The Housing Bubble

The Casper Journal reports from Wyoming. “If you’re looking for something to make you feel positive, you might consider Wyoming’s economy. And if you’re looking for a person with a good handle on Wyoming’s economy, you might just talk with Mark Zaback, CEO of Jonah Bank of Wyoming, and who serves on the Denver Branch of the Federal Reserve Board. ‘You don’t have as many foreclosures going on in Casper or the state,’ Zaback said. He said there are pockets; Teton County has been hit hard but it’s a county that experienced a lot of appreciation as a resort area. He thinks the resort areas have all been hit hard because so of many second homes.”

“‘People can’t afford it and have lost their places,’ which Zaback said may be more of a reflection of the economy in other places than in Teton County.”

From NBC Montana. “Housing prices in Bozeman have fallen to nearly six percent lower than the national average. President of the Gallatin Association of Realtors, Rich Mayo, explains, ‘I think probably the downward pressure from short sales and foreclosures has a dramatic affect on that.’”

“Mayo says that because unemployment rates in Montana are still fairly high, it causes the prices of homes to stay lower and more affordable. ‘As long as we have banks foreclosing on homes and people short-selling homes and doing that kind of things it’s gonna continue to drive the market down,’ he added.”

The Idaho Statesman. “Homes in foreclosure accounted for 30 percent of residential housing sales in Idaho during the second quarter, Realtytrac reported. They amounted to an 8 percent increase over the second quarter of 2010. Lance Churchill, who specializes in investing in foreclosures, said banks are slowly putting more distressed properties on the Valley market.”

“‘There are a couple of million homes (nationwide) in default, but are still not in foreclosure,’ Churchill says. ‘So you can expect the number of filings to start to go back up again.’”

The Spokesman Review on Idaho. “Parcels within Post Falls Landing, a project billed for years as a downtown-style community, are being sold at a trustee’s sale this December. The development, which includes a 142-slip marina and dozens of condos, is still largely unfinished. The troubled development is the latest in a string of ambitious North Idaho projects that were foiled when the economy collapsed in the fall of 2008.”

“It is considered ‘vital to the success’ of Post Falls’ City Center plan and viewed as a catalyst that will influence future development, according to the Post Falls Urban Renewal Agency.”

The Oregonian. “Oregon is one of 24 states that allow nonjudicial foreclosures, provided lenders give borrowers proper notice, publicize the sale and abide by other requirements. But late last year, federal judges began blocking them, ruling that lenders had failed to follow one of those requirements: filing the mortgage’s ownership history in county records.”

“No one can say how many of the estimated 26,000 foreclosures pending in Oregon will ultimately land in front of a judge. But attorneys and trustees involved in both processes say hundreds of files are being reviewed. Pam Laxson, a real estate agent whose home in Sandy is in foreclosure, said a Fidelity National Title Insurance Co. representative said her file was among 600 being transferred to attorneys for judicial foreclosure.”

“Laxson bought her three-bedroom home for $206,000 in 2005. Her husband died in 2007 after a 10-year bout with multiple sclerosis. She was laid off in 2008 and went to school to retrain as a certified nursing assistant. She now works as a certified medication aid at a rehab center in Clackamas while still trying to sell homes.”

“Laxson estimates her household income is now one-third what it was when she bought her home. She said Wells Fargo has repeatedly denied her requests for loan modifications, a short sale and a deed in lieu of foreclosure. ‘Sometimes I try to hate my house,’ Laxson said. ‘I need to hate it because I might have to leave. But I can’t find very much I hate.’”

From KOMO News in Washington. “All Vera Johnson wants to know is why she can’t get a modification of her home loan. She owns Village Green Perennial Nursery. Johnson and her two children also live on the property, where she sells plants, containers, art. But she may lose it all. ‘So I’m $15,000 behind right now,’ she said.”

“‘I’m trying in good faith to keep my home that I’ve been living in for eight years, a business that I’ve been running for eight years,’ Johnson said. ‘This business has been here for 32 years. I’m not trying to say, ‘Give me a home for free.’ I’m saying, ‘Come on, work with me.’”

