The Housing Bubble

The Denver Post reports from Colorado. “Mike Kraft, a Realtor in Loveland, said first-time buyers have an edge in the current marketplace. The property they buy won’t have inflated equity, Kraft said, and many sellers are willing to help with closing costs. ‘It’s a buyer’s market. There’s a lot of inventory out there,’ he said.”

“George Todd, co-owner of Todd Realty Group, said house hunters need to keep the resale value of properties in mind as they shop around. It might sound counter-intuitive to be thinking about selling a home you haven’t even bid on, but it’s a reality homebuyers need to face, Todd said. ‘You want a house that will appeal to the most amount of buyers on the market at any given time,’ Todd said.”

“That doesn’t mean you should forget the home of your dreams, but understand it could take longer to sell when the time comes, he said. So consider a home’s location, asking price and floor plan carefully before placing a bid. Beyond that, first-timers need to be as patient as feasible during their first home-shopping trips. ‘I would be loathe to let (clients) write an offer until they’ve seen 20-25 houses. . . . If you need to see 50 houses to find the right one, that’s what you have to do, he said.”

The Rocky Mountain News from Colorado. “Several sectors of the Colorado economy are struggling and bracing for a tough 2009, but none is in worse shape than construction. After an expected drop of more than 4 percent in 2008, construction employment across the state could fall by another 7 percent in 2009, according to a forecast by the University of Colorado’s Leeds School of Business. That’s a loss of more than 18,000 construction jobs over a two-year period.”

“‘People are worried about their jobs, and what has happened to the rest of the country is happening here,’ said Mike Rinner, executive VP of the Genesis Group, who was part of the group that made the projections. ‘Companies are having trouble financing new growth opportunities, and that has an impact on outlook and expectations, and to some degree Coloradans are overleveraged and carrying too much debt.’”

The Arizona Republic. “Home builders face a struggle of Darwinian proportions in 2009 that experts say will shape the industry into a smaller, but smarter, animal. The pool of Valley home builders is expected to shrink considerably this year, as the prolonged flood of foreclosures pushes even more builders out of the business. ‘We’re going to see natural selection of the building industry,’ Fulton Homes President Doug Fulton said.”

“The Tempe-based builder recently formed a team of ‘Fulton Foreclosure Specialists,’ whose job is to talk prospective customers out of buying a foreclosed home, and if that doesn’t work, to sell them a foreclosed home. The idea is to get banks to appoint Fulton’s team members as listing agents for bank-owned homes that meet a certain standard of quality, Fulton said.”

“He’d still prefer customers to buy one of his new homes, but Fulton said he realizes that’s not always going to happen. ‘These homes are selling for less than we can build them for,’ he said.”

“The median new-home price has fallen much further - 10 percent further - than the median price for an existing home, said analyst Jim Belfiore of Phoenix. But it’s one specific category of resale homes that has presented builders with nearly unbeatable competition: so-called distress sales. Distress sales are those involving what Belfiore calls ‘upside-down parties.’”

“One former builder said the supply-side problem began more than a year ago, as the loan-to-value ratio fell on land slated for development, and banks required builders to inject more capital into the projects or face foreclosure. For some, that added pressure was too much to bear. The Arizona Department of Real Estate maintains a list of struggling and failed home-builder and developer projects that currently includes 38 bankruptcies and 85 ‘projects in financial trouble’ due to foreclosure, bankruptcy, contractor lawsuits and other concerns.”

“T2 Homes President Reed Porter said he remains optimistic about 2009, but it’s not the five-years-ago sort of optimism. ‘We all have a different outlook than we did in the roaring 2000s,’ he said.”

The Daily Courier from Arizona. “Caught up in the housing market crash, local governments rushed to cut everything from employees to electricity use as revenues plummeted in 2008. Prescott Valley was issuing as many as 143 single-family home building permits per month this century, but in 2008 the monthly count never even hit 20. Chino Valley cut this year’s budget a whopping 69 percent and laid off 13 employees in April.”

“City Budget and Finance Director Mark Woodfill said the economic slowdown began in about the first quarter of 2006, and basically has been on a downward trend ever since. Norwood projects a turnaround by about summer 2010 - still more than a year away. And even then, he said he doesn’t expect dramatic changes, because ‘people’s behaviors have changed.’”

“Greg Fister, manager of economic development for the Town of Prescott Valley, says the economic downturn is unlike anything he has experienced. ‘I’ve never seen the number of projects that have been postponed or cancelled in the past year,’ he said.”

“Prescott Valley collected $4.1 million in sales tax revenues from July through October, down 9 percent from $4.5 million during the same period in 2007-08, said Economic Development Manager Greg Fister. The direst news came on the home front. The town issued only one permit for single-family homes in September.”

The Spectrum from Utah. “The Washington County housing market continues to strain the local economy. Washington County witnessed a job contraction of 6.1 percent in November when compared with the same month last year, said Department of Workforce Services Chief Economist Mark Knold.”

“‘I’ve never seen anything like this in (Washington) County,’ Knold said. ‘Unprecedented is probably a good way to describe it.’”

“Following the national trend, Carol Sapp, executive officer of the Southern Utah Home Builders Association, said many builders are struggling through the recession. ‘There is no doubt at all that there are companies in the housing industry that are experiencing extreme hardships,’ Sapp said. ‘We are feeling pain.’”

“She said the problem is not diminished demand, but recently imposed lending restrictions from banks and a wealth of bank-owned properties competing with new home sales. ‘It has tightened up in the finance industry,’ she said. ‘That is really where we have the issue. Without the finance, you are not able to sell these homes.’”

The Salt Lake Tribune from Utah. “Is the economy in Utah going to get better anytime soon? Probably not quickly enough to suit most folks. In Utah, in 2009, ‘We’re still going to have more layoffs and more home price depreciation,’ said Mark Knold, chief economist with the Utah Department of Workforce Services.”

