The Housing Bubble

A report from the Oregonian. “Though not historically a big home mortgage lender, West Coast Bank pushed aggressively into some of the hotter housing markets around the Northwest with its two-step program, a short-term construction loan. Two-step was geared for flippers, investors intended to immediately sell the new home rather than live in it. Bank officials agreed to 100 percent financing, even for borrowers they never met. By the end of 2007, West Coast had grown its two-step portfolio from next to nothing to $341 million, more than 16 percent of its total loans. Then, the boom ended.”

“The bank’s loan portfolio suffered on all fronts, but its two-step loans went bad in enormous numbers. In Lebanon, where West Coast lent home flippers nearly $16 million for about 45 homes in a new, relatively high-end subdivision, it eventually repossessed more than 40 of them. In all, the bank repossessed 422 properties from failed two-step loans, according to SEC filings.”

“Bend banker Jeff Sprague helped originate so-called stated-income loans. Sprague routinely offered general guidelines to loan applicants as to the income or assets they would have to list in order to qualify. Sprague, meanwhile has left banking and is working as a carpenter. His marriage ended. ‘He’s taken some really big hits,’ said Marc Friedman, a Eugene attorney representing Sprague.”

“Just five years ago, Crook County was doing fairly well. Unemployment sat just above the state average. But the one-two punch of timber-supply cutbacks and the housing-market crash hammered the county, which lost half its manufacturing jobs from 2005 to 2010. The real estate crash also slammed Crook County’s construction industry, which had ridden central Oregon’s housing boom.”

“Northwest of Prineville, broad pastures give way to a hillside flanked with houses. Low on the hill, occupied homes line paved and gravel roads, interspersed with empty houses that gape like missing teeth, some with foreclosure notices tacked to the front door. One notice identifies the missing owners, who owe $200,000. Call the bank, it says.”

“Becky, an Ochoco West resident who gave only her first name, has gone without heat and electricity since March, having exhausted her unemployment benefits. Her landlord cut her rent in half, perhaps figuring some income beats none. Becky runs an extension cord to the house of a neighbor, who shares power despite being two months behind on her mortgage after losing her own job. As cold weather sets in, Becky is desperate for work.”

“‘I don’t know anybody who doesn’t owe bills out the tail right now,’ Marga Krugle said. ‘Until we get some work in this area, Prineville’s going to die.’”

The Seaside Signal in Oregon. “For the first time ever, distribution of emergency food boxes in Oregon and southwest Washington topped one million. ‘In 2004-05, the Bend area had one of the lowest unemployment rates in the state,’ notes Steve Murray, who directs food and energy programs for NeighborImpact, serving Jefferson, Deschutes and Crook counties. ‘For the past several years, Central Oregon has had one of the highest rates in the state. When the housing bubble burst, we lost our real estate and construction industries,’ he explained. ‘I see nothing to make me think those industries will come back anytime soon.’”

Seattle PI in Washington. “When the dust settled from the housing boom and bust of the 2000s, the percentage of Americans owning a home had suffered the biggest drop since the Great Depression, the Census Bureau reported Thursday. This nationwide trend, reflected less dramatically in Washington and Seattle, leads to a question: Has home ownership peaked? ‘Absolutely,’ answered Matthew Gardner, a Seattle land-use economist who works with developers. ‘A lot of people did get into the market in the 2000s with expectations of boundless increases in value,’ Gardner said. Now they see that this isn’t the case.”

The News Tribune in Washington. “Pierce County median home prices fell again last month, the fifth consecutive month in which median prices have fallen by 11 percent or more, according to Northwest MLS data. Although Pierce’s median prices were nearly $120,000 less than in King County, it hasn’t translated into many King County buyers moving south, said Windermere real estate agent Mark Kitabayashi, partly because prices continue to fall in King County. Last month, King County median prices fell 11.42 percent to $310,000 from $349,950 in September 2010.”

“Washington Realtors Association President Phil Harlan said that although the county hasn’t seen increases in monthly sales, he’s encouraged that the market is not seeing further sales declines. He also said a market that sells around 250 homes a month reminds him of Thurston County’s market in 2000. ‘We’re coming back to a new normal,’ he said.”

The Kitsap Sun in Washington. “Home prices in Kitsap County continue to fall. Elsewhere, high-end homes in the $800,000 to $1.2 million price range on the east side of Lake Washington and around Bellevue are enjoying a modest upswing in buyer interest. Those would be cash transactions, since jumbo loans now are hard to come by. Homes on upscale Bainbridge Island in the more expensive price category are attracting more interest, as well, according to Maureen Buckley, an owner of Buckley & Buckley Real Estate. ‘I do see over a million definitely being more active than it has been since spring,’ she said.”

