The Housing Bubble

The Sacramento Bee reports from California. “Hundreds of area homeowners poured into the Sacramento Convention Center on Friday with tales of financial distress, worry, fear and anger. They were looking for hope at an eight-hour foreclosure prevention workshop. One of those in line, Peggy Tripp, a mother of three, said she has no financial reserves remaining to save her home. ‘I just don’t know who else to turn to. Nobody else will talk with me. So I’m hoping I can get some satisfaction here today.’”

“Mary Pendleton, who said she lives in the Rosemont area east of downtown Sacramento, said she has been struggling to make a $2,200-a-month payment ‘for a long time, long before all this began. We don’t have any savings left.’”

“Bob Tull of the El Dorado County community of Cool said he was hoping to get his nearly $3,000-a-month payment modified, having ‘burned through about all I have.’ Tull said he worked more than 30 years as a contractor, and now he’s delivering mail to help out.”

“Jonelle Smith of Sacramento said she showed up with home loan documents ‘because a friend of mine told me this was going on. … I’m hoping to get some help from somebody, anybody.’ A couple of hours later, a disconsolate Smith walked away, saying, ‘I couldn’t get help today.’”

“The California Association of Realtors said this week that 67 percent of all home sellers in California in 2009 did so as a result of difficulties related to meeting their mortgage obligations.”

The LA Times. “It’s been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction. ‘ Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They’re not planning on going anywhere.”

“We’re kind of on pins and needles, but who’d want to leave when you put this kind of energy into a house?’ said Eugene Harrison.”

“In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it’s difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely. Economists say the situation won’t last forever, but in the meantime the ‘amnesty’ may allow at least some homeowners to regain their financial footing and avoid eviction.”

“In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn’t hear anything from the bank, First Franklin, until a real estate agent showed up at their door last month saying she was going to sell their house. Sandy Fraguere wasn’t surprised that it had taken the bank so long to ask them to move.”

“‘I don’t think they really knew what was going on or who was there,’ she said.”

“Next stop for the Fragueres is a hotel, where they plan to stay for two weeks until their apartment in Chino Hills is ready for them to move in. Their dogs are being boarded and their belongings stored until they can retrieve them someday. Their children, ages 8 and 9, are being steeled for more instability. The Fragueres have started saying goodbye to their neighbors, adding yet another empty house to a block that has already seen two other families forced to pack up and leave.”

The Glendale News Press. “Area home prices rose in December for the seventh straight month, according to a real estate report released Tuesday. But the recent gains do not reflect the beginnings of a true recovery in the market, experts and agents said. Fifteen of the 20 metropolitan areas included in the report showed price declines in December.”

“The government’s efforts to ease regulations on banks while stimulating demand have brought high competition for limited inventory, said Barry Burnett, the owner of Barry Burnett Realty Inc. in Burbank. But banks have had no incentive to foreclose on properties that have lost significant value, with some still down as much as 22% from their peak values in 2006, Burnett said.”

“‘What we have is the perfect storm of stupid,’ said Barry Burnett.”

“Unless banks begin foreclosing on homes and putting them up for sale, the market will not begin to operate naturally and eventually grow in strength, he said. But when banks finally do begin selling foreclosed properties, the effect will likely be challenging for homeowners, said Keith Sorem, a Glendale-based agent for Keller Williams Real Estate. ‘The other side of the coin is that if we had a lot of inventory, values would probably depress, and we have no control over it,’ he said.”

The Press Democrat. “The North Coast wine industry, home to the highest concentration of high-end wineries and vineyards in the nation, is reeling from the impacts of a recession that has made it chic to drink cheap wine. ‘This is beyond a recession. This is a complete resetting of the clock,’ said Sebastopol winemaker Tim Olson, co-owner of the boutique Olson Ogden wine brand.”

“Banks are pressuring these wineries to put up additional cash or assets as collateral, and some are finding that a difficult task, according to Allan Hemphill, a financial adviser to several area wineries. ‘I think you are going to see foreclosures and I think there’s going to be quite a few of them,’ Hemphill said.”

“There is something of a standoff in the market at the moment, according to veteran Sonoma vineyard appraiser Tony Correia. The handful of buyers are largely expecting to find great deals, but winery owners are reluctant to sell at such steep discounts, Correia said. ‘Sellers think it’s 2007, and buyers think it’s the 1930s,’ Correia said.”

“‘A lot of property owners really haven’t faced up to reality. They are still in denial,’ Correia said. ‘They think they are going to work their way out of these things, but some of them have dug themselves a pretty deep hole.’”

The Times Herald. “A full 61 percent of Solano County homeowners, or 56,787 mortgage holders, owe more on their homes than they are worth at the end of last year, First American CoreLogic reported this week. The latest report showed that, with 35 percent of its mortgages are under water, California remains among the five states in which negative equity is concentrated. In numerical terms, the report’s authors found California’s 2.4 million and Florida’s 2.2 million upside down mortgages atop the pack. They account for 4.6 million, or 41 percent, of all negative equity loans, its authors noted.”