“Much of his prediction stems from timing. Utah’s once-red-hot real estate market started to cool in summer 2007, about two years after other states’ markets faltered. And Utah’s economy didn’t really fall into recession territory until a couple of months ago.”

“There probably will be more declines in the values of homes priced above $400,000, said Wells Fargo & Co. economist Kelly Matthews. If mortgage rates remain below 5 percent, values of homes priced at under $400,000 — especially those below $300,000 — may stabilize this year, he said.”

“But there’s no guarantee. Salt Lake City real estate agent Randall Wall said that in recent weeks he has seen price concessions being made all the way down to the $150,000 range, although the lower the asking price, the less likely sellers are to take a hit to get their property sold.”

The Pahrump Valley Times from Nevada. “Developers announced ambitious projects in 2008 to build hotels, casinos, shopping malls, restaurants and housing developments. Many have fallen short. Focus Property Group announced it was restructuring its debt and reassessing the timing of the Pahrump project back in February. The county commission approved a development agreement allowing Focus to build up to 5,800 homes in September 2006. At that time, company President John Ritter expected home construction to begin in 2009.”

“‘All our projects in Pahrump are essentially on hold. We’re still a very big believer in Pahrump, and as soon as the market comes back we want to be part of it,’ said Mark Fiorentino, Focus senior vice-president of governmental affairs.”

The Reno Gazette Journal from Nevada. “Sales of existing single-family homes in Washoe County in November saw a significant jump over last year, but new home sales saw a steep drop as falling median prices and a glut in inventory continue to put pressure on the homebuilding industry.”

“Although Washoe County’s $220,000 median price for existing homes in November was relatively flat compared with the previous month, it represents a 30.2 percent decrease from last year. Prices still have a way to fall and are clearly not bottomed out yet, said Brian Kaiser, a housing and real estate analyst with the Center for Regional Studies, who expects some additional price decreases in 2009 coupled with stagnant new construction.”

“Existing condominiums fared even worse in terms of price, down 50 percent from last year with a median price of $100,000. Existing condo sales volume is also down 31.6 percent month-over-month and 13.3 percent year-over-year.”

“New-home sales also continue to struggle, with only 25 sales reported in Washoe County in November. The sales represent a 53.7 percent decline from the previous month and a ’staggering’ 82.9 percent drop from November 2007, Kaiser said. One bright spot for new homes is median sales price, which was at $351,958. The price is up 26.8 percent from September and 4.3 percent from the same period last year. But the jury is still out on what those numbers exactly mean, experts said.”

“‘I think the small sample size has more to do with (the median price increase) than any inherent strength that it might imply in new homes,’ Kaiser said. ‘It’s worth watching, though, to see if the new homes in the coming months can continue holding their own on price. I don’t expect there to be much of a positive change in the direction of the market in early 2009. Foreclosures are still increasing and flooding the market with bargain-priced homes, and I believe that it will be extremely difficult for new home builders to compete with that market.’”

The Review Journal from Nevada. “Local housing statistics released by the Greater Las Vegas Association of Realtors show local home sales more than doubling compared to the same time last year. In November, GLVAR reported sales increasing 125.5 percent for homes and 142.0 percent for condominiums and town homes, compared to November 2007. This follows even greater year-over-year sales increases in September and October.”

“Two out of every three homes being sold in Southern Nevada are owned by lenders.”

“The median price of a single-family home sold in the Las Vegas area decreased by 2.1 percent in November, from $190,000 in October to $186,000 in November. That’s down 32.0 percent from November of 2007. For condos and town homes, the median sales price decreased 17.2 percent from $109,575 in October to $90,750 in November. That’s down 49.6 percent from November 2007.”

“Las Vegas is not just a place where people are born and live. It is an enterprise. It is a deal people enter, a set of givens agreed upon: More is better. Biggest is best. To live in Las Vegas is to stake your future on this enterprise — for better or worse. For the past 20 years, it has been for better.”

“It was a place that not only believed its own hype, but depended on it. And so, it has been a shock as, quietly and slowly, everything has changed. Like many U.S. cities, Las Vegas is watching its economy reel. Home values have plummeted. Foreclosures have exploded. Unemployment is the highest it’s been in at least 20 years.”

“For the first time in decades, the population has stopped growing. Casino projects are on hold. Planes full of free-spending tourists are landing with less frequency. Long the embodiment of American confidence, the city is now in limbo.”

“‘Jackpot Town!’ the headline read. And above it was the smiling face of Jesse Grice. He was just 27, six years into his career as an Elvis impersonator. A young Elvis Presley. A fit, fresh, gold lame Elvis, on the cover of Time Magazine. As he tells it now, even then in November 1998, he could not believe his luck.”

“After years of seeing his home’s value soar, Grice took a gamble, using equity in his house to invest in a downtown bar, hoping for long-term security. As the bar’s business slowed and he started to fall behind on mortgage payments, his Graceland began losing value. The bank took it back in October. Grice sold his collection of memorabilia on the front lawn. He put the Graceland gates in storage and moved away. ‘Look how many years we were up, up, up, and the ride had to end at some point. Well, it just ended,’ he said.”

“Donald Youshaw and his girlfriend, Bernie Jones, heard the call. ‘Come out West. Get a job. They’re booming. They’re hiring,’ they remember being told. ‘Casinos are going up. The housing market is going up.’”

“In 2002, the couple drove across the country. Youshaw, along with his mother, a retired nurse, bought a three-bedroom stucco home. His neighbor was gobbling up investment properties as home values headed north. Youshaw imagined he might try his hand at real estate, but first he needed money to spruce up the home he already owned.”

“His mother saw an ad on television for a refinancing program. She called the number and got a new loan with ease and little clear explanation. But the loan came with hidden fees and higher monthly payments, and Youshaw fell $25,000 in arrears before the bank foreclosed.”

“Today he and Jones spend their days in a home they rent just blocks from the one he lost. Youshaw has pawned jewelry and even took out a payday loan at 200 percent interest to pay the gas bill. Stunned at how quickly his fortunes turned, Youshaw says, ‘I’m living like I did when I was 19.’”

