 40 e-mails and phone calls later, Parker got the bank to reduce his payments by about $126 a month. But there was a big tradeoff: His late payments were tacked onto the balance, increasing the amount he owes to $157,805 — $10,300 more than he originally borrowed.”

“‘I’m back to work but I’m paying more for the house than it’s worth now and they (Bank of America) weren’t willing to just pick back on the principal,’ he said.”

“From 2005 to 2008, the bank issued 62,000 mortgage loans in Pinellas and Hillsborough counties. Since then, it has started foreclosing on more than 4,000 loans. Last year, though, the bank recorded modifications on only about 50 home mortgages in the two counties. In 2006, Martha Kramer borrowed $116,000 from the bank to buy a Largo condo. After losing her property manager’s job and missing three payments, she asked for a modification.”

“Kramer says it was ‘easily a year later’ — April 2009 — before she got a modification that reduced the interest rate and almost halved her base payment to $525 a month. ‘I can deal with it,’ says Kramer, who is still unemployed.

“But the new terms will make it even harder for her to build equity. The bank tacked part of the late fees onto the principal, meaning she now owes $116,880 on a condo worth about $100,000. And to keep the payments relatively low, the loan is for 40 years, not the once-typical 30 years. ‘If they stretch it out further, that’s sort of helping you in that it reduces the monthly burden,’ says Arnold Heggestad, a University of Florida finance professor. ‘But unless housing prices start coming back, it’s not going to do much good in the long run.”’

From Florida Today. “Cynthia Scott said she suffered nosebleeds while pregnant with her son, now 2, who had to be rushed to the emergency room twice during coughing fits. Everyone in the family of five, including two older children, suffered headaches. Then they came to suspect the cause: Chinese drywall. They had it inspected and moved out of the Brookhaven home they bought for $231,000 in 2006.”

“Since moving from their home in December, the Scotts pay $1,200 in rent each month. For now, they’ve stopped paying their $2,200 monthly mortgage payment, which they’re trying to negotiate down. After the housing bust, their home is valued at a little more than $128,000. And the Scotts said Chinese drywall gutted the value further. It would cost upwards of $100,000 to tear the house down to the studs, replace the drywall, wiring, plumbing and other items needed to clear up the problem. That doesn’t include rebuilding.”

“As of Feb. 1, there were more than 660 cases from 30 counties reported to the Florida Department of Health, including the 20 in Brevard. But the problem could be much bigger, based on the more than 400 million pounds imported into the state since 1999, said Rob Crangle, a minerals commodity specialist with the U.S. Geological Survey. A 2,000-square-foot house uses, on average, about 16,000 pounds of drywall, so as many as 25,000 homes in Florida may be infected.”

“Most gypsum imported into the U.S. comes from Canada and Mexico. Chinese drywall imports spiked between 2003 and 2008, especially when construction demand peaked. ‘I think these will continue to trickle in for a long time,’ Crangle said. ‘It still amazes me that that much wallboard came from China to begin with.’”

The Orlando Sentinel. “Guess which county has the highest foreclosure rate in Central Florida? Could that be Osceola County? Yes, it is. Why, then, did the County Commission last week approve a ‘new city’ of 17,000 acres that would have 30,000 new homes on top of all the foreclosures? It would also offer hundreds of acres for commercial and industrial use.”

“Well, somehow they have concluded that, yes, this is visionary. A ‘once-in-a-lifetime opportunity!’ bellows Commissioner John Quiñones. Sounds familiar. Didn’t Osceola just last year hype another megaproject as a visionary ‘new city’? That one was Destiny in Yeehaw Junction, an hour from anywhere. State planners were so critical of Destiny that the county sheepishly backed off, for now at least. Among other things, Destiny never really could pinpoint where the jobs would come from. Oh, well.”

The St Augustine Record. “This sprawling development off State Road 13 got approvals to build 4,500 homes in early 2004, but Jamie and Kerri Vandenheufel — one of only seven families living in Rivertown at present — came here in October and don’t care how empty their neighborhood appears. ‘We love it, because the kids can roam. We feel safe,’ Kerri Vandenheufel said.”