“The report found a close tie between negative equity and preforeclosure activity. It’s also a major factor in homeowner default behavior, it noted. ‘Once negative equity exceeds 25 percent, or the mortgage balance is $70,000 higher than the current property values, owners begin to default with the same propensity as investors,’ said First American CoreLogic Chief Economist Mark Fleming.”

“Calling the report ‘not an unrealistic interpretation of the statistics,’ local Realtor Jeff Dennis said, “When it becomes clear that you’re throwing good money after bad, some people will tend to walk away. But as things in the market stabilize — and with loan modification programs available — more people will hopefully decide to hang on to their homes a while longer and things will turn around.’”

“Solano County has seen an 1,100 percent increase in new home construction permits so far this year compared to 2009, a building industry organization reported Friday…far and away the biggest jump, according to the California Building Industry Association’s latest report. Merced came in a distant second with a 600 percent increase.”

“Home-building officials, however, caution against calling this a recovery, as the numbers for January 2009 were extremely low. ‘Anything from nothing is an up,’ local Realtor Jeff Dennis said.”

The Modesto Bee. “Stanislaus County home construction in January hit its lowest level in more than two decades, but at least one local builder thinks there’s an opportunity in this down market. Florsheim Homes of Stockton bought up vacant lots in Riverbank and started building modest-size homes with prices starting at $182,900.”

“Joseph Anfuso, who runs Florsheim, is convinced the renamed Valley Oaks development will be popular with buyers. That subdivision used to be very popular, back during the region’s building boom when it was called Sterling Ridge. In 2005 when the 200-lot subdivision was owned by JKB Homes, up to 100 would-be buyers were on the waiting list for homes that had base prices of $342,000 to $431,000.”

“By last spring, JKB had slashed its prices, offering a 1,575-square-foot home for $225,340. Anfuso said his company bought 11 of Sterling Ridge’s remaining lots from JKB and another 16 lots from Guaranty Bank, which had repossessed them. At the peak of the building boom, Anfuso said, similar finished lots cost $130,000 to $150,000 each for the land, government fees and infrastructure. He said some foreclosed lots in the Northern San Joaquin Valley are selling for less than $10,000 each, but the Riverbank lots cost more than that.”

“‘We bought those lots at a huge discount,’ said Anfuso, who would not reveal the purchase price.”

The Victorville Daily Press. “The city is on a pace this year to exceed the number of building permits it issued in 2009 by 25 percent, leading some in the industry to see the Victor Valley as an oasis of hope in an industry battered by recession. ‘There are buyers out there who see (Victorville) as the most affordable market there is,’ Frank Williams, CEO of the Baldy View Chapter of the Building Industry Association, said.”

The Desert Sun. “John Husing is a longtime economist who focuses on Riverside and San Bernardino counties. Husing, ‘The critical question is one that can’t be answered: We don’t know for sure whether banks are going to, at some point, act precipitously against homeowners who are in trouble, but who — up until now — they’ve been allowing to slide.’”

“‘There are roughly 250,000 Notices of Default on file in Riverside and San Bernardino counties. We know there are more houses that are upside-down than that, so we don’t know if banks are holding off on the trustee’s sale or on evictions, the final act of foreclosure. With inventory on bank-owned homes down 50 percent, the market is acting precisely as predicted: Prices are slowly rising. Volume has made a big jump. Realtors are complaining about lack of supply.’”

“‘If banks do change their mind, aggressively take people’s houses and dump them on the market, then all bets are off: We could get double-dip recession. My forecast is, that won’t happen.’ Best advice for buyers: ‘If you don’t buy now, you’re nuts.’”

The Pasadena Star News. “Construction of new homes on one of the last sizeable open lots in the city is scheduled to start in April. Located just north of Pasadena High School, in a tree-lined neighborhood off Altadena Drive, the Rosecrest Lanes development will consist of 35 single-family homes, all above 2,500 square feet.”

“The developer, Pulte Homes, targeted the area specifically because its executives thought it was one of the few places where high-priced homes would sell in a down real-estate market. ‘Our focus is currently looking to highly desirable areas where home prices haven’t been badly affected,’ said Chris Haines, the president of Pulte’s Southern California Division. ‘Right now there’s a supply constraint for nice larger homes in Pasadena - not enough to go around.’”

“The price of the homes will start around $800,000 and will be custom built, said Haines.”

The North County. “Want to buy an empty lot in Escondido for under 15 grand? Too late!”

“Those kinds of deals were available Friday at the annual San Diego Tax Auction, where San Diego County Tax Collector Dan McAllister briefly became the county auctioneer. He tried to sell a record 197 lots and timeshares owned by people who had gone five years without paying their property taxes. Future homeowners, builders, and investors crowded a room at the San Diego Convention Center to score good buys and enjoy the thrill of the bidding.”

“Holly Stevenson and her husband, Matt Wilson had their eyes on an Escondido property near Lake Hodges as the future site for their dream home. The lot started with a minimum bid of $4,000, the sum of costs of sale and the taxes owed on the property (lots with buildings on them start at half the appraised value). A competitive auction followed, with Stevenson duking it out with bidders on either side of the room, but eventually winning the property for $11,500.”

