The Housing Bubble

The BBC reports on Colorado. “The city’s Office of Economic Development recently declared Denver’s housing market ‘the strongest in the nation,’ in terms of price appreciation and value. But it is precisely this strong, or ‘hot,’ market that is making getting that first step on the housing ladder so hard for Kait, 25, and Ryan, 29. The couple want to move out of their one-bedroom rented apartment in the cosmopolitan Capitol Hill neighbourhood and are looking for a house worth up to $240,000. ‘We chose not to get married [in order] to buy a house,’ says Kait.”

“The competitive housing market has left buyers frustrated, even resorting to writing letters to sellers or sending them videos featuring their children in order to plead their case. Most estate agents or real estate brokers in Denver actively encourage buyers to do this, to make their offer stand out and pull at sellers’ heartstrings.”

“Gary Bauer, an independent real estate analyst, acknowledges that frustration among buyers is high right now, with the added frustration of having to compete with investors buying up available properties and ‘flipping’ them. He says home buyers have to ‘establish and manage expectations’ and become more creative, and writing personal letters to sellers is one way of doing that. ‘If you really want your offer to be looked at, you have to make your offer the best you can and that’s not on the price alone. You have to touch the emotions,’ Mr Bauer says.”

KRWG on Arizona. “During the Great Recession, home builders in the suburbs abandoned neighborhoods that were only half built. The so-called zombie subdivisions left a ring of unfinished construction around cities like Phoenix. But now the zombies are waking up as developers in the Southwest are scrambling to keep up with another frenzied demand for housing.”

“Back in 2011, Realtor Greg Swann took me to the Laveen Farms subdivision in West Phoenix, where fire hydrants emerged dolefully from the desert floor and sidewalks lead to nowhere. The scene is not much better in 2013. ‘When you recover from a heart attack it takes time,’ said Swann, as he observed a crew of workers milling outside a dozen big, new homes. ‘This year is definitely better than two years ago, but there are limits to the enthusiasm you can express for this.’”

“Swann’s point is this: when things are really moving in this city, you’ll know it. ‘If there’s a truss on a truck everyday when you’re driving on the freeway and you’re trying to angle around that truss because you can’t see, then they’re building houses,’ Swann said. ‘If that’s not a problem, then nobody is building anything.’”

ABC 15 in Arizona. “Thousands of Arizona families have lost their homes to illegal foreclosures based on forged, faked and phony documents. Gabriella Westfall has served her community as a police officer for more than 25 years. Westfall said she faithfully paid her mortgage every month until the bank inexplicably raised her monthly payment and told her she needed a modification. She could only get one if she defaulted.”

“‘I contacted the AG to say, ‘Look, I’m a victim,’ but I have not heard from anybody in the attorney general’s office,’ Westfall said. ‘I’m a victim of the system and a victim of fraud.’”

NPR on Nevada. “High-paying investors have helped Las Vegas’ real estate prices to bloom in a place that once ranked as the country’s foreclosure capital. The housing market is so tight that Realtors are calling people to try to get them to sell their homes. Agents are always trying to find homes to sell, but right now in Vegas, it’s taken on a new fervor.”

“‘Right now, on average, an average listing we have we can say there’s no less than 15 offers on a property that we have,’ says Noah Herrera, VP of the Greater Las Vegas Association of Realtors. ‘We have institutional investors that are coming in and taking all of our inventory — overbidding, paying cash.’”

“Another big reason, he says, is a local law that did what other federal laws did nationally after the housing market crash: It made it harder for banks to foreclose. In September 2011, there were over 4,000 notices of default in the state of Nevada. In October, after the bill passed, there were 80.”

“According to an appraisal, Clara Padilla Silver was underwater $35,000 on her Las Vegas home. ‘And we didn’t qualify for any kind of modification,’ Silver says. Her only option, she thought, was to do a short sale — to sell the house for less than it is worth — even if it damaged her credit. That’s what her neighbor was doing. But then Silver thought about it. ‘The craziness is escalating in Las Vegas. So I said, ‘Let’s take a chance. We’ll list it for a couple of weeks,’ she says.”

“And wham! ‘We got a cash offer for $233,000′ — $50,000 over what she thought the house was worth, she says. That deal fell through, but a week later, she got a similar offer, one that she expects to close in the next few weeks. But it better happen fast — for the buyers, she says, because when she checks online real estate databases ‘the value of my house increases by about $1,000 every two days.’”

Nevada Public Radio. “The newly-created Nevada Housing Stability Index shows the market is ‘out of whack,’ said its designer, Jeremy Aguero. Nevada is currently a national leader in price appreciation. ‘We’re also at or near the nation’s highest in terms of the number of people that are living in homes they’re not making payments on. Those two things cannot go on together,’ he said.”

“Aguero is predicting ’some kind of shakeout.’ The number of homes for sale is ‘artificially low’ and that’s pushing up prices. More instability would come if banks start selling off homes where the owner is behind on mortgage payments or owners stop fighting to keep their homes. The high number of mortgages still under water and the fact that nearly 50 percent of homes are distressed sales – where the owner is facing foreclosure or cannot meet the mortgage – are also troubling.”

“‘Right now, we’ve created a second bubble within the housing market and what we’re doing right now is putting some additional air into that,’ Aguero said.”

The Associated Press. “Across the U.S., rural counties are losing population for the first time ever because of waning interest among baby boomers in moving to far-flung locations for retirement and recreation, according to new census estimates. Living in a rural Nevada town, Moe Royels recalls a more bustling time years ago when retirees poured in to enjoy the warm desert climate, nearby casinos and quiet community. But soon boom turned to bust, and years after the recession ended, Royels still wonders if things will ever fully turn around in small towns like his.”

“In Royels’ Lyon County, Nev., about 30 miles east of Reno, small towns prospered during the housing boom. Spillover residents from California’s expensive Bay Area flocked to the area, drawn to the affordable housing, temperate weather and lack of a state income tax. But after the housing bubble burst, the retirees stopped coming.”

“On Main Street in the town of Fernley, the Wigwam, one of the town’s oldest restaurants, now does half the business it used to, according to Royels, who opened the diner in 1961 and sold it five years ago. ‘People moved out of town,’ Royels said from his seat at the restaurant. ‘Some of these subdivisions are still sitting vacant, with the curb and the gutter in but nothing else.’”