The Housing Bubble

9 news reports from Colorado. “From the outside, it looks like any other foreclosure. The home on the 15000 block of Atlantic Place in Aurora has a ‘for sale’ sign in the yard and the front door is littered with notices. But when Efrain Diosdado opens the gate to the backyard, it really tells the story of how long the home has been vacant. As the crew headed by Diosdado starts working through the weeds, they discover a number of tires, an old air conditioning unit, three grills and an untold amount of trash. They have to clean it all up before they can even attempt to mow the grass that now looks like a jungle. ‘Looks like a forest back here,’ he said of the 3 to 4 foot weeds.”

“Since 2009, the city has required and charged banks to register foreclosures and clean them up. 3,700 homes have been registered. Right now 1,300 are on the list. John Knight lives near the home Diosdado’s crew was cleaning up. He says it has been empty for about a year. Knight, a long-time resident who is also looking to sell his home soon to downsize, says he was excited to see the city clean up the property. ‘It’s been looking bad for quite some time,’ Knight said. ‘It’s really discouraging, because you do take pride and ownership of a house, it’s a small cul de sac. When you have one house not very well taken care of, it depreciates the entire neighborhood. It looks great now.’”

In Denver Times from Colorado. “The number of homeowners in Colorado in active trial modifications – the first step in the federal government’s $75 billion plan to keep people out of foreclosure – has dropped by almost half since the beginning of the year, shows an InsideRealEstateNews.com analysis. Zachary Urban, spokesman for the Adams County Housing Authority, said that the ‘most critical aspect’ of the drop in trial modifications is the rules change that requires lenders to be more selective in letting consumers into the program. ‘That has punctured the bubble, if you will, of home modifications,’ Urban said.”

“And that is a good thing, he said. ‘We saw this rise in trial modifications and it was just not sustainable,’ Urban said. While it may seem like bad news to homeowners who would love to lock in rates as low as 2 percent, it often is not in the best interest of the homeowner, he said. ‘The way we look at it is why give more money to the mortgage company when it is a losing proposition?’”

The Prescott Daily Courier in Arizona. “A homebuilder in Dewey-Humboldt finished 75 percent of a house before losing it to a bank, according to Gregory Arrington, the town’s code enforcement/community outreach coordinator. Arrington said a disposal company removed a 5-ton roll-off container from the site and dumped the trash in the rear of the property. However, as many as four months passed by before the complaint reached the hearing officer, Arrington said.”

“Code enforcement violations have become more common since the housing market collapsed a few years ago, Arrington and other code enforcement officials from the tri-city area said. It becomes a challenge to track down ownership, and no one takes responsibility for maintaining homes, swimming pools and yards, said Boyce Macdonald, Yavapai County land-use manager. ‘When they are absentee (-owned), it is harder to get information because they are in Dallas, Texas, or California,’ Macdonald said.”

“If Code Enforcement Supervisor Fernando Gonzalez’ staff learns a property is in foreclosure, ‘We have to stop our process against the property owner and go after the (lending) institutions,’ Gonzalez said. ‘It is usually the bank. And we have to re-initiate the notice of violation against the bank. We have to start all over. Sometimes, the property is in limbo’ because a bank has not assumed possession of a foreclosed house.”

The Arizona Daily Star. “From the street, at least, Robert and Shannon Vigil’s old home looks great. But look over the backyard wall, or venture inside, and it’s easy to see that nearly two years of vacancy has taken its toll. Vandals have trashed the home, breaking windows, dumping mattresses into the backyard, throwing beer bottles into the pool and even stuffing the toilet with crossword books. ‘I just couldn’t believe that anyone would be so disrespectful,’ Shannon Vigil said. ‘But at the same time, the bank, they basically allowed it to happen by not taking the house when we told them we were leaving, by not working with us when we were trying to save the house.’”

“United States Postal Service data show about 120,000 vacant housing units across the state, said University of Arizona economist Marshall Vest. Of those, about 25,000 units are in the Tucson metro area and 90,000 are in the Phoenix metro area. The data track previously occupied units that have gone without mail delivery for 90 days. ‘If anything, I would think those numbers understate the idea of vacant houses,’ Vest said.”

“What bothers the Vigils, who were extremely upside down on their home, is that they tried to pursue a modification and then a short sale at about $155,000 before walking away and filing for bankruptcy. To see the house sit and get trashed nags at them because it feels like a waste. ‘Basically, they don’t want to lose any money,’ Shannon Vigil said. ‘Well, hello, the house has been sitting vacant for two years. You’ve lost plenty of money.’”

