The Housing Bubble

The Bozeman Daily Chronicle reports from Montana. “Bozeman city officials are looking for new ways to create affordable housing after a plan adopted four years ago has failed. In July 2007, when homes were still shooting up across Bozeman, city officials adopted the workforce housing ordinance, requiring developers to build low-income homes in new neighborhoods. ‘It was, quite frankly, a matter of timing,’ Planning Director Tim McHarg said about the affordable housing program. ‘The ordinance was set on the thought that the market was going to continue on its merry way as it had been for the last 10 years, and obviously the market came to a crashing halt.’”

“The workforce housing ordinance requires developers of large subdivisions to price about 10 percent of new homes or condominiums under $200,000. But rather than the ordinance, the declining market wound up lowering home prices. As of Friday, there were 253 single-family homes, condominiums, townhouses and modular residences priced at $250,000 or less in Bozeman, according to Montana Multiple Listing Services statistics.”

“Bozeman’s problem isn’t out-of-reach home prices anymore, said Tracy Menuez, head of the city’s Community Affordable Housing Advisory Board. It’s getting a bank to lend you the money to buy a home. ‘You can find a $100,000 condo, but the likelihood of getting financing on it is relatively low, so it’s not necessarily an affordable housing option,’ she said.”

The Idaho Statesman. “The change in attitudes about renting has been a godsend for apartment developers and landlords in the Treasure Valley. New apartments are starting to spring up as demand rises, thanks in part to people forced out of homes they couldn’t afford or were prevented from buying by tougher mortgage-loan standards. Others are renting because they’re leery of homeownership due to insecure or mobile jobs or because of the decline in home values since 2007.”

“In Idaho, where homeownership reached a 25-year high of 75.5 percent in 2009, property managers say they have little space left to rent as people lose homes to foreclosures and short sales. ‘We’re seeing long-term owners settling into rentals,’ Chapman said. ‘Homeownership is not what it used to be. A lot of people don’t look at it as the American Dream.’”

The Mail Tribune in Oregon. “If you are looking for a kernel of good news about residential real estate prices, try the latest Fiserv Case Shiller indices. The firm’s latest findings indicate Medford and two other Oregon markets that suffered major reversals during the past six years are due for a comeback between now and 2016. There is plenty of room for debate over how soon Jackson County’s single-family residential housing market will reverse its steep decline and how long prices will keep rising.”

“Alec Miller, a senior economist with REMI Northwest in Medford, thinks there is a greater chance for employment to pick up during the months ahead than for real estate to do a vigorous about-face. Like in much of the country, too much housing stock was built here in the last decade. ‘Especially in the West, we overbuilt,’ Miller said. ‘We just built too many houses, and one of the effects of having a housing surplus is that it disengages the housing market from jobs, at least temporarily. It will get re-engaged again as housing inventory is absorbed.’”

“In other words, he sees double-digit unemployment disappearing long before there are double-digit gains in home sales prices. ‘I see more hope for the jobs market,” Miller said. ‘I’ve been a little over-optimistic all along, but as California heats up, we’ll see things start to pick up here. Certainly, we’re seeing Portland and Seattle job markets pick up and inevitably that will transfer here, it’s just a matter of time. But I don’t see a big influx of jobs that will affect the housing market over the next five years.’”

The Olympian in Washington. “Thurston County apartment vacancy rates decreased a bit in the second quarter, according to new data released by Apartment Insights Washington of Seattle, which tracks rental trends. Factors supporting the rental market include the ‘general aversion’ to homeownership, according to Apartment Insights Washington.”

“‘There has been a major shift in attitudes about homeownership,’ the report states. ‘It has become painfully apparent that (home) values can go down as well as up. There is unsold inventory of bank-owned houses that will put downward pressure on values in the coming years.’”

The Seattle Times in Washington. “The troubled condos at Burien Town Square, promoted for years as a catalyst to revive that city’s downtown, will come back on the market early next month after a hiatus of nearly two years, the project’s owner said. Burien City Manager Mike Martin said the city hasn’t been informed of ST’s plans, ‘but it’s welcome news if it’s true. … It’s been obvious to us that they had to revise their pricing or nothing was going to happen.”

The News Tribune in Washington. “Just five years ago, Tom Price and Hyun Um were a Pierce County success story. They had renovated a historic cannery in Puyallup and planned to dot downtown Tacoma with towers of condos. Dozens of Prium buildings are run by receivers. Of Prium’s seven planned condominiums, only two were built. Now they’re apartments, and the company no longer owns one of them. The Winthrop is for sale.”

“In court documents, Price and Um acknowledge the Prium empire grew quickly and broadly but blame their financial trouble on a ‘historic economic downturn, which threatened the ability to refinance the existing secured debts, renew leases, etc.’”

“Condos in Tacoma turned out to be a losing idea. ‘The biggest mistake people made in Pierce County in particular was condo development in downtown Tacoma,’ said Bruce Mann, a University of Puget Sound economics professor who tracks local economic indicators. ‘There were an awful lot of people looking at Tacoma and Pierce County and seeing pieces in place. The demography was changing. Higher-income young professionals were moving in.’”

“Nevertheless, a market analysis released in 2006 and the subject of a News Tribune story at the time showed thousands of people would have to move downtown to justify all the condo development. At the time, reality checks were in short supply. ‘All the pieces were in place with a somewhat vacant downtown, and that was driving a lot of the play,’ Mann said. But ‘condos had never been very successful in Pierce County.’”