The Housing Bubble

It’s Friday desk clearing time for this blogger. “A partner in the 46-story Trump Soho, the condo hotel that opened in April 2010 in the Hudson Square district over the objections of neighborhood preservation advocates, last week put the building on the auction block. Of the 391 units, about 90 have been sold and 42 were currently listed for sale with prices ranging from $995,000 for a 425-square-foot studio to $8.74 million for a 2,331-square-foot two-bedroom suite.”

“Sean Sweeney, director of the Soho Alliance and one of the neighborhood critics of the project, said he thought the Trump Soho was in financial trouble. ‘Trump and his shady partners have learned the hard way not to come to Soho with a dubious scheme that violates our zoning and expect the community to roll over,’ Sweeney said. ‘Trump behaved arrogantly and now his brand name is attached to a bankrupt property being sold at public auction to the highest bidder,’ he added and concluded with, ‘Soho to Trump: You’re fired!’”

“For around four years, China has been building around 1 billion square meters of housing a year, ten times the figure in the U.S. The amount needed to accommodate real owners — people moving from farms to the cities, for example — is 700 million square meters. Prices in the frothiest markets are fifty or sixty time rents. The 50 to 60 multiple is far above the level in most U.S. markets at the height of the bubble in 2006; in those heady days, a multiple of 40 was considered giant.”

“While the government’s official figures show modest declines starting late last year, those numbers are famously unreliable. A better view comes from owners trying to sell their units. Losses of 30% aren’t uncommon. In fact, many owners who paid, say, $600,000 in 2010 are furious that their landlords are now offering unsold units in the same building for $450,000.”

“As professor and mentor at the University of Chicago’s Booth School of Business, Robert Aliber observes, ‘In China, the housing boom is a far bigger source of growth than is widely recognized, and it’s totally unsustainable. China’s spurt of a 10% growth rate is likely to be history.’”

“The million-dollar view from this 28th floor corner condo at the Ritz-Carlton Hotel and Residences is beyond one of a kind. But for a very long time, no one was buying. This ‘mansion in the sky’ took 180 days to sell. And it’s far from alone. ‘I think we’re seeing already with the Ritz that there’s not a lot of demand for resale (condos) in this price range,’ says realtor John Pasalis, who has been watching this sector closely and is concerned about an oversupply of luxury condos. ‘In some ways this (the number of Ritz and Trump units now for sale) is the sign of a market that was very speculative and is reaching a point where investors are starting to realize that just because they bought (early) doesn’t mean they are going to make an easy buck.’”

“According to the National Association of Realtors, non-residents of the United States accounted for some $41 billion of real estate purchases in 2010, and as of late 2011, 23% of all international sales were to Canadians. Canadian buyers are able to finance about 70% of the purchase price from either banks or private lenders, and often use home equity lines of credit for the down payment to ‘generate cash flow with almost 100% leverage,’ says Wendy Fedoruk, a Calgary-based investor, consultant and broker.”

“‘It wasn’t an accident that Phoenix and Las Vegas had a bubble,’ says Calgary-based broker and consultant Mike Wolf. ‘People want to live there.’ After all, he points out, the weather is good and the cost of living is low. Nevada has a business-friendly climate, with no state income tax. ‘You can buy a house here and have a good life just working at McDonald’s,’ he says.”

“Ash Cutchin, owner of Ash Cutchin Real Estate Appraisals, noted that when Wingate and Associates assessed the county’s 12,000 properties last year as required by law, the Roanoke firm did not include foreclosed properties. ‘They kind of seemed to ignore foreclosures,’ said Cutchin, noting that in 2011, one-third of home sales in Hampton Roads, which includes Southampton County, were foreclosures.”

“‘They have a willing buyer and a willing seller, neither under duress,’ said Harold Wingate, president of Wingate and Associates. ‘In other words, if you put your house on the market and I offer you $50,000 less than you’re asking, you don’t have to sell it. But, if you get foreclosed on, the bank owns your house, and they don’t want to hang onto it. They want to unload it, so somebody might buy it for $100,000 less than it’s worth.’”

“A foreclosed mansion on the shores of Lake Norman is no longer the most expensive real estate listing in the area. The home took more than $22 million to build. It was previously listed at $8 million. Now it is a bargain at $5.9 million. The broker who has the listing said there’s been a lot of interest, but so far no offers, so the bank decided to make a drastic reduction in price.”

“‘We still have had long interest. But BB&T is ready to sell that property. We’d love to get it off the books,’ said Debbie Monroe, Broker with Lake Norman Realty.”

“Mitt Romney’s campaign has staged rallies at foreclosure hot spots and struggling construction companies. Tampa retirees Chris and Mary Lou Ferguson, lost $200,000 when they sold their home. ‘That’s our nest egg, gone,’ said Mary Lou Ferguson.”

“Struggling to keep her business going after the recession, Land O’Lakes homeowner Lisa Shorts tried six times to reduce the mortgage on her home before the bank finally sent her a foreclosure notice. ‘They have the capacity to take the loss,’ she told Romney. ‘Why have they not been forced to do that?’”

“Area housing experts believe the banks are purposely holding back on releasing more foreclosure properties to the market. ‘I know for sure that there is still a fair number of homes being foreclosed every day,’ Skip Murphy of The Address Realty in Redding said earlier this week. ‘And a great many more are somewhere in the pre-foreclosure limbo. I see vacant and empty homes in every local neighborhood.’”