“That said, some of the Bainbridge homes that entered the market earlier this year at much higher prices remain unsold. Two with asking prices of between $8.5 million and $9 million still are looking for buyers. One on Bergman Road in Manzanita remains for sale today for just less than $2.7 million, substantially down from the almost $7 million sought for the property when it came on the market in 2008.”

The Bozeman Daily Chronicle in Montana. “Spanish Peaks, a 5,700-acre private ski and golf community in Big Sky, closed and laid off its staff Monday, citing a troubled real estate market and substantial operating losses. ‘As it stands today, the future of the Club is undetermined,’ a letter addressed to members said. ‘It is likely Spanish Peaks will remain closed for the foreseeable future.’”

“On the club’s website, Spanish Peaks is described as a ‘private enclave in a very privileged neighborhood.’ It includes cabins and home sites, some of which offer ski-in, ski-out access to Big Sky Resort, and a golf course. The Yellowstone Club, another private ski and golf community in Big Sky, went bankrupt in 2008. The next year, Moonlight Basin, a resort and real estate development in Big Sky, also went bankrupt.”

The Idaho Statesman. “During the boom years that drove up Valley land and home prices, demand for new homes seemed endless. From about 2005 to 2007, many farmers sold out for cash, or committed portions of their land to developers. But when the housing bubble burst in 2008, home buyers and construction loans faded. Deals fell apart. Developers and speculators found they had purchased too much property at inflated prices. As values dropped, many had more money invested in the properties than they could sell them for.”

“Milan Gould’s been farming in the Middleton area since 1959. This year, rows of corn stretch from his property in Star across 80 acres of the East Canyon subdivision once approved for about 200 homes and a park. A lender ended up with the subdivision after the developer, Corinthian Homes, defaulted on its loans, said Star Mayor Nate Mitchell. Gould leases the land from the lender. ‘It keeps the weeds down. It keeps the land in production. It gives them a tax break,’ Gould said. ‘It benefits all of us and keeps us in business.’”

“Gould said he’d like to buy, but he chooses to lease land near his properties in Middleton because the investors sank too much money into them for development and need to make it back on the sale. ‘I couldn’t afford it,’ he said.”

“Many prime farm parcels have had their irrigation ripped out and have been broken up with streets, sidewalks and utilities. To convert such land back to agriculture would be too costly, many say. It can’t be farmed anymore. Take the 235-acre Meadow Park. Streets and utilities cut through weedy fields, along with the remnants of vinyl fencing. Initially platted in 2005, the subdivision with three sections sits waiting for the day when demand or pricing make it attractive to investors or developers.”

“‘There’s a lot of room to build, and nobody’s building, and the economy’s not helping,’ said Idaho Rep. Pat Takasugi. ‘I don’t know if we’ll ever see it like it was before.’”

StateImpact Idaho. “Idaho has the unwelcome distinction of having one of the highest foreclosure rates in the nation. Nearly 2,000 Idaho homeowners lose their homes each month, according to RealtyTrac’. But that’s not the whole story. Even as many homeowners work their way through foreclosure, low prices draw new buyers in. It’s a cycle of dreams lost and dreams gained.”

“Carmel Crock says they could afford the home when they bought it in 2001, but soon financial pressures began to mount. Her husband, Ken Harris’s nightclub businesses faltered and ultimately went bankrupt, but not before Crock had refinanced the home twice. At that point, she was doing well as a real estate agent. Her income was going up and up. She thought she could do it all: help her husband, and pay the monthly mortgage that had risen sharply to more than $3,000. ‘This is where you kind of go – ‘Golly sakes, where was my brain thinking?’ Crock said. ‘I actually had a lender girlfriend that had said in 2005, ‘Carmel, just sell the house.’ And I couldn’t let go. And she was like, ‘What if something goes wrong?’”

“Something did go wrong. In the fall of 2008, Crock was diagnosed with breast cancer. Surgeries and chemotherapy followed. She couldn’t work regularly, and couldn’t cover the mortgage payment. Crock says she tried to negotiate with her lender, but discussions went nowhere. Before long, she came to a hard realization: they were going to lose the home. Crock says the stress was overwhelming. She stopped making payments in 2009. o avoid foreclosure, she short sold the home last summer for $100,000 less than she owed.”

“A year after her short sale, Carmel Crock has a different life. She’s now cancer-free. In her work as a realtor, she specializes in short sales and foreclosures. She and her husband have a smaller home, and a much smaller mortgage. ‘We’ve come through an incredible, character-building time,’ she said.”