The Housing Bubble

A report from the Washington Post. “The glut of homes for sale in the Washington area has shrunk dramatically since the housing market’s darkest days in 2008. On the sidelines is the Arlington condominium that Ryan Sparacino bought when prices soared in 2005. Sparacino and his fiancee, Lindsay Kucera, recently bought a new house and would love to unload the condo. But they’ve decided to rent it out because he owes more than the house is worth — up to $30,000 more, according to his real estate agent’s estimates. ‘I could afford to sell the condo, but mentally I’m not there right now to write that kind of check,’ said Sparacino, a lawyer.”

“Even people who are not underwater, such as Scott Berman, are holding out. Berman and his wife Hillary briefly tried to sell their Bethesda home in January. They changed their minds after concluding that it would not fetch the $899,000 they wanted. They are renting it out instead. ‘We wanted to let the market come back a little,’ said Berman, a financial planner.”

“Nearly 31 percent of Washington area residents have no equity in their homes, according to First American CoreLogic. In order to sell, they must bring cash to the table. Since many homeowners are unable or unwilling to do that, they don’t list their homes for sale even though they want to, said Michael Briggs, VP of professional development at a local real estate brokerage. ‘That’s a whole bunch of properties that should be on the market right now and they’re just not in the game,’ Briggs said.”

The Washington Examiner. “Stephen Fuller, director of the Center for Regional Analysis at George Mason University, says there will be more foreclosures, but far fewer than the economy-shaking deluge of 2008 and for a different reason. ‘We expect there will be a second wave, but nothing of the magnitude we saw in 2008,’ says Fuller. ‘That wave was tied to subprime lending. This one will be more of a result of an extended length of unemployment.’”

“‘The Washington area does not have the significant magnitude of unemployment like some other areas of the country,’ he says, ‘but we do have 100,000 more people unemployed than we did a year ago. Prince George’s County is the new epicenter of this. It still has significantly declining property values.’”

The Daily Press in Virginia. “April set a new record for foreclosure filings on the Peninsula. Foreclosure looms for some who bought their first home during the housing boom and were told they would be able to refinance later. But since then, perhaps they’ve lost income or their credit has been damaged, and that’s not possible, said Jill Simmons, a Catholic Charities of Eastern Virginia financial counselor.In other cases, people refinanced, not realizing that the money it cost to refinance was rolled back into the mortgage. Then a financial hardship happens, and they find themselves in debt, she said.”

“Joe’s health took a turn for the worse in 2003, launching his finances on a downward spiral. Now he’s fighting to keep his Hampton home — the home that he grew up in. The family racked up credit card debt and took equity out of their house. Last year, Joe tried talking to the bank about a loan modification after President Barack Obama unveiled plans to help struggling homeowners. But those plans were too new, and the bank was too overwhelmed by the droves of people seeking mortgage relief, to help him, he said.”

‘He looked for agencies to help him modify his loan. All he found were companies that charged between $800 and $1,500 up front and promised nothing. That’s when he found help for free from Virginia Beach-based Catholic Charities of Eastern Virginia. Simmons helped them apply for a modification. He hopes to find out soon if his monthly payment is reduced. If it doesn’t work, he’d consider moving into an apartment so he won’t have to worry about mowing the grass, paying water bills and the other expenses of homeownership, he said. But it’s hard to think of leaving his childhood home, the home he returned to shortly after his father died, he said.”

“His advice to homeowners facing foreclosure? ‘I just didn’t give up. People have to not give up,’ he said. And, ‘Don’t go for the scams. If they want money up front, that’s a scam. Stay away from it. You grab the first lifeline that comes your way. All I had on my mind was saving the house.’”

The Gainesville Times. “In January 2008, a the Prince William Board of County Supervisors voted 7-1 to approve rezoning requests for the areas of land now known as Haymarket Landing and the UVA-Foundation property. Well, there’s no houses yet. In fact, you’re more likely to find deer than land surveyors in the area. And that means the Haymarket Bypass is stuck in the concept phase until the housing market recovers well enough that demand for new property in western Prince William County surges again.”

“In the third quarter of 2007, just months before the county’s votes on the rezonings, the average home price for a detached single-family dwelling in Haymarket was over $600,000. Now, multiple Web sites have the price listed at under $400,000. As for how long a wait until there’s movement on the ground on the developments and $3.3 million road, that’s anyone’s guess according to county planning director Stephen Griffin.’

“‘The development has grinded to a halt just about,’ he said.”

The Frederick News Post in Maryland. “Frederick County saw a slight dip in the number of foreclosures in April, but with distressed home sales still nearly half of all houses sold locally, Realtors remain worried. ‘Banks are becoming more receptive to short sales; they are better than foreclosures,’ said Sandy Fouche, president-elect of the Frederick County Association of Realtors. ‘ think you will still see short sales for several years.’”

“Realtytrac said there were 287 in Frederick County in April, 72 percent higher than the number of foreclosures in April 2009. Patrick McLister, a lawyer who works with Realtors, said the 72 percent higher rate for foreclosures in April, compared to a year ago, is troubling.”

