The Housing Bubble

The Denver Post reports from Colorado. “The baby-boomer generation is poised to blaze new frontiers in retirement as it has in other endeavors. Yet, in this case, many boomers are experiencing regret, frustration and resignation that the path their parents took is closed to them. John Taylor, 54, of Loveland, lost his job as a handyman for a commercial real estate company three years ago, watched his house slip away in foreclosure and then cashed out what remained of his 401(k), about $23,000, for living expenses. ‘My retirement plan is that I have none anymore,’ said Taylor.”

“Even those who are better prepared and more fortunate are feeling the pressure from diminished investments and fallen home values. ‘It’s not what your dream was, but you have to make it as positive as you can,’ said Barbara Brito-Trujillo, 64, of Brighton. Her husband, Les, 65, is planning to continue working several more years as a marketing director for a commercial builder while Brito-Trujillo works part time. The couple expects to sell the home where they raised three children and move into a townhome, and they will travel less than they had hoped, she said.”

“‘We’re going to have to make adjustments to allow us to be comfortable without the anxiety,’ she said.”

From Vail Daily in Colorado. “The local real estate market, once such an integral part of the valley’s economy, may not be through dropping. Local government budgets will take a significant hit in 2012 thanks to a hard fall in property values and property tax revenues. This year’s values are based on a ’snapshot’ of sales activity from June 30 of 2010. Those numbers, on average, are down 26 percent from the last ’snapshot’ in 2008. At the meeting, Eagle County Assessor Mark Chapin said that the ratio of property sold to property for sale has dropped by about half over the last few years. Just a few years ago, about 90 percent of all listed property was sold. These days, about half of listed property ends up at the closing table.”

“Mike Budd, a local Realtor and a member of the financial advisory board, told the commissioners that the local real estate market may not be done dropping. The limit for FHA-backed mortgages is set to drop from the current $729,000 to the low $600,000 range. That means mortgages for some vacation properties will come with higher interest rates, if financing can be found. Then there’s the continuing push to raise taxes on people who earn relatively high incomes. Part of that push, if it comes to pass, might include modifying or eliminating the mortgage interest deduction for second and third homes. If that happens, the second-home market is going to take a serious hit, Budd said.”

“As the economic slump lingers, property valued at $500,000 and up is starting to take more space in the weekly foreclosure notices. ‘There are so many things that could change in the next couple of years,’ said County finance director John Lewis. ‘We just need to keep our fingers crossed that 2014 will be better.’”

The East Valley Tribune in Arizona. “Arizona’s economy is showing ’slow, grinding’ improvement, but a full recovery will likely take until 2015 and won’t occur until population growth and construction pick up again, a leading economist said. ‘From 2015 and beyond we’re in great shape,’ Elliott Pollack told business leaders attending Economic Outlook 2012. ‘If you’re looking for a lot of stuff between now and 2015 you’re going to be sorely disappointed.’”

“Another drag on the economy, Pollack said: Fewer new households are forming, primarily because young people are having trouble finding jobs but also because people can’t sell homes elsewhere and move here. While the economy is weak these days, Arizonans can be optimistic about the future, he said. ‘There’s a boom out there somewhere, a huge boom for Arizona,’ he said. ‘Unfortunately it’s not 2011, it’s not 2012.’”

The Arizona Daily Star. “An agency created to prevent foreclosures has turned instead to helping people sell their homes for less than they owe. About a year after the program began, only three homeowners had reduced the principal amount owed on their homes and only 11 had settled a second mortgage.”

“‘The modification effort has been pretty much a failure,’ said Michael Trailor, director of the Arizona Department of Housing. ‘The short sale may be the best tool we have considering the failure of modification.’”

“Unlike many other states, Arizona does not assist homeowners who performed a cash-out refinance, which is used to tap equity. The rule is meant to keep from helping irresponsible borrowers who took out loans to buy luxury items. Trailor estimated 20 percent of Save Our Home AZ’s denials are because of cash-out refinancing. But some of those people used the money for medical bills, home improvements or other uses that are sensible in Trailor’s eyes.”

The Deseret News in Utah. “With the average interest rate on a 30-year fixed mortgage loan hovering around 4.15 percent — a 40-year low — a lot of people look into refinancing. However, many people are finding out it is not worth it for them because the value of their homes have dropped. ‘Many people that would love to refinance aren’t able to because they are upside down in their house,’ said Kay Ashton, regional VP of SWBC Mortgage Corp. in Bountiful.”

“‘The loan balance they have is higher than what their home will currently appraise for,’ Ashton said. ‘There are a ton of people in that circumstance.’”

“Beckie Shiveley, a senior loan officer with Altius Mortgage Group, said many lenders are being inundated with calls from homeowners and prospective buyers asking about rates and whether they qualify for a loan or refinance. While the current market has more interest than actual lending activity, a similar situation occurred a few years ago when, during the housing boom, many homeowners inquired about refinancing in an effort to ‘cash in’ on the equity gained as home values rose.”

“At the time, some unscrupulous lenders and agents used appraisers who artificially inflated property values in an effort to funnel more loans through the pipeline and thus make more money for themselves. ‘No doubt that part of the (housing) bubble was created and mortgage fraud commonly happened because there was often times (complicit loan officers, appraisers, real estate agents and title companies) were involved in flipping schemes that drove up the value of real estate unreasonably,’ Ashton said.”

The Daily Herald in Utah. “Orem residents tired of seeing the half-constructed Midtown Village on State Street may be getting a treat instead of a trick this Halloween. A notice of trustees sale on Midtown Village was filed in the Utah County Recorder’s office Friday stating that it will be auctioned Oct. 31. Both the contractors and the project’s lenders, which have liens against the property, have been fighting over who has priority to get paid first after Orem city. The city has liens against 152 residential units in the north and south towers — except for four units that were sold — and about 139,000 square feet of commercial space.”

“Steve Earl, assistant city attorney said, ‘Because we’re the first lien holder we’d be paid in full before any other creditors.’ Orem still has $4.2 million owed to them. Big D Construction and subcontractors are second in line for payment and they are owed approximately $20 million. Third in line are the banks, which are owed nearly $60 million, according to Earl. ‘I feel bad for those people going through this,’ Earl said.”

The Record Courier in Nevada. “A double-dip recession seemingly plunging American markets into oblivion is psychosomatic — existing in the mind rather than in the objective world — according to a senior economist for Elliott D. Pollack and Company. ‘There is little discussion in the media of the right economic data,’ economist Jim Rounds told attendees of the 17th annual Critical Issues Conference, which is organized by the Business Council of Douglas County.”

“Rounds predicted that Nevada’s economy will recover to pre-recession levels by 2018. He said the state originally was tracking closer to a mid-decade recovery date, similar to other western states, but has suffered additional job loss. Nevada currently ranks 45th in the nation for job growth. ‘We feel poor,’ he said. ‘But if you’re a little upside down in your house, I don’t care too much because conditions will return to normal. I do care if you can’t pay your mortgage.’”

“Rounds said efforts to keep interest rates low don’t mean much for people without an income. ‘If you don’t have a job, you can’t buy a house,’ he said.”