The Housing Bubble

The Greeley Tribune reports from Colorado. “The FDIC in March issued prompt corrective actions to Bank of Choice, Greeley’s largest community bank, and Signature Bank in Windsor. Bank of Choice was listed as significantly undercapitalized and Signature Bank was undercapitalized. The stepped-up orders came after the banks, both put under consent orders about a year ago by the FDIC, hadn’t shown regulators sufficient progress in raising capital. Bank of Choice and several other local community banks — five have been put under FDIC consent orders and a sixth has been put under a step-lighter letter order — are struggling to reduce other real estate owned, or properties taken back in foreclosures, from the books.”

“Bob Hinderaker, president of Signature Bank, said said the biggest negative impact to the bank currently is having to, per regulation orders, add to the reserve account to protect against declining real estate values. ‘Anyone who owns a home knows how those values have declined,’ he said. Banks have to reserve against that.”

The Reporter Herald in Colorado. “In Larimer County, real estate brokers and market researchers say home prices have mostly held steady, and in some instances have even risen during the past year. ‘In January and February, we had a slight increase in values. We saw a slight decline in prices from February to March, but we’re hoping that during the late spring and summer, those will rebound,’ said Kurt Albers, a broker with Century 21 Humpal Real Estate in Loveland and vice president of the Colorado Association of Realtors.”

“That compares to a 17 percent decline in Weld County, one of the hardest-hit markets in the nation during the foreclosure epidemic that peaked in 2007. Among the region’s brokers, all eyes are on Loveland and the prospects for new manufacturing jobs — as many as 7,000 over five years — at the Aerospace Clean Energy Manufacturing and Innovation Park at the former Agilent Technologies Inc. campus. ‘That would be a tremendous boost to the entire region,’ said Gene Vaughan, managing broker at the Re/Max Alliance agency in Fort Collins.

“Vaughan said that while the past two years of recession had been a watershed for the real estate industry, he was seeing signs of recovery. ‘I’ve been doing this for 39 years, going on 40, and it’s the craziest rodeo I’ve ever been in,’ Vaughan said.”

The Arizona Republic. “The vacation-home market in Mexico’s coastal city of Rocky Point, Sonora, is bound to the rise and fall of Arizona’s economic prosperity, like the ocean’s tide to the moon. That fact will come as no surprise to the hundreds of Phoenix-area residents who have purchased an estimated 2,400 beachfront condominium units and detached vacation homes in the city also known as Puerto Peñasco.”

“Richard Savino, president of the Rocky Point Board of Realtors, estimates that Valley residents own about 60 percent of all vacation properties built in Rocky Point in the past decade. At the moment, the Rocky Point housing market is in a major slump. Of the city’s estimated 4,000 vacation condos and houses, about 650 properties are listed for sale, Savino said.”

‘Based on the Puerto Peñasco vacation-home market’s average transaction flow of about 16 sales per month, those listings represent a more than three-year supply of inventory. ‘We’re all kind of waiting for the U.S. economy to turn around,’ he said.”

“He blamed the dearth of travelers not on the weak economy but on a string of news reports that started coming out just before spring break in 2010. The news reports linked Rocky Point to a public scare over recent drug-related murders in Mexico, Savino said, adding that most of the drug-related violence has been in major cities and not around Puerto Peñasco, which has a population of 45,000.”

“‘It is a safe place,’ Savino said. ‘I would not be living there if it wasn’t.’”

The East Valley Tribune in Arizona. “Valley home values fell 8.4 percent in the last year, making for a total plunge of 55.9 percent since the peak in 2006. That makes the Valley’s fall the largest of the top 20 metro areas, according to the S&P/Case Shiller Home Prices Index. A decreasing number of homeowners isn’t necessarily a sign that large swaths of the next generation will have to settle for something less, said RL Brown, a local market analyst who publishes the Phoenix Housing Market Letter.”

“Homeownership rates reached a historic high in 2004 at 69.2 percent, which Brown said was boosted by government policies and banks eager to loan money. That dropped to 66.4 percent at the end of March. ‘In hindsight, we should now begin to recognize that was an unrealistic number of the percentage of the population to own homes. That was a social exercise,’ Brown said. ‘Homeownership requires stability and a whole bunch of other things like the ability to budget and it may well be that more than 30 percent of people in our nation don’t have those attributes and therefore shouldn’t own a home.’”

“The excesses of the real estate bubble are changing attitudes about ownership, McIlwain said. Homes that are selling now tend to be more energy efficient, and high gas prices are making urban development more attractive. Homebuyers are less interested in the massive houses built during the boom, he said.”