The Bellingham Herald in Washington. “Trillium Corp. has lost control of millions of dollars’ worth of Whatcom County real estate in the past year due to defaults on loans. In an emailed statement, Trillium VP Chris Benner blamed the loan defaults and resulting losses of property on the vagaries of the global economy.”

“Much of the land that Trillium no longer owns is in the Semiahmoo and Birch Point areas, including an undeveloped 231-acre tract near Birch Point as well as the Seagrass condominium properties and boat slip sites at the Semiahmoo marina. Dave Rodgers, manager of Wise Enterprises for Whatcom County, said Wise intends to sell the properties as quickly as possible. Rodgers acknowledged that Wise faced a substantial loss on the transaction, but he declined to say how much.”

“Real estate broker Mike Kent is the listing agent for Wise’s Semiahmoo holdings. Whatcom County real estate is attracting increasing interest from Canadian buyers, as well as some investors from mainland China, Kent said. ‘People are looking to invest in our relatively low real estate,’ Kent said. ‘There’s definitely a trend of Asian buyers looking at Whatcom County, no question.’”

The Vancouver Sun in Canada. “B.C. residents have high hopes of retiring debt-free, but for many, this reality show has an unhappy ending. While most B.C. residents believe they’ll be debt-free by age 58, fewer than one-third of B.C. residents aged 45 to 64 don’t owe any money, according to a Harris-Decima poll conducted for the Canadian Imperial Bank of Commerce.”

“Many homeowners who are mortgage-shopping still ask how much they can get instead of how much they can comfortably afford, pointed out Scott Hannah, CEO of B.C. Credit Counselling. ‘For a lot of people who put themselves into a tight spot, it makes it difficult to get ahead,’ he said .”

“It’s not only expensive real estate that has British Columbians cash-strapped. One in five B.C. residents who responded to an ING Direct survey said their biggest monthly expense — besides mortgage or rent payments — was loans and credit card payments, compared to 16 per cent nationally. Half of B.C. respondents reported that they could not afford to save $25 more per week.”

“It’s no secret that Vancouver has the highest cost of housing in Canada, so the release last week of Royal Bank of Canada’s affordability index only confirmed what we already know. It concluded that ownership costs for a standard bungalow in Vancouver amount to 92.5 per cent of median household income, prompting chief economist Craig Wright to say that owning a home in Vancouver ‘is a dream that only the area’s highest-earning households can contemplate.’”

“Not to take issue with such a renowned economist, but the dream is still realizable for median-income earners if buyers are willing to make compromises. The variety of properties available at different price points and flexibility in financing, including variable rate mortgages and extended amortization, along with a bit of luck, can help fulfil the dream of home ownership for agile buyers willing to keep their options open — even in Vancouver’s ‘unaffordable’ market.”

The Financial Post in Canada. “Two teachers in Alberta we’ll call Thomas and Georgia are in their mid-50s and face a disaster in their retirement plans caused by poor real estate investments that could eat up their retirement savings. If not fixed, the properties will leave them rich in real estate and poor in cash.”

“The problems begin with previous successes in real estate speculation. Figuring that property always goes up, they bought three rental condos for a total of $1.3-million at the peak of the Alberta property market and put $120,000 down on a property in Costa Rica. They supported this investment on $9,490 combined monthly take-home pay.”

“Two of the condos barely pay their way on a cash basis that does not even account for depreciation. A third property is a costly flop that costs them $931 a month more than its rental income. The $120,000 Latin American property, which was not completed, is in litigation and has been written off. Thomas and Georgia face the unpleasant task of cutting their losses to preserve their wealth.”

“‘When we retire, we would like to sell our home and downsize to something smaller on Vancouver Island,’ Thomas explains. The problem, of course, is the three cash-draining condos. ‘We would have liked to walk away from the deposits we had placed when the market turned, but the builders threatened legal action. So we went ahead with the purchases. Each is financed by a line of credit with a 25% down payment and secured by equity in our home.’”

“If Thomas and Georgia were to sell in today’s market, they would lose much of their equity, for prices are not as high as they were in 2007. They pay interest only on the lines of credit. As interest rates rise, they will have to add more cash and pay what amounts to higher subsidies. ‘On a good day, we are optimistic that things will work out well,’ Thomas says. ‘On a bad day, I feel that we are too exposed and must reduce risk.’”