The Housing Bubble

The Anderson Valley Post reports from California. “Loan Modifications: It was touted as the savior of the American economy. For many north state residents, it offered a way out of a financial mess that would ultimately result in the loss of their home. Or so they thought. ‘I started the process in 2009,’ said Red Bluff resident Krista Carpenter. ‘I’m still waiting for my loan modification.’”

“But the truly horrifying part of this whole mess, claims Carpenter, is that many lenders are failing to notify property owners that they’ve fallen out of the Loan Modification process. And then the final stab in the back. ‘They complete the foreclosure process without telling you, too,’ said Carpenter.”

“Carpenter never received a notice of default. ‘All we received,’ she states, ‘Was a letter on the door with a sale date.’”

The San Francisco Bay Guardian. “‘Foreclosures are the new F-Word.’ So said Regina Davis, executive director of the San Francisco Housing Development Corporation, at an April 29 seminar at SFHDC’s office. ‘Wells-Fargo CEO John Stumpf took home $21 million in 2009 while his bank received $25 billion in TARP funds,’ stated a flier that ACCE (formerly ACORN) and the Home Defenders League are distributing.”

“‘He and his cronies fought tooth and nail to kill consumer protection bills in California and around the country and are currently trying to gut a 50-state Attorneys General settlement with homeowners that have been defrauded,’ the flier concluded. ‘We are also part of The New Bottom Line, a national campaign focused on creating an economy that works for the many, and not the few.’”

The Pacific Coast Business Times. “A Westlake Village attorney is asking a judge to rip up a homeowner’s mortgage and strike down the legal framework the lending industry uses to foreclose on notes that have been sliced, diced and sold so many times that it’s impossible for borrowers to tell who owns them. John Larson filed a lawsuit in Ventura County Superior Court on behalf of Sam Palmer, a senior citizen in Thousand Oaks facing foreclosure on an $862,000 home loan. The defendants are a number of loan servicers and MERS, or Mortgage Electronic Registration Services.”

“Larson’s complaint argues that the only parties with the right to foreclose on the mortgage are the thousands of investors who ended up owning Palmer’s loan and whose names are nowhere to be found in the Ventura County Recorder’s Office or in any other public record. Those investors, Larson alleges, are known only by numbers inside a computer system with accounts controlled by Goldman Sachs, Deutsche Bank and other Wall Street giants. He wants Palmer’s mortgage erased unless the investors come forward.”

“‘Forfeiture is what [lenders] fear the most,’ Larson told the Business Times. ‘It’s the worst thing that can happen to a lender during one of these quiet title cases.’”

The Santa Cruz Sentinel. “Banks that foreclosed on 5,000 homeowners in Santa Cruz County over the past three years are selling those homes at prices that would have been unthinkable during the housing boom. The median sales price in March for a single-family home in Santa Cruz County was $476,900, according to Gary Gangnes of Real Options Realty, who tracks the numbers.”

“‘I think we’re turning a corner where friends of ours can afford to buy a home here again,’ said Jim Zenner of Karon Properties, who represented buyers of a three-bedroom, two-bath home in Santa Cruz for $510,000. The same house sold in 2005 for more than $700,000.”

“The condo market remains chilly, with condo owners walking away from homes they bought at the peak of the market five years ago and buyers reluctant to invest while prices fall. In March, 32 condos sold, half being distressed properties, and the median dropped to $247,000. During the boom, prices exceeded $500,000.”

“Zenner is looking for a young couple, first-time homebuyers interested in a three-bedroom, two-bath home in Santa Cruz for $500,000, but they have little to choose from. ‘There’s not a lot of inventory to work with right now,’ Zenner said.”

The Mercury News. “Listening to battle-scarred Realtors talk about all the short-sale funny business, fake landlords, mold-slimed foreclosure properties, bogus real estate agents and yappin’ junkyard dogs makes you wonder how any homes are getting bought and sold at all. With upside-down homeowners, overwhelmed banks and cash-toting low-ballers sucking up investment properties at bargain-basement prices, veteran real estate professionals around the Bay Area say they’ve never seen a market as whacked-out as the one we’re slogging through right now.”

“Steve Mohseni, a 15-year real estate broker with ReMax in Pleasanton, calls it ‘the wild, wild West. Whether they’re buying or selling or lending, people are just looking after their own neck, and the ones who are trying to act responsibly are the ones getting burned.’”

“Then there’s the so-called ‘buy and bail,’ which one real estate agent explained this way: ‘Mom and pop bought a place for $600,000. Now they’re upside-down on their loan. So mom goes down the street and pays cash for another house just like theirs. She puts it in her name. Then once it closes they walk away from the original house. And they don’t care about their credit being ruined because they’ve now got their new house.’”

The Daily News. “The epidemic of foreclosure that began in 2008 has been devastating California’s families, communities and the state economy. Since then, more than 1.2 million Californians have lost their homes, and the number is expected to exceed 2 million by the end of next year. About one in five U.S. foreclosures is in California. More than a third of California homeowners with a mortgage already owe more on their mortgages than their homes are worth.”