“‘There are cultural implications. People being more conservative financially, young people — hopefully this is true — thinking more in terms of the quality of life rather than the quantity of life,’ said John McIwian, a senior resident fellow at the Urban Land Institute.”

The Casa Grande Dispatch in Arizona. “The Arizona Department of Housing is sitting on more than a quarter of a billion dollars to help homeowners avoid foreclosure. It can’t spend the money fast enough. As it happens, the department can barely spend it at all — not until banks buy into the agency’s foreclosure prevention program. And so far, they’ve been unwilling or unable to do so, said Reginald Givens, the Housing Department’s foreclosure assistance administrator.”

“The bottom line is only $2 million of that big pot of money has been spent — and only a small slice of that has gone for mortgage modification. Most went for another leg of the foreclosure prevention program. That’s unemployment mortgage assistance, which covers mortgage payments for up to two years if the breadwinner lost a job or suffered a drop in income.”

“Banks cite the notion of moral hazard — that it would be wrong to let homeowners back out on a deal they first agreed to. Another problem is the loan itself. The bank may have sold it to investors and claim it hasn’t authority to modify it. The hang-up is the reluctance of banks, not that Givens hasn’t tried to bring them on board.”

“‘You feel like you’re talking until you’re blue in the face,’ he said.”

“Casa Grande’s program to clean and board up abandoned homes or demolish those that are a clear danger and beyond repair has been a success during its first 10 months, Planning and Development Director Paul Tice said. Tice said that circumstances in a neighborhood are considered when deciding which houses to clean and secure, citing 301 and 303 N. Evelyn as examples.”

“‘Evelyn is a little cul-de-sac, like five houses,’ he said. ‘The other three you could clearly see that the owners were trying to maintain them, trying to do a pretty good job of keeping them up, and across the road were these two, a negative impact. We really stabilized it.’”

“There are continual frustrations in trying to track down responsible parties, said Code Enforcement Officer Jeff Palmer. When title searches are run, he said, about 90 percent come back to the original owner, even though they have been foreclosed upon. ‘The banks aren’t recording them in their name,’ he said. ‘The banks will not own up to it because they don’t want the liability of having to clean it. It becomes the city’s problem.’”

The Las Vegas Business Press in Nevada. “When bankers told Nevada lawmakers they wanted to punish home-wreckers, they were referring to legislation that makes it a crime for homeowners to damage and steal parts of houses subject to foreclosure. It appears the bill, introduced by Assemblyman Pete Goicoechea, R-Eureka, may become law.”

“Assembly Bill 373 makes it a misdemeanor for a property owner, such as a homeowner, to destroy or remove parts of the structure with intent to defraud a lender who is foreclosing. Gov. Brian Sandoval ended the suspense May 20 when he signed the bill without comment.”

“During a legislative hearing, a private lender in Fallon complained that he could do nothing while a woman who was delinquent in loan payments was systematically destroying the house that was his collateral. The bill empowers the lender to call police to intervene and stop vandalism and theft from a property targeted for foreclosure.”

“When going through foreclosure, ‘trashing your house is not OK,’ Nevada Bankers Association CEO William Uffelman said. ‘This provides a criminal penalty that will discourage some people from doing it.’”

“Bank of Nevada CEO Bruce Hendricks gave the association photos of houses that had been gutted and damaged by foreclosed-upon homeowners. He mentioned a house where the soon-to-be-ex-homeowner pulled out copper wire, carried off appliances, yanked out the toilet, sinks and bathroom cabinets, and even walked away with shrubbery, trees and pavers.”

The Los Angeles Times. “In some parts of North Las Vegas, more than 80% of homeowners have plunged “underwater,” meaning they owe more on their mortgages than their properties are worth. Charles Mills can barely afford to stay here. But he also can’t afford to move. He purchased his house in 2006 for $308,500. Current value: $105,797. ‘We talked about it: What can we do with the house?’ Mills said. ‘Nobody’s going to buy it. Nobody’s going to rent it. If we walk away, my credit’s shot. We’re stuck.’”

“Elsewhere on Midnight Breeze Street are Steve and Gay Shoaff, who once talked of selling their house and retiring somewhere pretty. But the Shoaffs have been living mostly off savings since the construction industry sputtered. ‘I’d say, ‘Gay, we’re going to become millionaires on this house,’ Steve recalled one day as he and his wife unwound in the backyard they’d spent thousands of dollars sprucing up. Gay mustered a smile.”

“Their $187,980 home is now assessed at $99,220. ‘This house won’t be worth what we paid on it until after we die,’ she said.”