“Terry Jicinsky, (is) the senior VP of marketing for the Las Vegas Convention and Visitors Authority. As smaller numbers of visitors come, off 10 percent in October from a year earlier, the marketers keep adjusting their pitch: casting Las Vegas as an easy last-minute destination, then as affordable, then as an escape for ‘crazy times.’”

“But bad times? No one here planned for that. ‘Because our growth cycle has been going on for 20 years, you know, for many people, myself included, that’s a career. That is the entire length of your experience,’ Jicinsky says. ‘We have casino executives that started working in their 20s and 30s that are now in their 40s and 50s, where all they knew was double-digit growth year after year after year.’”

“As Jicinsky speaks, the bustle of the convention floor floats into his office. Today’s convention, a gambling industry summit, has been full of glum news of frugal gamblers and tightfisted lenders. Just now, aspiring bar bands are auditioning for club owners below. A woman’s voice intrudes on Jicinsky’s thoughts. ‘Chain, chain, chain … chain of fools,’ she sings.”

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The San Francisco Chronicle reports from California. “From her snug one-bedroom condominium near San Francisco State University, Lea Azucena has watched family members struggle against foreclosure. But Azucena is not worried about losing her home, even though she recently lost her job. The payments on her fixed mortgage are so modest that she knows she can get by on unemployment insurance while she seeks work. Azucena credits her sense of security to the pre-purchase counseling she received from the Mission Economic Development Association.”

“‘I couldn’t be in a safer spot than I am,’ said Azucena, who purchased her 560-square-foot condominium unit near the Daly City border on Halloween 2007.”

“In 2006, MEDA counseled nine families threatened by foreclosure, said Jane Duong, MEDA’s homeownership program manager. In 2008, the group helped 155 such families. Across the bay, at the Home Ownership Center operated by Oakland’s Unity Council, 945 clients had foreclosure concerns, up from 31 in 2006. ‘The numbers have just grown exponentially,’ said Sheri Powers, homeownership manager at the Unity Council.”

“The most pernicious mortgages, said Powers, an attorney and former bank loan officer, were the negative amortization loans. Borrowers who opted for that plan effectively dug themselves deeper into debt each month. That’s what happened to a close relative of Azucena’s, who is now in foreclosure proceedings.”

“‘People in the industry knew that these loans spelled trouble,’ said Powers. ‘For Alan Greenspan to have the nerve to say that he had no idea? Give me a break; lowly loan officers like myself knew.’”

“Azucena…was desperate to have a home to call her own. She grew up in San Francisco after her family gained asylum in 1980 after fleeing El Salvador’s civil war. She attended high school in El Salvador, college in Southern California and then returned to San Francisco for the Genentech job. But Azucena’s rental apartment was sold out from under her and she found herself couch surfing.”

“‘I started to feel that owning a home was not a luxury - it was a must,’ she said. She attended a MEDA workshop, started saving for a down payment, and Duong helped her find first-time home-buyer assistance from city and state programs.”

“‘In coming here so young and being displaced from my country, it became a mission to find a sense of home,’ she said.”

The Manteca Bulletin. “Foreclosures dominated the news — and the economy — in Manteca. Just over 1,000 homes that went back to bank ownership during the year were sold at prices averaging $180,000 less than they were purchased for three to four years earlier.”

“Median prices of existing homes dropped over $116,000 in Manteca during 2008. They are down $181,000 off the market’s peak of $429,000 in 2005.”

“At the start of 2008 when foreclosures started shaking many people’s confidence in the economy, The First Assembly of God Church under the leadership of Pastor Mike Dillman did what qualifies as a leap of faith and a modern-day economic miracle all wrapped up into one. They had bought a home on North Grant Street that had become the poster home for the foreclosure mess. Vagrants had taken the house over, ripping apart cabinets for firewood, stripping copper from the walls, and urinating on the floors. Walls were marked with graffiti. The neighborhood was under siege.”

“The congregation bought the home vowing to fix it up, resell it, and spend the proceeds on charitable undertakings. People thought they were nuts. There was no way the house could be worth the effort. Some even called the Bulletin saying the pastor was leading his church down the wrong path and into financial ruin.”

“By mid-spring the miracle had taken place. The house had been repaired, updated, spruced up and sold for a tidy profit. ‘This is truly an opportunity that only comes along once in a lifetime,’ Dillman said after the church bought the home.”

The Recordnet. “Steven A. Rosso, longtime president and chief executive officer of Stockton-based Pacific State Bank, has resigned his position, citing personal reasons. The chairman of the board, Stockton physician Harold Hand, said Rosso was under no pressure to leave because of bank losses last quarter. ‘This is a tough time for banks, and we lost a little money,’ he said, adding that the bank - and hopefully, the whole economy - will do much better next year.”

“Plummeting mortgage interest rates combined with declining home prices are boosting sales, Stockton real estate brokers report. Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton, said sales continue to be strong.”

“‘The lower interest rates, combined with lower home prices, have brought many first-time home buyers into the market,’ he said. ‘We are seeing many investors entering the market as well.’”

“Foreclosures continue to dominate the existing home-sales market, making up nearly nine out of 10 purchases. In terms of sheer unit sales, Stockton brokers have reported…their best sales year ever as median home selling prices in the city dropped as low as $130,000 for November - down more than half from $265,000 the previous November.”

The Press Enterprise. “Brian Gerard, who runs a one-man executive search operation in Los Angeles and specializes in recent graduates, said it used to be a good month when he could place between 15 and 20 people in jobs. Now he’s lucky to get three or four, and Gerard worries about how he’s going to pay his bills. ‘I’ve been doing this since 1984, and this, without any hesitation, is the worst job market I have ever seen,’ Gerard said. ‘The other people who do the same type of work are having the same problem.’”