“‘That statistic is indicative of the fact that homeowners have tried to modify their loans but are ineligible or don’t qualify for the modification programs, or the banks are now moving forward with foreclosures after a short break last year to see if the modification experiment would lessen the defaulting loans,’ he said. ”

“The rise in unemployment and depletion of personal savings accounts are also contributing factors, he said. ‘I was starting to feel old looking at the birth dates on the driver’s licenses for most of our homebuyer settlement clients last year. Now that the $8,000 credit has expired for contracts not signed by April 30, the banks may have a more difficult time selling the properties they are now taking back by foreclosure, especially those that are above the $300,000 price range,’ McLister said.”

The Star News in North Carolina. “One in every five people who worked in the Wilmington-area real estate and construction industries five years ago is out of the business now. Until recently, home sales here had spiraled down to less than half of what they were when the housing bubble burst, according to statistics from the Wilmington Regional Association of Realtors. Employment in the sales and leasing end of the industry fell about 20 percent from the first quarter of 2005 to the first quarter of 2009, according to data from the N.C. Employment Security Commission.”

“But employment in home construction side slid about 22 percent, with some construction occupations showing job contractions of 50 percent. And real estate experts believe that the job loss continued after that.”

“If you were to plot sales of new construction homes here from 2000 to 2009, the line would look line a climb up and down Mount Everest, said William Hall, an economist at the University of North Carolina Wilmington. The summit was reached in 2005, and it’s been a steep descent since then, he said. ‘If you look at building permits for single-family homes, there was a fourfold increase from 2000 to 2005, then a fourfold decrease to now,’ Hall said.”

“While the number of real estate agents in the WRAR has dropped since the boom, the decrease hasn’t been proportional. In 2005, the number of agents in the WRAR was about 2,200; now it’s around 1,800, said Tim Milam, CEO of Coldwell Banker Sea Coast Realty. ‘But it’s not what you think. A lot of people say they’re working but they are not in the business,’ Milam said. Agents may be working part-time in another area, he said. Others ‘couldn’t pay the dues or the money it takes to be in business,’ Milam added.”

“The Brunswick County Board of Realtors has seen a hefty drop in membership, said Mary McCarthy, president of the association that covers most of Brunswick County south and west of Leland. Association members include inspectors and appraisers. She said there has been a significant loss of appraisers statewide. ‘I know an appraiser selling insurance now,’ said Howell Graham, a partner in the Wilmington appraisal firm Joseph Robb & Associates. ‘Some of the new appraisers that are not well-known are struggling.’”

“Many have adapted to the changes, however. Take attorneys. Some Wilmington firms have moved part of their business from home closings, which have fallen, to foreclosures, which are rising. Wilmington attorney Alan Solana said two-thirds of his business now is ‘directly related to the downturn in the economy – foreclosure, eviction,’ he said.”

“And he’s busy. ‘I came back from a foreclosure sale at noon in Bolivia. I filed the final report,’ Solona said, describing one recent day’s work. ‘I’m getting ready to finalize five more foreclosures, then a closing, and I’ve got five new foreclosures. (Attorneys) who have a straight residential practice are hurting badly. Those who had the ability to morph have morphed.’”

The Philadelphia Inquirer in Pennsylvania. “With record numbers of foreclosures littering the landscape and even more likely to come, the housing industry has been doing a lot of soul-searching on the question of who should be a homeowner. One view of ownership, articulated by James H. Carr of the National Community Reinvestment Coalition, is that there should be ‘no lending without ensuring that the borrower is able to repay.’”

“‘Even to say that shows how out of control the financial system is,’ Carr told a seminar sponsored by the Philadelphia Federal Reserve Bank here last week.”

‘For Farah Jiminez, it is less a matter of money than of temperament. ‘Not everyone is prepared for the responsibility,’ said Jiminez, executive director of the Mt. Airy USA community-development corporation in Philadelphia. ‘As housing counselors, we see this all the time. We have clients who want to know when they can get in a house. Then we have clients who want to know what they can do to ensure they can stay in the house.’”

“Even the worst housing downturn since the Great Depression doesn’t dampen the enthusiasm of Americans eager for a piece of the American dream of homeownership. A recent and extensive Fannie Mae consumer survey shows that the vast majority prefer owning to renting - even people who are delinquent on their mortgages or whose houses are worth less than their loans on them.”

“‘The nonfinancial issues eclipse the financial ones,’ Fannie Mae chief economist Doug Duncan told the Fed seminar. ‘They say owning a house makes more sense than renting one, even if they are in trouble.’ Yet as a result of the comprehensive public awareness of mortgage issues, ‘most believe that it will be harder to buy a house in the future, especially for their children,’ he said.”

“Efforts to increase homeownership generally and among minority groups long kept out of the market were not wrong and did not lead to the housing crisis, Carr said. Excesses in the mortgage industry that led to the debacle ‘were not designed to increase sustainable homeownership,’ he said. ‘If innovation in financing is simply designed only to create billions of dollars in profits, that is not innovation.’”