“‘Usually, an empty lot around there is going for $50,000,’ Stevenson said. ‘So I’m very happy.’”

The Tribune. “Permits for new single-family and multifamily housing have slowed to a trickle in San Luis Obispo County, according to data from the Home Builders Association of the Central Coast. A total of 15 permits was issued in January, compared to 18 in January 2009. Last year, 372 permits were issued, down from 597 in 2008. The number of permits issued has declined each year since reaching a peak of 2,263 in 2004.”

“Jerry Bunin, government affairs director for the Central Coast association, said the number of foreclosures on the market is slowing the pace of building, and more foreclosures are expected. Depending on the type of unit, he said, it often doesn’t make sound financial sense for a builder to move forward because of the bargains that are out there in the home resale market.”

“Another issue for builders is the lack of credit, he said. ‘Even if they had a qualified buyer or a project that made sense, it’s hard to get money to build it,’ Bunin said.”

“The association is hopeful that construction will pick up later in the year. ‘No one anticipated this level of downturn,’ he said.”

The Ventura County Star. “Cash-strapped individuals and families resigned to sleeping illegally in their vehicles in Ventura may soon get some relief. Starting Monday, people can apply to be part of a pilot program that would allow certain vehicles and qualified participants to legally park overnight in one of two designated church parking lots.”

“The program is modeled after city-sanctioned parking programs in Santa Barbara and Eugene, Ore. While not ideal, a sanctioned place to park provides temporary relief while people seek stable housing, said Bill Finley, a captain with the Ventura Salvation Army, which is administering the program for the city. ‘I think there is going to be more demand than the spots we have,’ Finley said.”

The Record Searchlight. “Housing affordability in the greater Redding metropolitan area peaked in the final three months of 2009. The area’s median sales price closed out 2009 at $175,000, down from $181,000 in the third quarter. Area affordability has skyrocketed since the spring of 2006, when the greater Redding area’s index reached an all-time low of 11 percent with a median sales price of $280,000. Redding’s median income back then was $49,000.”

“‘A combination of declining prices and extremely low interest rates’ are driving affordability, said Eric Smith of Keller Williams Realty in Redding. ‘I am not sure if there is going to be a better time to buy, when you factor in the low prices, interest rates and the ($8,000) tax incentive (for first-time buyers).’”

“But with Shasta County’s unemployment rate around 16 percent, the dream of home ownership remains out of reach for many, Smith said. ‘Again, the big if is you have to have a job,’ he added.”

“Home values in the Redding area, which includes Anderson and Shasta Lake, fell 7.3 percent over the final three months of 2009 compared with the same quarter in 2008, according to the Federal Housing Finance Agency’s house price index (HPI). In a sign that prices might be leveling off, Redding values dropped a mere .37 percent from the third quarter of 2009. Home values here have fallen 8 percent over the last five years, the Federal Housing Finance Agency reported.”

“Redding made news in 2003 when the same index ranked it as the top appreciating housing market in the nation. Prices in Redding during the first quarter of that year jumped 16.3 percent over the previous year. Chico (16.04 percent) ranked second behind Redding and the five fastest-appreciating markets in the nation were in California during the first three months of 2003.”

“Year-over-year values in Redding reached their zenith during third quarter 2004 when the HPI reported prices jumped 26 percent. How crazy was the market back then? Redding couldn’t even crack the top 10 with that 26-percent leap.”

“The two areas that had the fastest rates of appreciation during the late summer of 2004 were Las Vegas (42 percent) and Riverside (34 percent), communities that have both been hammered by foreclosures.”

“So who capped 2009 as the fastest-appreciating community? Terre Haute, Ind., where prices nudged forward 3.1 percent compared with a year ago. Dubuque, Iowa, was second at 2.12 percent. Times have changed. That kind of appreciation would have made you a bottom-feeder six years ago.”

“The real estate world was very different in the Coachella Valley five years ago. Prospective buyers streamed through model homes while real estate agents poked pins onto maps to reflect constant sales — some posting $10,000 price gains by the month. Phones rang incessantly. Common were bidding wars, waiting lists, lotteries and house-flippers, the latter often cashing out six-digit profits.”

“It was fast and frenzied in 2005 as price seemed to be no object and affordability dissipated, squeezing many families out of the market.”

“The picture is a stark contrast to today’s market. The data, filtered from the Multiple Listing Service, market activity in key valley areas show that sales are up 25 percent compared to 2008. Overall sales volume is down 15 percent. Of 9,238 total home sales, 8,204 sold for $500,000 or less. The average sales price of homes below $500,000 was $182,369. That was 22 percent less than in 2008, when the average sales price was $236,160.”

“The sale of homes priced from $500,000 to $750,000 fell 21 percent. Of 9,238 total home sales, 452 homes sold above $750,000. Prices are so low that prospective buyers with cash, a ‘golden’ credit record, resilient investment portfolio and job security are swooping in to snag homes at prices not seen in nearly a decade.”