“The market is different for headhunters who find experienced managerial people, said Art Gage, who has run an executive search firm in Riverside for 32 years. Gage specializes in senior management positions and said that market is solid right now. There’s job movement at those levels, in part, because some executives are so discouraged by the spiraling economy that they’re fed up, Gage said.”

“‘They’re saying ‘This isn’t fun anymore,’ Gage said of retiring executives. ‘They’ve been doing it for 30 years, and they’re saying they don’t want to go through another one of these downturns.’”

“CulverCareers, a San Diego-based job placement service with an office in Riverside, has an advantage because it’s a national operation, so it can match clients with applicants from all over as long as they’re willing to relocate, said Jerry Muntz, a recruiter in Riverside. But business is slow, Muntz said. The Riverside CulverCareers office has lost half its staff to attrition, and companywide, employment is down about one-third.”

“Muntz agreed that there are opportunities to fill senior-level openings, but the employers are looking for long-term commitments. Entry-level placements, which were bountiful in Inland Southern California only a few years ago, are a fraction of that now. ‘A recent graduate used to have a half-dozen choices,’ Muntz said. ‘Now it’s down to one or two for entry-level. It is very tough right now, especially in the Inland Empire.’”

The San Gabriel Valley Tribune. “After a year of layoffs, tightening credit, mortgage defaults and Wall Street woes, business leaders and operators around the San Gabriel Valley are hoping for a new year of better news. We talked to some of them this week, and they all echoed similar themes: that government bailout money would help not just Wall Street, but businesses and their employees on Main Street. And they hoped for a new year in which consumers will regain their confidence in an increasingly accessible credit market.”

“Here’s what they actually said. ‘My hope for the new year is three-pronged: Number one, that the bailouts will convey its effects starting in January or February so that retail can start turning things around. No. 2, that the small businesses that are struggling can benefit from the bailouts….Some small business are barely staying open. My hope would be that they could show a profit - that they wouldn’t have to worry about closing their business. Third, that the unemployment rate will decline, and we see less people laid off from jobs.’ - Gary Lawson, executive director of the West Covina Chamber of Commerce.”

“‘An economic upturn…and some relief out of Washington to folks here who are trying to contribute to the economy. It would be nice to see some of those significant taxpayer dollars going to bailout the economy make it to local business people who really are the bedrock of the economy. I’d like to wake wake up on Jan. 1 and find out this recession was some kind of a joke….’- Paul Little, CEO of the Pasadena Chamber of Commerce.”

“‘It’s all about stabilization of the economy. We want people to keep working, jeep spending money and keep their jobs. That’s what I’m hoping for. As a result that homeowners - those who can afford it - will be able to modify their loans, and keep their houses and keep their families together….And for those that can’t that they get a speedy recovery. - Marty Rodriguez - Real estate broker, Century 21, Glendora.”

The Daily Breeze. “Prices of homes in the Los Angeles metro area dropped 27.9 percent in October compared with a year earlier, according to the Standard & Poor’s S&P/Case-Shiller Home Price Indices. The study’s 20-city survey showed a record annual price decline of 18 percent for October. The 20-city composite is down 23.4 percent since its peak in mid-2006.”

“The Standard & Poor’s study came a week after a similarly downbeat survey was released by the Los Angeles-based California Association of Realtors. That earlier release for November showed that South Bay home prices fell 17.2 percent, compared with November 2007, to a median price of $530,000.”

“Carson led the way with a drop of 41.2 percent for November to $300,000. Gardena also suffered a steep drop of 29.2 percent to $310,000.”

“The beach cities saw a price drop of 16.8 percent to $872,500. Redondo Beach was the seventh priciest city in the survey with a median price of $667,500, down 10 percent. Other cities considered pricier than Redondo Beach, such as Manhattan Beach, did not make the list as individual communities because they did not register at least 30 home sales for November. Torrance’s price slide was 17.1 percent to $512,500.”

“‘Median prices declined across all regions of the state in year-year terms, with the largest declines occurring in areas with higher concentrations of distressed sales,’ CAR chief economist Leslie Appleton-Young said.”

“Appleton-Young added that for the first time since early 2002, the statewide median price for only existing, single-family detached homes fell below $300,000, registering at $285,680, a 41.8 percent drop from the previous November.”

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It’s Friday desk clearing time for this blogger. “Record numbers of Sonoma County homeowners are seeing property taxes fall, softening the blow from plummeting values. Steven James and Judy O’Brien bought their Windsor home in February 2005 for $670,000. While the couple recognized the county’s housing boom would eventually end, they didn’t think the subsequent decline would be so steep — the county’s median home price is down nearly 50 percent from the market’s high. ‘I thought there’s no way that would happen. We’re staring at that in the face right now,’ James said.”

“Easing the pain was the $2,600 property tax reduction. ‘It was wonderful,’ James said. ‘Spending $8,000 in taxes on a devaluing asset would have been a little hard to swallow.’”

“Bob DeKeulenaere says junk cars in his neighbor’s yard prevented him from selling his house last year. DeKeulenaere is among hundreds of North Port residents who call on city code enforcement to clean up their neighborhoods. The real estate market has only grown worse since then, leaving him with little choice but to stay put and wait for a turnaround.”

“‘This problem cost me a couple hundred thousand dollars,’ said DeKeulenaere. ‘Do I have any recourse? No.’”

“Pasquotank County has accepted $6.7 million for Outer Banks land worth nearly $10 million during the real estate boom. Pasquotank County accepted a bid of $7.25 million in March, but the group could not borrow that amount. Last week, the county accepted its lower bid of $6.7 million for the property.”

“‘He was the only bidder at the time,’ said Pasquotank County Commissioner Marshall Stevenson. ‘We felt we needed to take it.’”

“Marshall & Ilsley Corp. is foreclosing on a suburban Chicago condominium development and is seeking to collect nearly $19 million of unpaid loans connected to the project. The building was used for many years by Mallinckrodt College, and then Loyola University, before being sold and converted into condos.”