“Developer Michael Ingram, of El Dorado Holdings, took an interest in Maricopa back in the ’80s, buying up 18,000 acres, often for as little as $500 a pop. He developed the town’s first subdivision, Rancho El Dorado. ‘We’ll be bringing something on the market that’s far below the southeast Valley today because prices are so much lower’ in Maricopa, he told the Phoenix Business Journal in 1996, when Maricopa’s population was about 600.

“Ingram’s vision was simple: expand the drive-till-you-qualify ring. And people bought into that vision, flocking to his lower-priced homes. At the peak, Maricopa grew by nearly three people an hour. The downturn has left Maricopa unfinished. There’s nothing to do, and nowhere to go. ‘If we had something to offer other than cheap housing, we would be a much more attractive city,’ said Maricopa resident Heather Susoreny, who commutes about 100 miles round-trip to her job in Phoenix.”

“Susoreny put $180,000 down on her house in Maricopa and has watched it disappear with sinking home values - she calls it her ‘ghost money.’ She’s watched other homeowners walk away, and she said she vacillates between being ‘pissed off and acceptance’ of the situation. She used to follow news about the housing crisis and track sales, but all of that made her feel crazy. Now she just tunes it out. Still, she said, she likes living in Maricopa. She’d like to wait it out, she said - until she can get at least a tenth of her ghost money back.”

“On weekends in the city of Maricopa, signs of the housing crisis come to life. Sign spinners line the main road in and out of this foreclosure mecca, pointing the way to bank repos, cheap homes and ‘final opportunities.’ Like much of Pinal, foreclosures are king in Maricopa. Distressed homes made up 80 percent of sales there at the end of last year - and that’s an improvement from when things were really bad. The median sales price has fallen from $260,000 in 2006 to about $110,000.”

“‘There’s an identical model next door selling for half the value that I paid for this house,’ said Marvin Brown, a Maricopa city councilman who bought in Pulte Homes’ Cactus at Senita subdivision for $325,000. ‘Half the value. That’s painful. That’s like Mike Tyson hitting you in the jaw in his best days.’”

“Pinal County is a lunar landscape of unfinished developments where streets dead-end at dirt, playgrounds were built for neighborhoods that don’t exist and vacant model homes idle in the dust. ‘We bought here because it was a place that was affordable. We couldn’t afford anything in Gilbert or Chandler or anywhere close to work,’ said Jon Cox, who lived in unincorporated Queen Creek for five years. ‘And we liked it out here at the time. It was new.’”

“Cox made those comments in March when foreclosure was looming large. He lost his home in May, and has since put Pinal in his rearview mirror, moving his family to Gilbert, where he rents. ‘For losing the house,’ he said, ‘I feel like I am a number.’”

The Salt Lake Tribune in Utah. “After years of strong sales and of owners using their homes as ATMs — only to see it all come falling down in the biggest housing crash in recent memory — it has come to this. If you want to get a home in trouble sold in today’s market, there’s a strong likelihood you’ll have to go through the complex, time-consuming short sale route to get it done. In Salt Lake County nearly one-quarter of all residential listings are short sales.”

“Jeremy Stroup of West Jordan, who purchased his three-bedroom, two-bath rambler in a new subdivision in 2007 for $362,000. He has watched it fall in value by more than $100,000, and after a divorce late last year, Stroup began to worry not only about how under water his home was, but about making mortgage payments over the long term on only his salary. After efforts to work with his lender on a loan modification failed, Stroup opted for the short sale route. Months later, the bank has approved a selling price of about $250,000, and he could be out and living with his mother by the end of the month.”

“Although there’s some relief he will soon move past his predicament, ‘there is definitely disappointment and stress in losing your home,’ he said.”

“Realtor Mary Olsen specializes in short sales. Olsen says she’s no longer surprised when a home has not one, but two or even three mortgages. In Riverton, she shows a home that’s part of a deal complicated by the fact that two banks are involved. ‘A few years ago ‘everybody was using their homes as an ATM machine,’ taking out home-equity loans to buy new cars, motor homes, new furniture.”

“Although the owner is upside-down on her mortgage and wants out, and buyers have made offers, Olsen has yet to get both banks to agree on a selling price. So she waits.”

