The Housing Bubble

The Register Guard reports from Oregon. “June was a month of mixed signals for Lane County’s housing market. The 389 closed sales was the highest figure for June since 2007. Homes sold more quickly than any time in recent months, while the housing inventory dropped, figures released Monday by the Regional MLS show. But 85 fewer homes actually sold in the first half of the year compared with 2013. June’s average and median sales prices were down a bit from the same time last year. Those findings are in line with what some analysts have pointed to as a market cool-down in 2014.”

“However, some real estate agents have noted a strong increase in activity among local buyers, even verging on a return to bidding wars for homes listed at $300,000 and less. ‘We had one turn in six hours last week,’ said Karen Church, principal broker at RE/Max Integrity, referring to a Eugene home priced in the mid-$200,000 range. ‘We listed it in the morning and by 4 p.m. there was an offer in hand, two actually.’”

The Oregonian. “In the first half of 2013, Portland-area home sales were booming. So far, 2014 has been at best an echo, and at worst a stall. It’s a brisk, animated market. But it’s still not a healthy, sustainable one. Prices are rising at rates untethered to inflation and gains in income. And construction of new homes hasn’t ramped up to meet new demand. ‘We’re not seeing normal levels of housing activity,’ said Josh Lehner, a senior economist with the Oregon Office of Economic Analysis. ‘We’re going in this direction where there’s a supply response coming, but it hasn’t come as strong as we would’ve thought maybe a year and a half ago.’”

“It’s clear the housing rebound has lost some momentum. The number of sales is essentially flat from a year ago. Prices are still rising, but the increases have slowed from the the double-digit percentages seen in 2013. Still, tell that to the close-in neighborhoods of eastside Portland, where houses can sell in a matter of days — or hours — rather than weeks, and often at thousands of dollars above asking price. ‘That’s going to be a good thing for affordability,’ said Lehner. ‘Things can’t go up at 10 percent a year forever.’”

The Portland Tribune. “While the economy is better off than any time since the Great Recession, it’s not performing as well as it did in earlier economic expansions — especially the 1990s, a long period of solid economic growth in the state, said economist Tim Duy, author of the University of Oregon Index of Economic Indicators. Construction of single-family houses has yet to take off for a variety of reasons, Duy said.”

“‘On the demand side we’re likely looking at some dearth of buyers — particularly in the first-time homeowners,’ he said. ‘Until recently, job recovery was relatively slow and wage growth has been relatively slow and (mortgage) underwriting conditions are somewhat higher and I think that has constrained the first-time home buyer market.’”

“‘For a number of years developers weren’t focusing on new land because the housing market was so bad. Why would you bother? So I think there has been some lack of sufficient supply in the buildable lots. If you have a lack of sufficient supply, the lots will go to more expensive housing rather than less expensive housing,’ he said. ‘It’s not clear that banks are as willing to lend into the speculative single-family market as they are lending into the speculative multifamily housing.’”

The Mail Tribune. “Gary Poulos planned to spend this summer packing his bags, selling his house and moving on from his west Medford home. Instead, the retired systems engineer is compiling a dossier on his next-door neighbor, whom he caustically calls Mr. Chase M. Bank. As neighbors go, ‘Mr. Bank’ isn’t a good one, failing to maintain his yard, ignoring a mangled garage door and allowing junk to pile up outside his house. When he does answer the phone, he’s none too talkative.”

“Over the past 12 months, Poulos has painstakingly compiled documents and telephoned a litany of loan and property servicers, as well as the police, and finally City Hall. Poulos has delayed selling his home because he fears the eyesore next door will scare potential buyers away. Poulos isn’t alone in his frustration with an abandoned house. Across Jackson County, vacant houses sit empty as lenders fail to complete the foreclosure process.”

“Real estate agents are begging for more inventory and neighbors are concerned about diminished property values, yet government officials remain perplexed by the ‘zombie foreclosures,’ easily identified by the multiple notices stapled to their front doors and taped to windows. The narrative changes from address to address, but the general pattern is consistent, said John Helmick, president of Gorilla Capital, a Eugene-based company that buys fixer-uppers and resells them. The owner is notified of pending foreclosure and moves out. A lengthy foreclosure process ensues, the home foreclosure stalls, and years later, the property remains unsold.”

“Often, the lender is collecting mortgage insurance payments even as the house falls into disrepair. ‘The owner of the property has no incentive to maintain the property in terms of neighborhood standards,’ said Poulos. ‘And the banks won’t, because they don’t have to.’”

“Ron Galbreath, an agent in Medford, said he began running into dead ends with such properties in about 2008 when Bank of America purchased failing Countrywide Financial, which had originated 20 percent of mortgages during the height of Jackson County’s real estate boom in 2006. During the downward spiral, Galbreath watched as an east Medford house that had previously sold for a million dollars eventually sold for $540,000. The owner stopped making $5,000 monthly payments, yet it took four-and-a-half years until a short sale began to close. He discovered the lender had been collecting mortgage insurance payments during the interim.”

“‘The bank was collecting monthly and was in a position where they didn’t have to write off a bad loan until the end of the policy,’ Galbreath said.”