“Most of the units had listed selling prices ranging from the upper $300,000s to $1.4 million, according to the Chicago-based Metropolitan Planning Council. But those condos became available around the same time that the housing market began its rapid decline.”

“Denver businessman Jerrold Hauptman turned his father’s title insurance agency into a behemoth by betting big in the nation’s hottest real estate market. But when California’s housing boom turned bust and the Mercury Cos.’ bank called its loan last summer, Hauptman’s $1 billion empire collapsed.”

“‘I don’t know where it all went. A lot of people are going to lose a lot of money,’ said Calvin Schmidt, 61, of Parker, who is owed $38,500 in back pay and retirement savings kept by the company in the form of deferred compensation. ‘It totally amazes me. It was a good, strong business up until sometime last year.’”

“The dream is quintessential Arizona: Buying that new house in a new community, surrounded by people making a new start in life. The nightmare is becoming quintessential, too: In dozens of developments caught half-built in the real-estate downturn, homeowners are finding themselves trapped in a financial and legal mess. In one case, owners of homes in the half-built San Tan Heights development in Pinal County are staring at a special assessment of $750 per home in addition to the monthly assessment of $125.”

“Arizona has long encouraged construction of big developments. This is the ‘planned community’ state. Now some of those communities are turning on residents. Effectively, they are lost in a sea of stark, empty houses and vacant lots.”

“Mortgage and interest rates are down once again — way down. And, ask any lender, they will tell you there is plenty of money to be lent. So what’s up? ‘There is a huge misconception that it is difficult to get loans. It’s not true,’ says Mark Miskiel of Lighthouse Mortgage in Cottonwood. ‘What’s different is that in the recent past all you needed to do to qualify for a loan was to be able to stand on two feet.’”

“‘For the most part, the market is back to the core basics. It is still easy money, just not as easy as before. It’s cheap money. It’s just not funny money,’ Miskiel says.”

“Miskiel warns there are likely more foreclosures on the horizon, in part because the loan market is too segmented to settle its own problems. ‘Since most mortgages are now owned by more than one investor, it has been difficult for investors to agree to any restructuring of many bad loans,’ Miskiel says, ‘It is unlikely that will change in time to save many marginal mortgages.’”

“Stephanie Hanna, a loan officer with Platinum First Mortgage of Reno, said refinancing loans and regular mortgages not only have picked up, but for those in the right circumstances she can even undercut the national rate cited in the latest weekly report. Yet some other Nevadans still can’t catch a break on mortgage matters.”

“What gives? According to Hanna, refinancing can’t be done with dicey credit or on homes in which the owner owes more than the market indicates the house is worth. ‘A lot of people coming to us want to refinance right now,’ she said, ‘but they don’t have the equity – they’re under water.’”

“One of the long-held beliefs about subprime mortgages is that they had a positive side, extending credit to non-traditional buyers and increasing minority homeownership rates. But in a new research paper, the Boston Federal Reserve takes a closer look at foreclosures in Massachusetts. In a remarkable finding, researchers say that widely-held assumption simply isn’t true. In fact, subprime lending led instead to a churning of properties that only left minority homeowners and neighborhoods worse off.”

“From the Boston Fed: ‘We show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents.’”

“Here’s more: ‘Altogether, the data seem to paint a somewhat bleak picture of the role of subprime lending in Massachusetts urban neighborhoods. Rather than increasing the share of homes owned by members of the community, it appears that subprime lending allowed one set of minority homeowners to replace another…these new homeowners, with greater debt burdens and less equity (and likely poorer credit to begin with), were poorly suited to handle the collapse in house prices that followed.’”

“In another surprising conclusion, researchers found it may do little good for lenders to reduce the loan principal on multi-family properties in particular to avoid foreclosures. Those properties are especially vulnerable to foreclosure, but reducing the loan amount only leaves a marginal homeowner still in place - and one who still may not be able to handle the mortgage.”

“What began as a bad year for real estate turned into one of the worst on record, driven by an unprecedented drop in home prices, a tide of foreclosures and a credit crisis whose magnitude few anticipated. Regions that had been booming were hit especially hard by the bursting of the real-estate bubble. In the Southwest and Florida, homes lie vacant along the winding streets and cul-de-sacs of brand-new subdivisions. In Phoenix, home values have fallen 41% from their peak in June 2006.”

“‘Boomers who we counted on coming down here when they retire can’t sell their homes in Chicago or Michigan or other places, so they’re not coming,’ said Betsy Kurasch, a local real-estate agent.”

“‘For economists now to make forecasts is a pretty difficult thing,’ said Ray Torto, chief global economist at real-estate firm CB Richard Ellis. ‘All of our models are outside the territory in which they’ve been built.’”

“‘I thought it would be a bad year,’ said Mark Zandi, chief economist at Moody’s Economy.com. ‘I didn’t think it was going to be a complete washout.’”

“So begins a new year in the Sacramento real estate market, remarkably making its case as the fourth straight year of a downturn. From the files, here are memories of what the pros said as the market started – slowly at first, then faster and faster – to fall back to earth. October 2005. As housing values had already started to roll back down the hill, a National Association of Realtors report pronounced Sacramento’s real estate market in ‘excellent shape with a potential for significant equity gains.’”

“What happened: In a year, median sales prices fell 8 percent in Sacramento County.”

“July 2006: ‘The evidence of a cool-down is everywhere, but I don’t think there’s evidence of a collapse. I think barring any major macroeconomic shock, like a real spike in interest rates or unemployment, things are going to remain pretty flat.’ – Sean Snaith, then director of the Business Forecasting Center at Stockton’s University of the Pacific.”

“What happened: The next year in Sacramento County, home sales fell 23 percent and prices fell 10 percent.”

“October 2006: ‘I think by next spring the residential market will reach a plateau. … If my scenario holds up, you may be under water 10 percent for a while. I don’t know if you’d call it a soft landing, maybe slightly hard, or hard light or something, but you’ll still be fine.’ – Richard Kovacevich, then chairman and CEO of Wells Fargo & Co., in a Bee interview.”

