The Housing Bubble

A report from the Idaho Statesman. “While developer Bob Hosac is taking bids on Royal Plaza’s condos to stave off a foreclosure sale, Steve Hosac, his brother with a separate development company, is moving ahead with the 130-condo River 8 project. Meanwhile, 15 residential and commercial units in the Royal Plaza will be auctioned May 7 for minimum bids ranging from about $150,000 to $400,000. ‘We’re trying to move forward,’ Bob Hosac said. ‘It’s important to bring some kind of closure to the Royal Plaza.’”

“Most condo projects in Downtown Boise were planned or under construction before the bubble burst in the housing market and the recession hit in December 2007. Several, like Royal Plaza with 26 units, had up to half their units sold before they were finished. But since 2008, developers have had to lower prices and offer upgrades and other incentives to lure buyers. Not being able to drop prices far enough and fast enough because of the financing contributed to Royal Plaza’s problems, real estate experts said.”

“Sales are improving but at a slower rate than developers would like, said Bryant Forrester, owner of Urban Concepts Group at Homeland Realty, which specializes in condominiums. Pricing Downtown ranges from about $200 to $400 per square foot, compared with $300 to $500 in 2007, Forrester said. R. Grey Lofts, 16 units at 8th and Myrtle streets, has new owners and is about to go back on market with new prices, Forrester said. ‘If you can close one a month, that’s a pace that’s enough to keep the project viable,’ Forrester said.”

“According to the Intermountain MLS, 808 homes in Ada and Canyon counties received sales offers last month, a 5.2 percent drop from March 2010. Industry experts were not surprised by last month’s slowing Valleywide sales figures, arguing that March’s numbers were competing against 2010 transactions influenced by a now-expired $8,000 federal tax credit that had first-time homeowners rushing to get homes under contract before the offer expired. ‘Last year’s numbers for March, April and May were inflated because of that tax credit,’ said Jere Webb, an agent with Coldwell Banker.”

The Columbian in Washington. “The number of Clark County homes in foreclosure fell dramatically in March. Some say the sector’s new willingness to help borrowers with home-loan modifications led to the 29.2 percent one-month drop in local foreclosures, as reported by RealtyTrac. Others say banks are slower to foreclose because they don’t want to own still more properties when it is taking longer now to sell off houses in distress, given the smaller pool of qualified buyers.”

“Scott Anthony, a broker in charge of the real estate owned division of Windermere Real Estate Stellar Group in Vancouver, attributed the drop in Clark County’s total foreclosures to occupants who refuse to move out of distressed properties, holding out for the relocation fees offered by many banks. ‘The banks will actually offer them cash to move out,’ as long as the occupants don’t leave damage behind, Anthony said.”

“Anthony, who has sold more than 270 bank-owned foreclosures since 2009, has also seen some troubled homeowners plan out their homes’ foreclosure. He said the strategy occurs more among Clark County homeowners who are hopelessly underwater, which means they owe more on their mortgage balances than the home is worth. About 32 percent of homeowners in the Portland-Vancouver metro area were underwater in 2010, according to Zillow.”

“Others expect county foreclosures to increase in September, when interest rates will bump up on a crop of adjustable-rate mortgages issued during the height of the housing boom, said Terry Wollam, an agent and president of the Clark County Association of Realtors. ‘We are going to continue to see those through September,’ Wollam said. ‘After that, it’s just going to be a matter of working through that inventory.’”

The Yakima Herald in Washington. “Yakima County has seen a drop in home sale prices over the first two months of the year. The average home price for January and February was $142,720, down 12.1 percent from the same period a year ago, according to Headwaters–The Source, a Selah-based firm that tracks Yakima County real estate sales. ‘It is kind of a reminder (that) we’re still not back to normal,’ said Ken Nelson, broker of DK Bain Real Estate Inc. in Sunnyside.”

“An increasing number of foreclosed homes on the market has been the primary driver of dropping sales prices. Concerns amid the national robo signing scandal slowed down the foreclosure process for many of these homes in the past few months, said Glenn Crellin, executive director of the Washington Center for Real Estate Research at Washington State University. But now the homes are making their way to the real estate market, creating price pressure on nonforeclosed homes, Crellin said.”

