The Housing Bubble

The Denver Post reports from Colorado. “Although Colorado avoided the worst of the housing bubble, banks in the state are failing at five times the expected pace. A possible explanation is that many of the failed banks were caught up in a ’stealth’ development bubble in fast-growing counties, such as Weld and Douglas. While a ’stealth’ housing bubble might explain why certain Colorado banks failed, it doesn’t necessarily justify the loose lending that went on. Larry Martin, a Denver banking consultant, said easy lending appears to have created an illusion of prosperity that might have blinded some regulators and managers to the dangers that lurked ahead.”

“‘There was robust development, especially up north,’ said Fred Joseph, the state’s acting bank commissioner. ‘Things are moving, and no one ever thinks it will end.’”

Northern Colorado Business Report. “Weld County’s residential market is picking up steam, albeit slowly, according to new statistics and industry professionals. Buyers are willing to pay more for a new house than an existing one, said John DeWitt, managing broker of Re/Max Alliance of Greeley, and following the recent wave of foreclosures, developers can build homes on vacant lots in a subdivision at lower cost than in previous years.”

“Rick Jablonski, developer of Firestone Villas, has found a good niche and price point, said town manager Wesley LaVanchy. Investors can purchase homes in the Firestone Villas development in groups of five for $995,000, which brings the cost of each home to $199,000, just above the median home price.”

The Salt Lake Tribune in Utah. “Federal regulators have ordered SunFirst Bank to raise additional capital or find a buyer for the struggling St. George bank. The bank is struggling with a mix of financial and legal problems arising from home-building and land-development loans it made before the Washington County housing bubble popped in 2007.”

“Bank of America stopped filing foreclosure default notices in Salt Lake County earlier this month, but its attorney argued in court Thursday that it still has the legal right to do so. Homeowner attorney, Christian Barlow of St. George, asked why ReconTrust had halted filing foreclosures under its name if it believes the practice is legal. ‘If ReconTrust can foreclose, why did they stop?’ he asked.”

“Another homeowner, Karolyn Michelsen, of Draper, also said she was frustrated trying to deal with a loan servicer on her house after it fell into foreclosure. She said the loan servicer even refused an offer to sell the house at full price. ‘I offered them a very fair solution,’ Michelsen said.”

From Inman News. “The days of the Harmon Hotel tower in Las Vegas may be numbered — even before the hotel welcomes a single guest. Begun during the Las Vegas high-rise condo boom, the hotel tower — first proposed as a 49-story mixed-use condo and hotel project — is an empty, if flashy, shell that its owner, MGM Resorts International, seeks to demolish.”

“Originally conceived as a 400-room nongaming tower with more than 200 residential condo units, the Harmon was part of the larger CityCenter development on the Las Vegas Strip. When MGM put the planned condo units on the market in early 2008, buyers — mostly owner-occupants — put down 20 percent deposits on nearly half of the units within a two-month period, said Robert Hamrick, who served from January 2006 to March 2011 as senior vice president and broker at CityCenter Realty Corp.”

The Arizona Daily Star. “The state housing market continues to search for a bottom, with new figures showing the average Arizona home now selling for only about half of what it did five years ago. Jay Butler, professor emeritus at the W.P. Carey School of Business at Arizona State University, said there are a variety of reasons for the continued plunge. But he put the situation in decidedly non-economist words. ‘Right now, it sucks,’ he said.”

“Marshall Vest, economist at the Eller College of Management at the University of Arizona, said there won’t be a turnaround in the trend until the ‘fundamentals’ of the housing market get better. That starts with trying to absorb the excess supply of homes. ‘We have enough vacant houses here in the state of Arizona to accommodate an entire decade worth of population growth,’ he said. ‘And that’s if the population were growing.’”

“But, he said, ‘Mobility is near zero,’ he said. ‘People are frozen in their houses,’ unable to sell them, at least at a price where they would be able to pack up and move to Arizona.”

The Atlanta Journal Constitution. “By 2008, Silverton Bank’s lavish annual soirees at the Ritz-Carlton’s Amelia Island resort were the place to be each summer for the Atlanta institution’s rapidly growing crowd of customers — hundreds of community bankers from across the nation. As a bank for banks, Silverton’s services included clearing checks, offering short-term investments for banks’ cash, financing new bank startups and divvying up and selling parts of loans — known as ‘participations’ — that were too large for any single bank to handle.”

“But it turned out that Atlanta-based Silverton was on an express trip that ended in oblivion. The fallout from its failure in May 2009 — Georgia’s largest bank failure ever — helped sink dozens of its customer banks as well.”

“The FDIC said Silverton was taking on bigger and bigger loans as far away as California and Arizona. Among the largest was a $100 million loan in late 2006 for Merrill Ranch. It was a massive residential, office and retail development that metro Atlanta businessman W. Harrison Merrill wanted to build on 6,100 acres of desert scrubland an hour’s drive from Phoenix. It’s ‘a total land play,’ objected Silverton director R. Rick Hart when the board of directors reviewed the planned loan, according to company records cited by the FDIC.”

“Despite his objections that the housing market was already depressed in Arizona and that the Merrill loan had other flaws, the board approved it. The project never materialized and Silverton’s 60 member banks that participated in the loan suffered heavy losses.”

ABC 15 in Arizona. “Fulton Homes executives are reporting an unusual rise in new homes in Gilbert, Tempe and Chandler. Vice President Dennis Webb said the company had to change their approach to selling new homes and become a customer-choice-driven seller over a home-builder-choice seller. For Allison and Barret Hartman that made buying a bit easier. The couple had their eye on the Fulton Ranch area for quite some time.”

“‘We heard the homes were selling fast. We came in and took a look and knew that, if we were going to jump the gun it was time to do it,’ said Barret Hartman.”

“The choice to buy new had to be tough with the increasing number of bank-owned homes available. Reuters reports Nevada with the most foreclosed homes, while California and Arizona share the second spot, holding 56 percent of the nation’s foreclosed homes. ‘It’s very difficult to compete with the homes that we built that are foreclosed homes that are $30,000 to $40,000 less than costs,’ said Webb.”

Nogales International in Arizona. “Local Realtors and landlords say there has never been a better time to rent a home in Santa Cruz County; the cost has dropped dramatically in the past year, landlords are more flexible with month-to month leases, and rental deposits have become negotiable.”

“In downtown Nogales, ‘For Rent’ signs seem to be everywhere – on houses, telephone poles and even scrawled in magic marker on boxes placed at street corners. ‘Right now, there is an oversupply of rentals,’ said John Sandler, realtor for Grant Properties Group in Rio Rico. ‘We’re getting calls, so obviously people are looking, but drive down any street and you’ve got rental signs on many lots in every neighborhood.’”

Sandler says he’s trying to stay optimistic, and he’s trying to make the best of a bad situation by urging people who have lost their home to foreclosure to consider renting instead of moving in with family and friends. ‘It’s still a great time to rent a property,’ Sandler said.”