“What happened: Sacramento County median sales prices fell another $24,500 by June. In July, year-over-year depreciation went into double-digit percentages and has accelerated ever since.”

“November 2006: ‘It’s not like we’re seeing a huge erosion in home prices, and really do not expect to see that going forward.’ – Robert Kleinhenz, deputy chief economist, California Association of Realtors, giving a 2007 real estate forecast to Sacramento Realtors.”

“What happened: In 2007, Sacramento County sales prices fell 20 percent. In 2008, they’ve fallen again by a third.”

“January 2007: ‘We don’t expect any significant decline unless there’s some major economic shock, and we don’t anticipate that.’ – Alan Nevin, chief economist, California Building Industry Association, unveiling his 2007 forecast.”

‘What happened: In 2007, California’s new-home sales fell 31 percent. This year, they fell almost twice that much.”

“June 2007: ‘I think right now, we’re probably bouncing around the bottom.’ – Sid Dunmore, then chief executive officer of Granite Bay-based Dunmore Homes. What happened: Five months later, Dunmore Homes filed for bankruptcy protection.”

“March 2008: ‘I think California has maybe two more quarters of tough sledding and things are going to get better. … It’s just a 36-year gut feeling kind of thing.’ – John Robbins, a San Diego mortgage banker, and 2007 chairman of the Mortgage Bankers Association. What happened: That was three quarters ago.”

“San Diego was one of six metropolitan areas measured with an annual decline of more than 25 percent — coming behind Phoenix, Las Vegas, San Francisco, Miami and Los Angeles. Three new markets broke the double-digit barrier for the first time in October — Seattle, Atlanta and Portland, each with year-over-year drops of more than 10 percent for the first time.”

“Alan Gin, economics professor at the University of San Diego, searched for a suitable saying for the coming year and came up with ‘Things will be not-so-fine in ‘09,’ a slogan he delivered during his outlook on the local economy at USD’s recent annual real estate market gathering.’

“At the end of 2007, Gin started to expect the trouble in housing would seep into the rest of the economy. But its extent this year still surprised him, he said. ‘Last year’s problems were like termites,’ he said. ‘This year, the house collapsed.’”

“Unlike Sweden, in France sellers take the appliances with them when they move. An 86-year-old woman, however, was so eager to unload her Riviera apartment and return to Paris that she offered to throw her kitchen appliances into the deal. Speaking of popping bubbles, as housing woes deepen, approaches to selling are changing. In Stockholm there were only two people at a recent showing and the price had dropped by twenty percent.”

“Florida is holding a buy-one-get-one-free sale: two houses for the price of one. Hesitate and they’ll throw in a Lexus as an incentive. And in the most alarming sign of the meltdown yet, the French are considering Home-Staging.”

Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.

Readers suggested a topic on the future housing markets. “What are HBB predictions for when the housing market will bottom out, and why?”

One was bearish. “I think it will be so bad in 2009 that no statistics are even made. Like the lost years. The dark ages of the housing market in California lasts until 2012. I’m off to burn a witch.”

Another had this. “The NAR has stopped reporting statistics for Metro Detroit. A local group published a median of $62,800 for the whole metro area, and another $18,578 in the City of Detroit. For the metro, with 10% down and the 4.5% interest rate the Federal Reserve is targeting, that implies a monthly mortgage payment of just $285 per month for 30 years.”

A reply. “Look at the BBC Report on Detroit. I feel for the area… but why didn’t they reform the Automakers when there was a chance? Ugh… You cannot fix what doesn’t want to be fixed. Its going to get ugly… I admit I was too much of an optimist.”

One sees this. “It was a rolling bust, so it will be a rolling recovery.”

“I will maintain to the end, however, that the longest suffering will be endured by Larry’s ‘flyover’ country. As some of you point out, the bubble masked the Rust Belt’s death throes. Stories of fleeing manufacturing were already there eight years ago - for those that cared to put their 401k statements down long enough to look. I remember small mfg. closures being well documented in the Midwest press circa 2000.”

“Given a choice, I’d still cast my lot with the Sun Belt states - over the longer term.”

Another predicts. “Think ‘infrastructure.’ Long pipelines from the Great Lakes to the Everglades!
Refill the Florida swamplands with clean, cool water from Lake Superior. Plenty of water. Plenty of Sunshine. Florida Restored, and ready for the next wave of carpet-baggers from Cincinnati.”

One looks at migration. “I think the immigrants will have a positive affect on the real estate markets of such cities as Frisco and NY. I’m from NY, and I can tell you that these immigrants from Korea and South America (Savers) are just keeping otherwise slums from being turned into such. It’s all a tug of war, as it were, but in the last downturn, circa 1991, Jamaica, Queens all but folded up. Not now. There are all these immigrant businesses to fill the gap with restaurants, cheap stores, like 99 cent stores, etc. Not upscale, but it does seem to have its own economy.”

Another sees a political angle. “‘When and why’. I will still go with 2012. Reserving the right to amend that estimate as time goes forward!”

“Why not sooner: Prices are still very high by the measure of rents and incomes, and the downward movement of prices, though now accelerated in many areas, would still take a few years to bring prices in line with rents (if rents don’t fall a whole lot). We have often noted that the resets in the Zellman chart and other people’s updates of that chart have a second peak in 2011. I’m not sure if that matters while prices are sinking — foreclosures will feed on themselves without requiring the additional impetus of ARM resets. However, if prices had any other reason to stabilize, the ARM resets would tend to prevent it.”

“Why not later: Let’s just say, Obama, C. Dodd, B. Frank, and Columbia dean Glenn Hubbard, not to mention Sheila Bair (if she’s rehired) will all be trying very hard to arrest the decline. The worst of it is, they may succeed in making the decline go slower and last much longer. But O will be up for re-election in 2012, so it would be good for him if there had (then) been several months in a row of flat-to-upward house-price statistics.”

