The Housing Bubble

The Union Leader reports on New Hampshire. “The good news for the housing market? New Hampshire home sales rose 13 percent in September, the third-consecutive month sales have increased compared with the same month last year. The other news? The median purchase price dropped 10 percent during that time — from $217,000 in September 2010 to $195,350 in September 2011. There’s reason to believe that the down-to-earth nature of today’s prices is the new normal, not an aberration. It’s worth remembering that the notion of housing as a can’t-miss investment is relatively recent.”

“The bubble didn’t begin until the 1990s and lasted just a decade. Consider the Granite State: According to the New Hampshire Housing Finance Authority, the median price of homes in New Hampshire rose every year from 1994 to 2005, dipped negligibly in 2006, then peaked at $252,500 in 2007. Since then? With the exception of an uptick in 2010 (thanks to the First-Time Homebuyer Credit), median prices have decreased every year.”

The Sentinel Source in New Hampshire. “Falling property values in Cheshire County are directly attributable to the recession-fueled national housing bubble, not local affordable housing issues, said Dennis Delay, an economist with the N.H. Center for Public Policy Studies and the New England Economic Partnership. ‘Falling property values had nothing to do with workforce housing and everything to do with the (housing) bubble,” he said.”

“The average price of a house in Cheshire County today, adjusted for inflation, is the same as in 2000, prompting Delay to call it ‘the lost decade.’ He said whereas homeowners could count on their homes for 10 percent of their disposable income, it has since dropped to negative-3 percent. ‘You can no longer use your homes as ATM machines,’ he said.”

The Hartford Courant in Connecticut. “Home sale prices in Greater Hartford plunged nearly 11 percent in October — the biggest monthly year-over-year decline so far this year. Curt Clemens Sr., owner of Century 21 Clemens & Sons in Hartford, said the steep median price decline in October does not necessarily mean there is an overall decline in prices of that magnitude. ‘It doesn’t surprise me that the median dropped,’ Clemens said. ‘There are more foreclosure sales.’”

The Connecticut Post Post. “The median sales price in Fairfield County in 2011 is $497,000, compared with $481,000 in 2010, but sales are down 5.9 percent. Many of the houses that Prudential Connecticut Realty sells now are short sales, when the home owner arranges with the lender to sell the property at a loss. ‘Thirty to 50 percent of sales we handle are short sales,’ said Peter Helie, chairman and CEO of Prudential Connecticut Realty, adding that now is the time to buy because interest rates are low. ‘In my 40 years, I’ve never seen interest rates as low as they are now. If houses are priced properly, we’re seeing multiple offers.’”

My Central Jersey. “The Federal Housing Finance Agency, with help from Congress, recently took steps that affect people buying homes in high-priced real estate markets such as New Jersey. First, Congress approved an extension of the loan limit on Federal Housing Administration loans in high-priced markets at $729,900. The regular limit in most areas is $417,000, but in the Housing and Economic Recovery Act of 2008 Congress temporarily approved the higher limit for some high-priced areas. That limit was set to expire in November 2011. Instead, the higher limits have been extended for two more years.”

“In addition, the FHFA has set the size of loans for 2012 that will conform to the Fannie Mae and Freddie Mac guidelines in higher-priced markets at $625,000.”

“Real estate professionals in Central Jersey had mixed feelings about the high-balance loan limit extension. ‘I believe that Congress should raise the loan limits. The last thing the country’s weak housing market needs is stricter limits on government-backed mortgages,’ said Brian Platten, a sales associate with ERA Van Syckel, Weaver & Lyte in Bridgewater. ‘FHA is important for first-time homebuyers, so that will help support housing demand.’”

“But Jo Carlin, a sales associate at Weichert Realtors, expressed some reservations. While she likes the idea of a longtime policy that gives people some stability with which to plan, she said: ‘With loan limits above $700,000 and down payments as low as 3.5 percent, it is a scary thought concerning the future solvency of the FHA if many buyers start defaulting after borrowing more than $675,000. With less than $25,000 of the buyers’ money in the deal, a small decline in the potential selling price of the purchased property means the seller would quickly find himself underwater and inclined to walk away. I would suggest for the larger-dollar loans greater than $650,000, FHA should require down payments of at least 10 percent.’”

“‘Contrary to years ago, home prices are low and interest rates are at record lows. There has not been a better time to purchase a home in over 30 years. Most real estate agents would agree that most of the time, when a buyer wants to buy a home north of $700,000, they are qualified without the need for an FHA-insured loan. I don’t think Congress needs to worry about $700,000 FHA mortgages. The real estate industry needs the support and expression of confidence from Congress that will come from an increase in the loan limit,’ said Real estate broker Joseph Boniakowski.”