“‘We’re seeing some of these foreclosures at 60, 70 percent of their value, because (banks) want to dump them,’ said Daniel McLaughlin, owner and broker for The Buyer’s Agent in Yakima. ‘They’re being bought below market value and it’s really affecting other homeowners because that below-market sale is used as a comparable sale.’”

“While a drop in prices is good news for the buyer, it’s tough for sellers. Mike and Gloria Munly listed their parents’ house after the death of Gloria’s father in December. They priced the west Yakima home at $157,500, just under the current assessed value of $158,000. They felt the price was competitive, especially because they repainted the house and replaced the furnace to make the home move-in ready.”

“They expected to sell the house with a full-price offer. What they did not expect was just one offer, $12,500 below their asking price. ‘It was a rude awakening,’ said Mike Munly. But with the house paid off, they decided to keep the listing price as is and let the house sit for several months, if necessary.”

“‘When you see value in the home, you don’t want to hand it over and give it away’, said Gloria Munly.”

The Oregonian. “Leland Jaquay, president of the Fairview Terrace Homeowners Association, says the association has reluctantly sued some members with unpaid association fees. Fairview, like homeowners associations all over the state, is enduring a financial storm brought on by the economic slump and housing bust. Hard-pressed residents are not paying their HOA dues in numbers that professional condo managers say they’ve never seen. The delinquencies are depriving associations of a crucial revenue stream and forcing some to defer maintenance or levy special assessments on the paying neighbors to make up the shortfall.”

“‘Its something that I’m learning: to try and sue someone, to garnishee their wages,’ Jaquay said. ‘It’s sad, very sad. When you see someone losing their home, bringing in the moving men, you ask yourself where are they going. I’m sure it will affect them the rest of their lives.’”

“‘We’ve got some HOAs suffering 5 percent to 40 percent delinquencies’ on their association dues, said Karna Gustafson, a Portland attorney whose firm represents more than 1,000 associations. ‘What ends up happening is all these delinquencies have to be split up among the homeowners who are paying, so it increases their fees. Then they can’t afford it and they go into default. It’s like a domino effect.’”

“It’s not always cash-strapped homeowners who renege on their HOA dues. Residents of the Hunters Ridge development in Sherwood are facing a shortfall of more than $182,000. The Hunters Ridge association claims most of that sum, about $140,500, is owed by a company controlled by J. Patrick Lucas, the real estate developer who built Hunters Ridge. ”

“The impact of unpaid HOA dues goes deep. Fannie Mae and Freddie Mac announced a year ago that it would no longer buy mortgages on the secondary market involving homes in associations suffering HOA delinquencies of 15 percent or more. Absent a willing buyer on the secondary market, many banks are unwilling to lend money to buyers wanting to buy into the developments. The Federal Housing Administration has declined to make new loans for would-be homebuyers in associations with more than 15 percent delinquencies.”

“Homeowners faced with the threat of foreclosure might simply walk away from their homes, and obviously stop paying the HOA dues. When banks repossess a condo or townhome unit, they generally are good about paying new HOA obligations as they come due. But in many cases, the bank or servicer chooses not to proceed with foreclosure for months or even years. The result is what HOA officials call a ‘ghost foreclosure.’ The owner is long gone, the bank refuses to step up and take possession, and the HOA dues go unpaid as the home sits in limbo.”

“‘The pending foreclosures really drive me crazy,’ Jaquay said. ‘The banks delay and delay, and we’re getting nothing for months and months.’”

“Doug Farrell, a resident of the Rockwood Village development in east Portland and former president of its HOA, said a 1,200-square-foot unit at Rockwood sold for $165,000 before the recession. After the housing bust and foreclosure wave, vacant Rockwood units have sold for as little as $35,000. Those were distressed sales, and the actual market value of the Rockwood units may be well more than that. But Farrell, 73, fears that the $55,000 he still owes on his unit may be more than its worth.”

“‘We’re underwater,’ he said. ‘This house was supposed to fund our retirement.’”