One last time prediction. “When I finally get off my lazy ascii and send Ben a Christmas card, for crying out loud.”

Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.

Readers suggested a topic on the future of the real estate industry and the housing bubble. “Is there any cause for hope that the NAR will go bankrupt before the housing bust ends? CNN Money. “The number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts, according to a closely watched housing industry report issued Tuesday. The National Association of Realtors said that home sales dropped to an annualized rate of 4.49 million units. That was down from 4.98 in October and much less than the 4.93 million units projected by a consensus of industry analysts.”

“‘The only region where we’re seeing more sales are where bargain hunters are taking advantage of distressed sale prices,’ said Lawrence Yun, the Realtors’ chief economist. ‘About 45% of transactions, nationally, were of distressed properties.’”

“Yun blamed the financial market turmoil for the devastating report. For months, sales had hovered 4.9 million to 5.1 million. ‘Today’s figure reflects the stock market crash that began in October,’ he said.”

“The drop took place despite bargain prices as property values continued their decline. The median existing home sold for $181,300 in November, down 13.2% from a year ago when the median was $208,800. Yun said that price drop was the largest the association had ever recorded and probably the worst decline since the Great Depression.”

One replied, “America is brainwashed that Realtors are ‘professionals.’ It just wont happen.”

To which was posted, “You are a pessimist. I am quite hopeful that once the full potential of internet technology for real estate sales comes to fruition, the traditional used home sales business model will be permanently broken. Let’s both make sure to avoid used home sellers like the plague and only use online shopping techniques next time we buy houses, in order to hasten the NAR’s demise.”

Another pointed out, “In the Herald - Tribune comments section someone refered to the NAR as the sixpercenters. Reminded me of a city youth gang, back in the 80’s, called the five percenters.”

The Bonner County Daily Bee. “Here in Bonner County, the average selling price for residential listings decreased by 7 percent through mid-December, compared with home sales activity for the 2007 period, based on information provided by the Selkirk Association of Realtors MLS. The average time on the local market was nearly five months. The fastest-moving sale took close to three months to close, while the slowest seller hung around for 266 days.”

“In short, there are still more homes than there are buyers and the off-kilter supply and demand cycle that had its roots in the housing boom of 2005 remained a drag on the market during the year that is just coming to an end.”

“One year ago nearly to the day, outgoing 2007 Selkirk Association of Realtors President Dale Pyne discussed how too much inventory - mostly of ’spec’ homes built on the heels of the white-hot real estate market in 2005 - had affected local housing prices and caused a correction in terms of fewer sales happening at lower prices. This month, Lana Kay Hanson, the outgoing 2008 president for the Realtors association, talked about how the correction continued throughout the past year and why she believes there is opportunity embedded in the lower housing statistics.”

“Q: How would you characterize the 2008 housing market? A: ‘It was a continuation of the bad market of the bad market we’ve seen since 2007. But there was some activity in November. It may not be gung-ho - they’re not knocking down the door - but people are realizing they can’t sit back forever.”

“Q: What’s your forecast for when the market might start to move upward? A: ‘I think we’re going to see these lower prices for at least another year, maybe longer. I do think that it’s turning, though. Not that prices are going up, but because people are starting to buy because of the deals out there.’”

“Q: Housing-related headlines in places like Phoenix and Las Vegas are saying, ‘$500,000 is the new million.’ Do you anticipate seeing the million-dollar listings going down in this market? A: ‘They’re already down. If someone had a listing for $1 million-plus in 2005, it’s probably in the $700,000-plus range now. Those properties have already taken the hit. Nobody was sheltered from this. But it had to come back to realism. Everything was getting out of range too fast.’”

“Q: Did the upward price spiral that preceded this correction start in 2005, or did it begin even earlier? A: ‘It really started in the fall of 2004. I remember seeing the statistics for home sales that November and December and realizing at the time that we really hadn’t seen anything like it before, as far as how many things were starting to sell during the winter months. Unfortunately, some people are still thinking their property is worth those 2005 prices.’”

“Q: It used to be said that we run about five years behind California as far as what the housing market is doing. Does that still hold true? A: ‘Yes, but it’s shortened to about three years. We’re really riding behind all of the other markets that are having tough times.’”

“Q: So there are some good buys because of tough times? A: ‘Extraordinary buys. There are some fabulous buying opportunities right now. But what I’m finding is that the new buyers - people who are just coming into the market for the first time - think they can get it for even less.”

“Q: With the lower sales price trends over the past couple of years, could they be right about waiting out the market a while longer? A: ‘I think we’ve hit the bottom, price-wise. We’re there. It may stay level for a long time, but as soon as more money comes into the market, prices are going to go up. It’s always the same story and it’s the same thing I’ve seen over the years. If you’ve got the money and you don’t buy in a market like this one, you’re going to kick yourself in 10 years.’”

Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.

The Inland Valley Daily Bulletin reports from California. “Foreclosed homes are getting scooped up by investors and first-time buyers, but the massive supply of units being repossessed by banks and put on the market still exceeds home-buyer demand. More plunging home values are destined for Southern California, and especially San Bernardino and Riverside counties. ‘Home prices are falling faster than they were before, and that’s what people don’t understand,’ said Michael Carney, executive director of the Pomona-based Real Estate Research Council of Southern California. ‘We won’t see any leveling off until at least the spring of 2010. It’s likely to be later.’”

“Alex Espinoza Sr., president of Ontario-based California Capital Home Loans…says there are 8,000 homes and condominiums in the two-county area now going for $200,000 or below. Buyers should realize it’s a long-term investment and that California home prices rise an average of 5 percent to 6 percent every year if you hold on to the property for at least 30 years, Espinoza said.”

“Jim Mulvihill, an urban planning and economic geography expert at Cal State San Bernardino…notes the tax break homeowners receive for owning a home. ‘We’re the only industrialized country that does that,’ he said. ‘We’re going to have that, I think, forever.’”

