The Housing Bubble

The Detroit News reports from Michigan. “Boyne City, on the banks of Lake Charlevoix in the northwest Lower Peninsula is seeing a burst of vacation home construction even as it grapples with a glut of properties for sale. There are plans to build condominiums on the lake’s edge and another marina and condominium development on the edge of the city. About 60 percent of the homes in Boyne are cottage residences — meaning they are not the owner’s primary residence and are used mainly for vacation. ‘There’s just a lot of painful stories to be told,’ said Monica Ross, a longtime Realtor in the area. ‘Many people lost homes that should have never been able to buy homes in the first place.’”

“Richard Moden bought a property 11 years ago with his two brothers just outside Boyne City. ‘It’s a good thing we love it because we would lose money if we had to sell it now,’ said Moden.”

“The northeastern counties near Lake Huron have seen much lower second-home sales. ‘It’s horrible,’ said Debbie Artrip, broker owner of Cardinal Real Estate in Onaway. Artrip used to sell vacation homes but now is in the foreclosure business because that’s where the sales are. She said about 10 percent to 15 percent of vacation homes in her area are foreclosing. Metro Detroit customers, who comprised about 80 percent of Artrip’s business, no longer can afford vacation homes, she said.’

“‘When they lost their income, lost their jobs, we lost their money,’ Artrip said.”

The New Indian Express. “To put a handle on the fears of a global recession set off by the week-ago debt ceiling reset in the US, it makes sense to trace one’s way back to the US housing bubble. Let’s trace the house buying/selling pattern of a desi American couple over the last decade. George Jacob, a second generation US citizen, and his wife bought a house in a down-to-middle market suburb in Detroit in 2001 at a mortgage of $200,000. When they sold it in 2005 just before the real estate rates peaked out, it was at a $50,000 premium. That is when they decided to move up to an upmarket suburb in Michigan and went in for a $400,000 mansion.”

“Four years down the line, the Jacobs were forced to sell their house at $290,000 and relocated to Ohio. There they purchased a bigger house at $345,000 — one that was valued at $540,000 in 2005. Now, the Jacobs have put up their Ohio house for sale at $390,000. They are moving to Houston, Texas. Jacob, who currently shuttling between Ohio and Houston, as he tries to balance the sale of one house and the purchase of another in two different economic zones in the US, says: ‘In Houston, there seems to be a real estate boom on as perhaps the rates never sky-rocketed in the first half of the last decade; hence neither did they crash.’”

“Not all have been as lucky. There are many of Indians/people of Indian origin who have lost their houses in foreclosure, especially those who bought their second and third houses for investment purposes. None of these things have come to pass in India. The real estate sector, despite its periodic sullen moods, seems to be forever on a swagger. And the sector players are laughing all the way to the bank as investors keep flocking despite the unrealistic rates ruling across the country. And there appears no realty bubble in the making in India that is ready to burst in the immediate future.”

The Herald Bulletin in Indiana. “Vacant houses are visible throughout Anderson and Madison County. Michael Widing, the city’s planning and building director, believes that a lot of the vacant houses in Anderson are eyesores and buildings people don’t want. But that’s not always the case. Todd Freer has had his South Edgewood house on the market for five months. The four-bedroom 2,100-square-foot home has been completely redone inside and out and has two new bathrooms. Freer, who has moved into an Anderson house, frequently checks on his vacant property and has it mowed weekly so it remains in good condition. It is move-in ready, but he hasn’t had any takers.”

“‘A lot of the problem is the inventory is high,’ he said. ‘I’ve had two open houses where 12 or so people went through. I’ve had interest, but there are so many options in such a wide range of prices because of foreclosures.’”

“In Freer’s neighborhood alone, at least 10 or 11 homes are for sale. Freer has already reduced his asking price three times to the mid-$130,000s. A nearby home of similar size and condition just sold for a lot less. ‘I’ve put thousands of dollars into it and now I’m asking below what I paid for it,’ he said.”

The Pioneer Press in Minnesota. “This year, real estate observers are seeing more of those bidding wars that were a hallmark of the high-flying days of the housing market as the price peaked in 2006. But it’s hardly a sign that the housing market is heating up. Rock-bottom prices are behind the competition among serious buyers.”

“‘Even on traditional sales, prices are down somewhat, not nearly as bad as the distressed (home prices), but people are looking at this as an opportunity to move into a nice neighborhood and get a house at a historically low-level price,’ said Herb Tousley, director of real estate programs at the University of St. Thomas.”

“Sara Trembath and her husband, Travis, took the advice of their agents, Mary and Jim Sommerfield, and shopped the competition before listing their Southwest Minneapolis house in Linden Hills at $349,900 on July 26. In less than a week, they had two offers and signed a purchase agreement on Monday. They bought the house a few years ago for $328,500, and the final offer is for several thousand more. Their agents asked that the exact offer price be withheld since the deal won’t close until September.”

“‘The second offer came in on Monday night and we were, honest to God, sitting at the kitchen table signing the paperwork and the first offer called back,’ Sara Trembath said. ‘They came up but didn’t come up as high as the second offer.’”

“The Trembaths won’t break even given home improvements they’ve made but are happy with the speedy outcome since they had their second child last week and are planning a move to Jacksonville, Fla., for a job he’s taking.”

The Kansas City Star. “Welcome to the Kansas City housing market at the peak of the 2011 season — scattered bright spots, particularly on the upper end, and lingering shadows over much of the rest. There were 17,308 houses on the market in June in metropolitan Kansas City, a 9.8-month supply at the current sales rate, according to the Realtors Association, which does not count homes for sale by owner.”

“In some ways, it’s a tale of two worlds. ‘The upper bracket is unthawing a little bit,’ said Jerry Reece, president of Reece and Nichols. And some of the hotter-selling new subdivisions are for homes selling for $400,000 and up.”

“Then there’s the world that Jerri Moulder, an agent with Keller Williams, is familiar with. She sells homes in the Northland area in the ‘mid-family’ range, from about $90,000 to $250,000. Values have dropped over the past couple of years, forcing people to either short sell or bring cash to the table to cover the difference between the sales price and what remains on the loan. ‘At least 50 percent of my last six transactions involved sellers bringing cash to the closing,’ she said.”

“Russ Bouknight, an agent with Reece and Nichols based in Liberty, has been busy specializing in short sales. He estimated he’s done almost 450 since the recession began in late 2007 and 28 so far this year. He said he’s seeing people ‘who cashed in on their equity and are now trying to sell their house. The market has dropped and they have zero percent equity in their home.’”

“If the seller can prove his financial situation is truly desperate, banks will accept a short sale and lose some money upfront rather than be stuck foreclosing on a house, Bouknight said. Short sales are pretty much all the transactions he does these days, and Bouknight believes it will continue as long as there’s a large inventory of foreclosed homes.”

“‘Sellers didn’t want to believe they lost 15 to 20 percent of their equity, but now owners are realizing this and asking, ‘What do we do now?’ he said.”