The Housing Bubble

The Gazette reports from Colorado. “From Colorado Springs’ swankiest neighborhoods to its middle-class subdivisions to El Paso County’s rural areas, 2010 was a tough year for home prices in the Pikes Peak region. Bill Hurt, broker in Colorado Springs, thinks the housing market has about hit bottom. But any recovery won’t necessarily be a quick one, he said. He expects prices to be flat in 2011, as distressed properties continue to take a toll on the market. ‘The foreclosures aren’t going to go away tomorrow,’ Hurt said. ‘We still have a pretty substantial inventory of foreclosures to work through.’”

The Greeley Tribune in Colorado. “Greeley businessman Seth Ward has filed bankruptcy with debts exceeding $43 million, according to documents in U.S. Bankruptcy Court in Denver. Ward’s debt primarily stems from his partnerships in multiple real estate limited liability companies, including in Greeley, Windsor, Berthoud and Loveland. He has filed Chapter 11, meaning he will attempt to reorganize the claims and pay them back.”

“Keith Abbott, a bankruptcy attorney in Greeley, said it’s not surprising an area businessman who had many real estate dealings is struggling. ‘The last three years at least (real estate values) have gone down probably by a third across the board,’ Abbott said. ‘ … I know a lot of (attorneys) in Denver, and that’s all they did was real estate, and they’re hurting like everyone else. Times are tough. I talk to a half dozen people a day and do a lot of bankruptcy work. I’ve never seen it this bad.’”

“Bankruptcies such as Ward’s are part of the overall contraction of the real estate sector in the wake of the housing crisis, said John Green, a regional economist. ‘This is part of the shrinking process,’ he said. ‘It had to happen. You can’t take a big hit to the housing sector like that without ripple effects taking somebody down.’”

The Arizona Republic. “New-home sales in Maricopa County were down significantly from a year earlier during the first quarter, according to The Arizona Republic’s latest quarterly housing snapshot, based on numbers from realty studies at Arizona State University and Mesa-based Ion Data. Realty-studies professor Jay Butler said he was concerned that the continued decline in median home prices would push some homeowners who are upside-down on their mortgages to give up and walk away, particularly those who were exhausting all other financial resources to make the mortgage payments.”

“There were 11,425 foreclosures in the first quarter of 2011, up slightly from 11,190 foreclosures during the same period a year earlier. However, pre-foreclosure notices were down considerably, from 18,245 notices issued in the first quarter of 2010 to 15,232 notices issued during the same period a year later. Butler said the decrease in new notices seemed logical after four years of heavy foreclosure activity.”

“‘First of all, you’ve foreclosed on 11 percent of the homes in the Valley, so you’ve got to be running out of properties to foreclose on,’ he said.”

The Salt Lake Tribune in Utah. “With Utah facing the possibility of 40,000 foreclosures this year, speakers at an event designed to draw attention to the ‘crisis’ said Wednesday that the effects of so many empty homes will ripple across neighborhoods and communities. Billed as a rally at the state Capitol Rotunda, the event was more of a news conference that drew activists, community groups and a few officials who warned of the consequences of the wave of foreclosures hitting Utah. ‘Utah is on track for more than 40,000 foreclosure notices in 2011,’ said Marco Fields, founder of a homeowner advocacy group called TEEMS Utah and one of the event organizers.”

“Layton Mayor Steve Curtis choked up while describing his own experiences of losing his job, then having his home go into foreclosure despite ongoing negotiations to modify his loan.”

“Greg Sexton said he was forced to file a lawsuit to halt foreclosure of his Draper house after months of fruitless negotiations with Bank of America representatives to qualify for a federal short-sale program. He cites phone call after phone call to the bank and a company hired by it in which false criteria were used to block his participation. He said the various entities were not communicating with each other and turnover is such that he constantly has to talk to new people unfamiliar with his case.”

“‘They purposefully are booting me out of this program so they can foreclose on me,’ Sexton said.”

The Deseret News in Utah. “Utah is fourth in the nation in home foreclosures, and it’s mostly the mortgage industry’s fault. That was the message voiced by politicians and activists Wednesday at a rally on Capitol Hill organized by the Utah Foreclosure Crisis Coalition. ‘They are not perpetrators,’ said Sen. Ben McAdams, D-Salt Lake, of the thousands of Utah homeowners who have recently gone through foreclosure. ‘They are victims.’”