The Philadelphia Inquirer. “After their youngest child finished high school in June, destined for college, Janice and John Potts lost no time bolting from New Jersey. By the end of July, the longtime Haddonfield residents were cheerfully ensconced in a three-bedroom rowhouse near Philadelphia’s Washington Square. Their new abode is much smaller than the 4,500-square-foot home (with swimming pool) that they sold, but it comes with a huge plus. ‘We downsized in terms of space, but cut our property-tax bill in half,’ said Janice Potts.”

“‘What it came down to for us: We wanted to have a home and studio space,’ said Colin Keefe. ‘That wasn’t really possible in Brooklyn. To buy the (Mount Airy) house that we have here, in Brooklyn is $800,000, and that was not in the realm of possibility.’”

MetroWest Daily News in Massachusetts. “Stung by job losses, a shaky housing market and mortgage woes, Bay State residents are reflecting a national trend the U.S. Census unveiled recently: They are staying put. Economists and housing analysts see mobility as a sign of financial health - an indication of whether people are willing or able to pull up stakes and pursue new jobs or better homes. Both may be out of reach for many people who stick where they are.”

“Some potential homebuyers with decent credit have been unable to find mortgages since the market collapsed, said Barry Bluestone, director of the Dukakis Center for Urban and Regional Policy at Northeastern University. Others owe more on their mortgages than their homes are worth, making it impossible to sell or refinance. Some potential buyers are just waiting for home prices to level out. ‘A lot of people have stayed on the sidelines who have perfectly good credit, could get a good mortgage, but are staying in the rental market,’ said Bluestone.”

The Boston Globe in Massachusetts. “For the small-landlord-in-training there couldn’t be a better time to consider a multifamily. Rob and Juliet Pyles bought a three-family in East Boston for $500,000 at the height of the market. ‘Is it worth that now?’ asks Rob. ‘No. Do I mind? No, because I have absolutely zero intention of selling it. For us, these properties are very long-term investments.’”

From Town Hall. “Barney Frank is retiring from Congress? I’m surprised. Surely he could have stayed on and done even more damage to the American economy. Congressman Frank was largely responsible for inflating the housing market over the last decade, a decision that set off a chain reaction of fiscal disasters. The man is a great salesman — even if, sooner or later, what he’s selling tends to go poof. Like the housing bubble.”

“The moral of the story: A fellow can go far in this country if he’s a smooth talker.”

“Newt Gingrich is the latest example of that axiom over on the starboard side of American politics. These days Mr. Gingrich is vociferously opposed — he tends to be vociferous no matter what subject he’s addressing at the moment — to the kind of private-public deals that led to the housing boom-cum-bust heard ’round the world. But that didn’t stop him from accepting a million or two from Freddie Mac back in its heyday. For what, exactly? For his services as an ‘historian,’ he explained at one point; for his ’strategic advice’ at another.”

“Fast on his feet, the new Newt explains that he told Freddie Mac its policies were ‘insane.’ But its chief lobbyist, Mitchell Delk, doesn’t remember his saying any such thing. It turns out Freddie Mac, a government-subsidized agency, was subsidizing the former speaker at the rate of $30,000 a month, and the payments continued right up to the time the government had to take it over.

“Not that any of this has kept Newt the Irrepressible from vehemently criticizing Barney Frank. ‘Go back and look at the lobbyists he was close to at Freddie Mac,’ he told a questioner in a presidential debate the other night. ‘Everybody in the media who wants to go after the business community ought to start by going after the politicians who have been at the heart of the sickness.’ Except him, of course.”

The Gothamist in New York. “Wouldn’t it be nice to hop into the car and glide down to the street in a private elevator? Glauco Lolli-Ghetti, a Manhattan real estate developer, lives this dream from the 11th floor of his $7 million Chelsea condo. ‘This is about as close to a suburban home that you can achieve in an urban area like New York,’ Lolli-Ghetti tells the Times.”

“Lolli-Ghetti’s parking space ‘would be valued at more than $800,000 if priced at the same rate per square foot as the rest of the apartment.’ But the peace of mind knowing some punk kid isn’t keying your Range Rover, or even looking at it scornfully, is priceless.”

The Wall Street Journal. “New York developer Gary Barnett has picked a strange time to erect Manhattan’s tallest residential building, one featuring a five-star hotel and with top-floor penthouses available for nearly $100 million apiece. Mr. Barnett and his partners are among a small band of developers borrowing heavily and rolling the dice on a highly select clientele: the global elite who float above the economic malaise.”

“While a hallmark of the economic downturn has been the collapse of the housing market, the extreme top of residential markets in New York, London, Hong Kong and other select cities has been resilient. Mr. Barnett says the number of billionaire and multimillionaire investors in the world has never been greater. In addition to Russians and Western Europeans, he says, ‘you’re seeing Latin Americans in a big way. You’re seeing Chinese in a big way. You’re seeing the return of the Middle Eastern buyer.’”