“The recession has delivered a blow to commercial banks in Utah that, in addition to costing thousands of jobs and destroying several institutions, will affect the availability of real estate loans for years to come. ‘When it comes to real estate, the bar will simply be much higher,’ Howard Headlee, who leads the Utah Bankers Association, said late last week. ‘Where in the past, a lot of the risk was pushed onto the bank because, frankly, no one thought there was a risk, that risk will be put back on the developer,’ Headlee said.”

“Banks foreclosed on real estate-related loans valued at $33 million in the first quarter 2007. The figure ballooned to $613 million in the first quarter 2010. The foreclosures resulted from defaults by borrowers who used property as collateral. ‘These numbers reflect just how serious this episode has been, and I think reflect just how close we came to a significant catastrophe,’ Headlee said. ‘Clearly, this was what I hope will be the most significant economic event of my lifetime, and it never happens again.’”

The Deseret News in Utah. “Saratoga Springs’ population is now 13 times larger than it was just a decade ago. Nearby Eagle Mountain grew eight-fold. Herriman quintupled. Lehi more than doubled. Those are examples of explosive population growth in northern Utah County and southwestern Salt Lake County, according to U.S. Census Bureau estimates.”

“Nicole Martin, economic development director for Herriman, said growth came early in the decade because credit was easy, and that helped people afford the large tracts and large houses offered at the time in Herriman. Many of the homes then were in the $400,000 to $500,000 range. ‘It will be interesting to see in the 2010 Census how many of those (new suburban) houses (built when credit was easy) are vacant and how many are occupied,’ said University of Utah research economist Pam Perlich. ‘The census uses housing counts as a cornerstone of its estimates. But the beginning of the decade was much different than the end.’”

In Business Las Vegas from Nevada. “In its analysis of the Las Vegas housing market, the Center for Business and Economic Research maintains any recovery is threatened because there’s an excess supply of housing units compared with the demand. Although foreclosures are trending downward for now, there is concern the problem could worsen, said Mary Riddel, the center’s interim director.”

“One bright spot in the Las Vegas housing market is that prices have stabilized. But people shouldn’t get too comfortable with what that means, she said. ‘This could be a sign that housing prices have finally reached their bottom and that a recovery in the housing market is around the corner,’ Riddel said. ‘A closer inspection of some fundamentals of the housing market may suggest otherwise.’”

“The center estimates an excess of 9,000 vacant housing units over the normal local housing inventory. That is about two-thirds apartments and one-third single-family homes, economists said. With 9,000 more homes and apartment units than needed, that means the population has to increase by 22,500 before there is a balance between supply and demand, Riddel said. That doesn’t count in any homes that are being built, she said.”

“Another factor threatening any recovery of the housing market is the potential for strategic mortgage defaults from homeowners who are underwater, Riddel said. Las Vegas leads with the nation with about 75 percent of its homes underwater compared with 24 percent for the nation as a whole, she said. She said another threat to the housing market is the resetting of mortgages over the next two years that will lead to higher interest rates and therefore payments. That will create even more underwater mortgages.”

“‘Unless a quick turnaround in the local economy occurs, which is not very likely, this scenario will ultimately produce a new wave of foreclosures in Southern Nevada,’ Riddel said.”

8 News Now in Nevada. “Nevada is one of five states that will get more than $100 million to help with the housing crisis. It is part of the so called ‘hardest-hit fund.’ In Clark County, underwater home mortgages amount to $44 billion.”

“If you qualify, the state is also providing allowances to cover fees for appraisals and moving, even giving a legal allowance for up to three months. But, there is a lot of fine print and only a fraction of frustrated borrowers may even qualify. Also, your bank or credit union must be on board first. ‘The only way these funds will go as far as we hope they can is if the banks step up and match the deductions in principal, dollar for dollar,’ said Lon DeWeese, Nevada Housing Division.”

“While a lot of homeowners want this money, not everyone will qualify. The foreclosure prevention program is designed to help families in states hit hardest by the housing downturn. With housing prices here plummeting, and families unable to pay their monthly notes, the government hopes it will bring much needed relief to homeowners who’ve exhausted their options.”

“‘I went to my bank to try to get modifications. I went through the government programs, through Fanny Mae, Freddie Mac, and I went through the 888 housing help line on the Nevada foreclosure site,’ said Georgia Richardson, who is now selling her home.”