“County planners estimate that 60,000 to 80,000 homes approved for construction by the St. Johns County Commission over the years remain unbuilt, and that some of the county’s 14 developments of regional impact have few or no residents. Critics say these projects dilute the housing market, creating a massive supply of unsold new homes that sell for about the same as older homes.”

“However, Brian Teeple, executive director of Northeast Florida Regional Council, says an unbuilt surplus of homes is not necessarily a bad thing. ‘All will be absorbed over time,’ Teeple said.”

“Jamie Vandenheufe said homes in the project’s Bungalows district are close-set with front and back porches, much like Disney’s Celebration community. ‘Our house has four bedrooms and 3,000 square-feet,’ Vandenheufel said. ‘Prices have come down. It was a good buying opportunity, a good value.’”

“RiverTown has five other districts beside Bungalows: Main Street, Trails, Farm, Golf and Lakes. Only Bungalows has residents. Vandenheufel remains optimistic, despite the apparently glacial sales there. He looked around at the seven occupied homes and the three models, plus the wide-open grassy spaces where homes will eventually stand.”

“‘The economy recovery is going to take a little while,’ he said. ‘But slowly and surely, homes will be built out here.’”

The Tampa Tribune. “The federal government gave Florida more than a half-billion dollars last March to put new owners into homes left empty by the housing crisis. But the grant came with a ‘use it or lose it’ clause: Commit the money by September 2010 or send the balance back to Washington. With just six months until the deadline, few Florida communities have come close to dedicating all their funds. Since last spring, Pasco County has picked 19 houses in Regency Park and another 10 in neighboring Embassy Hills for rehab. Together, they make up about 15 percent of the 220 houses chosen countywide for the program. Just more than 10 percent of those houses have been returned to private hands.”

“Valerie and Jose Canales left a Clearwater apartment last December and moved with their children into the family’s first home, a four-bedroom on Aetna Lane in Port Richey. The Canales paid $105,000 for the house. Pasco County used stabilization dollars to cover 20 percent of the cost. The Canales have five years or more to start paying the county. Meantime, they’re paying the 80 percent of the loan held by Bank of America.”

“The home sits at the heart of Regency Park, a sprawling community of low-slung single-family homes. The housing bubble burst there two years ago. Vacant, deteriorating houses blight the area. ‘I’m happy,’ Valerie Canales said. ‘There’s no banging, no people screaming, no commotion outside. At the beginning, I felt out of place. I never had it so quiet.’”

From WINK News. “The Parade of Homes was attended by …thousands of people touring the dozens of home models on display in Southwest Florida. Paseo sales manager Tim Clark says…some are looking but he says other are buying. ‘We’ve got 22 deals that we’re putting together for the month of February.’”

“Riverview Homes builder Mark Stout says he’s been busy too. ‘There’s been plenty of traffic here and it’s been this way the entire show.’”

“Like everyone else, he says he’s had to make adjustments. He says, ‘The prices are probably down 25 percent so that makes a big difference to people, the land prices are definitely down so people can get a really good value for what they are doing today- and there is still really a demand out there.’”

“Something that shows that even though the housing market has been down, it seems if you build it, they will come. ‘I really feel like we’ve hit the bottom, so I think yeah it only has one way to go and it’s up from here on out.’”

The New York Times. “After a stint at Ford in the early ’70s, Ron and Patty Cooley left Detroit behind, taking over her family’s modest real estate business upstate. The company prospered: for 30 years the two worked together, helping to finance, build and sell more than 1,000 homes. With their two sons grown, Ron and Patty sold the business and semi-retired down to Naples, Fla.”

“But, unsurprisingly, the collapse of the housing market had a serious impact on a couple with a nest egg tied up in real estate. Ron and Patty looked around and did the math. Florida’s economy seemed to be declining even more steeply than the Motor City’s. Weighing their options, they came back. Talking about Florida, Ron sounds like someone who made it onto the lifeboat in the nick of time. Yes, they had to sell their home down there at a loss, but a former neighbor in Naples recently sold a similar house for less than half of what the Cooleys got.”

“The truth is that my Detroit — and Ron and Patty’s Detroit — might no longer be a city where dreams come true the way they once did. But this story still demonstrates some important things: how lives and businesses can thrive here, how rewarding it can be to have family close and, at the very least, how nice it is that we’re not in Florida.”