“‘In general, in California, property is always going to rise in value,’ Mulvihill said about long-term real-estate values. ‘It’s an investment.’”

The New York Times. “With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. For John and Laurel Goerke, in Santa Barbara, Calif., the housing market crashed in the middle of what Mr. Goerke said had been an orderly legal proceeding. At the height of the market, Mr. Goerke said, they had their house appraised at $2.3 million, which would have given them about $1 million to divide after paying off the mortgage. But by the time they sold last year, the value had fallen by $600,000, cutting their equity by more than half.”

“‘That changed everything,’ said Mr. Goerke, who is now nearly two years into the divorce process, with legal and other fees of several hundred thousand dollars. ‘The prospect of us both being able to buy modest homes was eliminated. The money’s not there.’”

“Now, with both spouses living in rental properties, their lawyers still cannot agree on what their remaining assets are worth. Their wealth is ticking away at $350 an hour, times two. ‘It’s got to end,’ Mr. Goerke said, ‘because at some point there’s nothing left to argue about.’”

“‘We used to fight about who gets to keep the house,’ said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. ‘Now we fight about who gets stuck with the dead cow.’”

The Recordnet. “State and federal regulators have hit Community Bank of San Joaquin, based in Stockton, with a cease-and-desist order that charges bank management with unsafe or unsound banking practices.”

“The bank was operating with insufficient capital, had too large a volume of ‘poor quality’ loans and engaged in unsatisfactory lending and collecting practices, according to an order issued jointly by the Federal Deposit Insurance Corp. and the California Department of Financial Institutions.”

“The bank did no subprime mortgage lending, said Bank CEO Jane Butterfield, and all of the ‘nonperforming’ loans were to local home builders taking out loans before 2007 to buy land and build single-family homes. No one guessed the real estate and financial sectors would see such a harsh downturn, she said, and San Joaquin County is ‘ground zero’ as the worst market in the country in the real estate-related meltdown.”

“‘Hindsight is 20/20,’ Butterfield said. ‘I don’t feel we were operating in an unsafe and unsound manner. … At the time we made the loans, they were good loans.’”

The North County Times. “One of North County’s largest home builders, Carlsbad-based Barratt American, filed for bankruptcy protection from creditors last week as it struggled to survive one of the worst local housing downturns in history. If Barratt American were to fail completely, it could cause a painful ripple through several local businesses. Of its top 20 creditors listed in a Chapter 11 bankruptcy filing, 11 were based in San Diego or Riverside counties and were owed $10.9 million.”

“Michael Pattinson, the company’s president, said Barratt was forced into bankruptcy after its lender, Bank of America, canceled a line of credit. He said the two companies had worked together for 27 years. Bank of America has seized all four North County projects in foreclosure.”

“Pattinson has crisscrossed the country, telling legislators about the pain builders are feeling because of ‘bad banks.’ ‘What upsets me is that a company that I was loyal to was not loyal to me,’ Pattinson said. ‘But we’re big boys. We know what goes on in this world, and what goes around comes around. I’ve got my boxing gloves on, and I’m up for the fight. I’ve lost Round One, but there’s 14 more rounds to go.’”

“But Dan Schaldach, owner of D&S Construction in Escondido, said he sees it differently. His company has been framing houses for Barratt for years, he said. ‘I think he (Pattinson) has been blaming other people for their mismanagement,’ Schaldach said. ‘They had a pretty high lifestyle, and it caught up with them.’”

From New Times SLO. “Caleb Lopez is one of the lucky ones. With several big development projects on his plate and a steady flow of smaller, private jobs coming in, Lopez might be considered a rarity when it comes to being a contractor in today’s economy. Following the overall downturn of the nation’s economy and the collapse of the housing market last year, contractors have been working especially hard to stay afloat financially.”

“‘Everything has changed,’ said Lopez, a general contractor and owner of Cal Coast Construction.”

“For several years, he said, construction was ‘people’s bread and butter’ in San Luis Obispo and Santa Barbara counties. But as the economy began to slow the business was forced to readjust to the changing economic climate. To make ends meet, companies tightened their tool belts by lowering prices, laying off laborers, or even filing for bankruptcy.”

“According to Leslie Halls of the San Luis Obispo Builders Exchange, development has slowed significantly.She said the number of bidders per project is higher than it has been in 15 years. ‘There’s just a lot more guys coming in chasing a lot less work,’ Halls said. ‘It’s gotten incredibly competitive.’”

“And while Lopez continues to do good business the state of his ailing industry stays on his mind like caulk on kitchen tile. ‘The industry has a pattern that repeats itself over and over again,’ he said. ‘Hopefully, you saved up when times were good.’”

The Press Enterprise. “The Inland region’s population boom is over, in large part due to skyrocketing foreclosures and unemployment. In Riverside County, about 13,600 people moved into the county, nearly one-third of the 30,000 people who moved in the previous year. In San Bernardino County, about 9,000 people who lived in the county left this year; about 1,000 people left the county in 2007.”

“Inland economist John Husing…said the state’s finance figures suggest that people losing homes and jobs are moving out of state. This group also includes retirees, who Husing said are moving to places like Utah and Nevada because of the lower cost of living. ‘If they can’t afford a house here, how are they going to afford one in Los Angeles County?’ Husing said. ‘If they are moving out, they are moving to places that they can afford.’”

“Husing predicted the next housing boom would begin in 2012, when he believes homebuilding will resume. ‘That still is four years away,’ Husing said.”

“Those who try to predict the future in a sometimes unpredictable California economy aren’t immune to the subjects of their prognosticating. That includes the economists.”

“The California Building Industry Association, a statewide trade group that advocates on homebuilder issues, this week sent out an e-mail to the media containing this message: ‘We’re sending you this note to let you know that due to budget cuts, Alan Nevin will no longer be under contract with us as of the end of the year. We encourage you to continue contacting Alan for his insights into the marketplace, but in order to avoid confusion, please do not refer to him as CBIA’s chief economist in the future.’”