The Housing Bubble

A report from Bloomberg. “When a parking space in Manhattan costs $136,000 and only 15 percent of San Francisco’s homes are affordable for the middle class, it’s easy to worry that another housing bubble is around the corner. The vast majority of American homeowners have little to fear: A new gauge from Nationwide Insurance in Columbus, Ohio, suggests the national market is in its best shape since 2001 and there’s no reason to fear a national downturn, no less a bursting bubble. The housing market may not improve by leaps and bounds this year, and that’s exactly why Americans should feel good, David Berson, Nationwide’s chief economist said.”

“‘There are a lot of markets that are probably growing less rapidly than people would like, but that means they’re sustainable, and in the Goldilocks sense they’re just right,’ said Berson. Pittsburgh, Cleveland and Philadelphia were ranked the healthiest cities. Rock-bottom was Bismarck, North Dakota. ‘In Bismarck, the booming-ness is being caused mostly by good economic fundamentals,’ Berson said. ‘Still, prices are going up there at an unsustainable rate.’”

The Orange County Register in California. “Rebounding house values and the market-cleansing work of foreclosures and short sales pushed the share of Orange County mortgages that exceed the underlying property value down to 3.6 percent of homes in the fourth quarter, according to CoreLogic. In 2005, the Ringgolds believed that surging home prices might knock out their chances of ownership for the foreseeable future. So they jumped at the chance to buy a two-bedroom, two-bath condo in Orange for $505,000.”

“Two months later, the same style condo sold for $500,000 – and Tim Ringgold winced. What the Ringgolds thought would be a brief stay in the condo – maybe three years – became practically a decade-long adventure when the housing market crashed. In 2013, when the housing market was in a brief frenzy, they tried to buy a single-family home but were unsuccessful. Then, last spring, they found a home that fit their budget and the needs of a growing family with two kids.”

“The Ringgolds landed a four-bedroom, three-bath detached home in east Orange for $685,000 while concurrently selling their condo for $455,000. They were willing to take a loss on the condo. ‘We knew we were stuck. We just had to make it through,’ Ringgold says of the sacrifices his family made – like having kids share a condo bedroom. ‘But it’s like stock. You haven’t lost until you sell.’”

The Dallas Morning News in Texas. “After months of declines, there’s a jump in the number of North Texas homes facing foreclosure next month. Lenders have scheduled foreclosure sales for more than 1,681 homes in the Dallas-Fort Worth area — a 14 percent increase from foreclosure filings in April 2014. Next month’s foreclosure posting volume in the four-county area is at the highest level in a year, according to Addison-based Foreclosure Listing Service.”

“‘This was kind of expected,’ said Foreclosure Listing Service CEO George Roddy. ‘I had heard a couple of months ago from the law firms representing some of the bigger lenders that they were predicting a pickup in postings. That is to kind of clean up the properties that continue to be in default but that Fannie Mae and the FHA have been sitting on for months, even years and not coming down with the foreclosure hammer.’”

The News Press in Florida. “Even as overall home prices continue to rise nationally and in Southwest Florida, a stubborn problem still lingers from the crash: The most mortgage-ridden houses and condominiums are quietly sinking deeper into debt. That’s a problem because it raises the specter of a new wave of foreclosures and abandoned homes if banks or owners give up on getting in the black anytime soon, housing authorities say. ‘There are still some great pockets of distress that are going to be difficult for people to go up in value,’ said Jack McCabe, a Deerfield Beach-based real estate consultant. ‘I think we’re still going to see a string of short sales and foreclosures that is going to continue for a couple of years.’”

“Not all the distressed homes are in the low end of the market. Ken and Lois Rankin, for example, have watched for years the slow decay of the house across the canal from their home in southwest Cape Coral. Now they’re trying to sell their house, listed at $619,000. But they’re getting no bites, said their real estate agent, Shelley Lachmann of Royal Shell Real Estate. A typical response from a prospective buyer’s agent, she said, is ‘My client doesn’t want to look at the garbage across the canal from you.’”

“McCabe said that even low-end home prices in Southwest Florida and the Miami area have been relatively stable. Those trends won’t last forever, he said, and huge numbers of houses in those markets are owned by hedge funds or individual investors who bought low and then rented them out with the intention to sell eventually. Already, McCabe said, some hedge funds are quietly putting a few homes up for sale to test the market. If large numbers of rented homes are dumped on the market, he said, prices will fall and distressed homes will sink even further. ‘It may be a decade or more before they’re in the black.’”

From Delaware Online. “People who lost homes to foreclosure will rally Tuesday to demand they get a share of Delaware’s settlement money stemming from the 2008 financial meltdown. About half of the money has gone to current homeowners in the form of mortgage modifications or to former homeowners as a small check in the mail. But, this has not helped people like Robbin and Jeff Brown, who lost their five-bedroom dream house on Old Baltimore Pike to foreclosure.”

“The Browns attempted to get a mortgage modification when Jeff lost his job as a millwright at the Chrysler auto plant in Newark in 2009. However, the bank was unwilling to assist and the couple fell victim to a modification scam. ‘Delaware should really feel bad that all the officials here don’t have a backbone,’ Robbin Brown said. ‘They are in office for the people, but they don’t say anything.’”

From RealtyTrac via Inman News. “Joe Schwarz is sick and tired of being a landlord. ‘The property has pretty much been a nightmare since day one,’ he said of a home he bought while a student at Arizona State University in 2007 near the height of the housing market in the Phoenix area. ‘I’ve wanted to be done with it for years but I couldn’t because of the second (mortgage) to be honest … A lot of people shy away from me because of the second.’”

“Schwarz said he purchased the property for $165,000, thinking he was getting instant equity given that other similar properties nearby were selling for as much as $199,000 at the time. The plan was to rent the property to cover the mortgage while watching the equity increase over time. He purchased using some money he inherited along with a stated-income loan and a second mortgage to avoid paying private mortgage insurance (PMI).”

“Schwarz said he has continued to make mortgage payments because he doesn’t want to harm his credit, but at $30,000 in the hole he’s close to giving up on the property. ‘I’m never going to see that money … so why would I want to be any farther in the hole?’ he asked. ‘I have kind of been under the assumption over the past few years that this property was going to be a foreclosure or short sale.’”

“Meanwhile, home price appreciation in the Phoenix market has slowed to a crawl after a strong rebound between 2011 and the first half of 2014. That slowing appreciation is deflating the hopes of underwater homeowners who have held on for years waiting to regain their equity but who are now ready to walk away, according to full-time Phoenix real estate investor Maria Giordano. ‘The majority are in situations where they have a second that is going to adjust,’ said Giordano.”

“Many of these homeowners also have the additional hurdle of deferred maintenance that makes it even tougher to sell or refinance their property. ‘The two I looked at this week had green pools, just nasty,’ she said, noting that these distressed homeowners have been willing to keep paying a second mortgage at a lower introductory rate, but now many are realizing that their payments will soon be going higher. ‘If you’re only paying $200 to $300 on a second … why not ride that out until you decide, ‘Oh shoot, I have to do something.’”