“As a result, home values in the state are estimated to plummet by $632 billion. That translates into a loss of more than $3.8 billion in property taxes. And just as local governments are starving for revenues, they are asked to deal with the increased costs - estimated at $17.4 billion over four years - caused by the foreclosure mess. A bill sponsored by San Fernando Valley Assemblyman Bob Blumenfield is currently going through legislative hearings - would require banks to pay their share of foreclosure costs. Backed by a broad coalition of consumer, community and labor groups, the bill would impose a $20,000 fine on banks for each foreclosure.”

“The foreclosure tsunami and the housing market crash are the primary causes of the severe budget crisis facing California’s municipalities and counties, forcing local officials to slash services and lay off tens of thousands of employees.”

The Chico Enterprise Record. “The city will pay 18 percent more for a piece of property than the lot was appraised for, following a 4-2 vote Tuesday night. The Chico City Council sitting as the Chico Redevelopment Agency agreed to buy the parcel for $100,000. It had a March appraised value of $85,000. The city has no developed plan for the lot.”

“Staff recommended the city buy the property including a house for $100,000. A year ago, the parcel was appraised at $140,000. Agency member Andy Holcombe said he supports paying more than the appraised price to reinforce the purpose of redevelopment. ‘I think the value is there,’ he said.”

The Record Searchlight. “That trench Caltrans is digging down the middle of Interstate 5 in Shasta County is all too apt a symbol of the hole the state of California has been digging for itself. A $5 million fiber-optic cable? Eleven electronic message signs, 22 traffic-monitoring stations and 37 cameras? All for the short stretch of freeway between Anderson and Mountain Gate? Did anyone stop to think this might be overkill? And in a time of relentless state budget cuts, did anyone ask if this was really a top priority for the public dollar?”

“This kind of full-spectrum electronic traffic management makes sense — indeed, it’s essential to keep cars moving — on the roads of a traffic-jammed metropolis. But in the north state? Even Caltrans says we don’t have the congestion to justify such a system. So why is the agency building it? Well, you see, in 2006, when the housing bubble was fully inflated, it seemed like a good idea.”

“Back then, Caltrans was urgently working to accommodate expected urban growth from multiple Shasta and Tehama County subdivisions with thousands of new homes. If and when developers actually build Sun City Tehama, The Vineyards at Anderson, Mountain Gate at Shasta and other megadevelopments, that gridlock could still occur. But at the current pace of housing growth — Redding had all of nine housing starts in the first four months of 2011 — we’ll run out of oil to fuel our cars and trucks before that happens.”

The Press Democrat. “North Coast construction activity remained flat for the first three months of the year, and some industry leaders took solace that at least things aren’t getting worse. North Coast builders pulled permits to construct 123 single-family homes during the first quarter, up from 85 a year ago. But five years ago, permits totaled 519 for the same period.”

“‘At this point even flat looks good,’ quipped Keith Woods, CEO for the North Coast Builders Exchange, a Santa Rosa trade group. ‘This is an industry that has been bleeding for so many years.’”

“DeNova Homes of Concord held a grand opening Saturday for its 96-unit Southgate development in west Petaluma. Ten homes are under construction and seven models are finished and furnished, said Lori Sanson, an executive VP. Homes start at $399,000.”

The Desert Sun. “Bank executives who have wrestled to put mortgage delinquencies, loan defaults and other issues behind them as a result of the valley and nation’s economic slump say they’re making headway. For some banks, however, the positive results are only just beginning to show. Pacific Premier Bank earned ’sound’ and ’superior’ ratings, which CEO Steve Gardner attributed to avoiding some risks that other banks opted to take.”

“‘Probably the biggest key is the fact that during the run-up in the real estate markets, we avoided a lot of the single-family, construction and land loans,’ Gardner said. ‘We looked out in 2005 and 2006 and just thought things were getting a little too speculative and a little too loose in terms of credit. We left some money out on the table, but we sleep pretty well at night these days.’”

The Press Enterprise. “While investors and other corporate interests have revived the warehouse market in Inland Southern California, the office market got slightly worse in the first quarter. According to a report by commercial real estate firm Grubb & Ellis, the vacancy rate increased to 24.2 percent, up slightly from the first quarter and virtually unchanged from 12 months ago.”

“The Grubb & Ellis report found the highest vacancy rates in the Riverside-Corona area, at 26.3 percent. Vacancies are 25.4 percent in Temecula and Murrieta and 21.3 percent in San Bernardino. More than 24 percent of offices near Ontario International Airport, the area with some of the area’s most desirable buildings, are empty.”

“The market has been slow to come back because jobs are only trickling back to the Inland area. Also, many of those jobs are related to the housing market, which is not close to coming back. ‘We’re stuck, and I don’t see it changing until the mortgage crisis is over,’ Redlands-based economist John Husing said.”