“The housing bubble may have burst for many in recent years, but not every segment of the market is suffering. According to the Salt Lake Board of Realtors, 91 homes valued at more than $1 million sold along the Wasatch Front last year, up 12 percent from 2009. And so far this year, 15 seven-figure homes have already sold. Deanna Dipo, president of the Salt Lake Board of Realtors, said that of the million-dollar homes sold in the past year, 38 were cash purchases. Approximately 18 percent of the upscale homes sold were short sales or bank-owned properties, meaning that despite the seven-figure price tag, they were still priced much lower than originally listed, she explained.”

“Sandy resident Jesse Riddle. He and his wife Lisa have put their 11,600-square-foot Pepperwood home on the market for $2 million. The house sits on nearly two acres and includes a swimming pool, sport court, trampoline and a lighted mini-football field in the backyard. ‘We built this home about 14 years ago as our dream home,’ he said. But his four children are grown now, and the Riddles are ready to downsize.”

“Shelly Tripp, a Realtor with Coldwell Banker Residential Brokerage, said prices have dropped 30-50 percent from just a few years ago at the height of the housing boom, making high-priced, custom homes a bargain even at the million dollar mark. ‘You get a lot for your money,’ Tripp said.”

“Architect Jory Walker recently put his nearly 9,000-square-foot Draper home on the market for $1.3 million. When his family initially purchased it 15 years ago, they had four young children. Now with only one son left in high school, he and his wife feel like they will be left with ‘too much house.’ ‘The thought was to scale down and get a smaller house,’ he said. ‘We want something that is a little less square footage for the two of us.’”

“He said he hopes to break even on the sale of the current property, and can afford to be patient since the sale is not a necessity. ‘Luckily, we’re in a place where we don’t have to sell,’ Walker explained. ‘If we don’t get the price we’re asking for, then we’re not going to sell because we don’t have to.’”

From Vegas Inc. in Nevada. “The Las Vegas new-home market remains weak and could hit its low during the downturn with fewer than 5,000 homes built. But with homebuilders controlling 83 percent of the 19,250 finished lots and 10,528 partially finished lots in the valley, some wonder how long it will be before builders go after raw land.”

“The problem is that land owners right now aren’t willing to come down on their price and make it work for builders, said Dennis Smith, president of Home Builders Research. Many of the finished lots and partially finished lots builders obtained from banks and other builders allowed them to construct homes at reduced prices to be more competitive with existing homes, Smith said.”

“Anything priced at $200,000 an acre is too high, Smith said. The price of finished lots continues to rise because builders have sought them out, he said. Two years ago, it was $30,000 a lot on the low end and $50,000 a lot but that has increased to as much as $75,000 a lot in many places, he said. ‘Builders are running out of land to build homes at today’s prices,’ Smith said. ‘If they can’t build a house for $150,000, they aren’t going to buy the land. That’s why the idea of anybody thinking we’re going to overbuild is simply ridiculous.’”

“Homebuyers don’t want to pay higher prices and even if they did, banks wouldn’t lend them money to buy them, Smith said.”

“Many had expected it to be the crowning achievement on the Vegas Strip that would reset the center of one of the most famous streets in the world. It was called a sign of what’s to come and the cherry on top of Las Vegas’ sundae in a community that thought the good times would never end. More than two years later, as spectacular as CityCenter is, it has become Las Vegas’ Tower of Babel—serving as a symbol of what could go wrong.”

“‘It still amazes me the intensity of the hubris that took hold in between 2000 and 2006 when many believed that we’d really Manhattanize Las Vegas,’ says John Restrepo, a principal at Restrepo Consulting. ‘I assume if MGM could go back in time, knowing what it knows today, it wouldn’t have made the high-rise residential component such a major part of CityCenter.’”

“With the condominium market in the tank, MGM in 2009 discounted its high-rise units by 30 percent and even then could only close on about 450 of the 2,387 it had on the market or one third of the 1,300 it had under contract. In a city with an abundance of hotel rooms, the desire for condominium living hasn’t panned out.”

“So, has Las Vegas learned anything in this recession? Is hubris still in vogue? ‘Often times it takes going through a trauma to take you to the next level,’ Restrepo says. ‘Pittsburgh went through it with the steel industry and it happened to the textile industry in the South. New York City went bankrupt in the 1970s and even Boston redid itself with high technology. It takes a crisis to rethink the future and lose some of that hubris.’”