“‘Since that inventory is mostly under government control via Fannie (Mae), Freddie (Mac), HUD, the government will solely determine 2012’s housing market,’ said Murphy, who also sits on the board of the Shasta Association of Realtors. ‘And Fannie and Freddie are the only lenders willing to offer 30-year loans. So it’s all in their court.’”

“One-third of single family home sales in King County last year were sales of distressed properties, while one-half of single family home sales in Snohomish and Pierce Counties were distressed, according to a new report from Washington Property Solutions. The median price paid for a single family home in King County in a short sale was $286,000, while the median price for bank-owned properties was $202,000.”

“However, Washington Properties Solutions CEO Richard Eastern said, ‘There’s a myth out there that you will be able to sell a short sale significantly below market value.’ Actually, ‘there is a bit of a check-and-balance process,’ Eastern said, with lenders typically basing their valuation on three active listings and three closed sales in the surrounding neighborhood. One challenge he sees is that banks do not take the listing history into account in evaluating offers on a distressed property. Eastern recently had a deal fall apart on a property that originally listed for $200,000 before dropping to $190,000. The only offer on the home in four months was for $163,000, which the lender rejected as too low, even though it was the only offer made, he said.”

“Federal Reserve Chairman Ben Bernanke has proposed one solution to help the country’s ailing housing market: ‘redeploy foreclosed homes as rental properties.’ In a white paper released earlier this month, Bernanke noted the flow of new REO homes could be ‘perhaps as high as 1 million properties per year in 2012 and 2013.’”

“Skilled and intelligent specialists, trained in neoclassical economics in leading US institutions, did not see their enormous housing bubble until it burst in front of them with horrendous consequences. What makes Australia’s ‘experts’ any more competent?”

“That Australia’s residential property market has resembled the Ponzi stage of financing for the last 11 years is nothing short of astonishing. On aggregate, net real rental income has resulted in continuing losses starting at $966 million in 2000, and peaking at $8.8 billion in 2008. Rental income has not exceeded interest costs since 2000, let alone met the costs of maintenance, rates, agent fees, and property tax.”

“As investor Jeremy Grantham has noted: ‘Bubbles have quite a few things in common but housing bubbles have a spectacular thing in common, and that is every one of them is considered unique and different.’”

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The Lakeland Times reports from Wisconsin. “Property values are continuing their dramatic downward slide in Minocqua and in other northern Wisconsin property-taxing entities, and the region is no exception as the nation struggles with a devastating housing market implosion that just doesn’t seem to have an end in sight. Even as people lose as much as 50 percent of the value of their homes, and sometimes more, average property tax bills are staying put right about where they were. Minocqua town chairman Mark Hartzheim said one property in Minocqua that had listed at more than $700,000 had sold recently for $269,000 or $279,000.”

“‘Now the sevens, that was way too high,’ Hartzheim said. ‘That’s when the market was hot. But there was a time when that could have been legitimately sold for 500-something.’”

“Others have cited other properties in apparent similar freefall, including a lakefront property with a 3,000 square-foot home and 150 feet of frontage, which was going at $350,000, down from around $850,000. Hartzheim says it’s the tax rate that fluctuates, not the levy amount, and fluctuation is a two-way street. Just as your taxes won’t go down by 25 percent if you lose 25 percent of the value of your property, they don’t rise by 25 percent if your property rises in value by that much.”

“‘You ride the bubble up, you ride the bubble down,’ he said.”

The Herald Palladium in Michigan. “Over the past year, Paul Dumke, a consultant with Core Real Estate in Bridgman and Stevensville said, many sellers have realized that houses must be priced according to current market conditions, not based on a value of five years ago. ‘Now they’re realizing this is no different from the stock market ‘and I have to take my pill,’ said Dumke, a Realtor for seven years and president of the association.”

“For example, a house in Union Pier sold for $295,000 last year, down about 13.5 percent from $335,000 three years earlier. But a person who takes such a loss in selling a house may come out ahead when buying a different house that has also lost value.”

The Post Bulletin in Minnesota. “Home sales in Austin increased by a whopping 17.1 percent in 2011. Low interest rates and a wide selection of homes helped increase sales, said Angie Schott, a Winona Realtor who’s the the SEMAR MLS president.”

“I would not say we are out off the woods yet with regard to the housing slump, since there are many sellers yet struggling to sell at a price that balances what they purchased their home for, Schott said. ‘Rather we may be at the start of a stabling market, and we can watch the data at the start of 2012 to know for sure.’”

The Northern Star in Illinois. “Members of the local Move On Council braved freezing winds to protest against banks foreclosing homes during the last four years. ‘The reason we’re out here is because in the last four years, one in 10 homes in DeKalb County has been foreclosed,’ said Richard Gallati, core member and recruitment coordinator for the Move On DeKalb Sycamore Council.”

“Although she is not a member of Move On, Julie Kiefer-Bells, of DeKalb, said she believes the crisis would not have happened were the Federal Consumer Protection Bureau (FCP) around years ago. Kiefer-Bells said it is too easy to misunderstand the fine print. This is why several homeowners believed their incomes would rise.”

“‘But that didn’t come out to be true,’ Kiefer-Bells said. ‘They started losing jobs, and that’s why so many who were innocent and believed those things could not handle the mortgage amount. It’s heart-breaking to skim through the classifieds and see so many homes for sale.’”

The Chicago Tribune in Illinois. “The Illinois Association of Realtors reported that existing-home sales in the Chicago area eked out a 1.3 percent gain last year, compared with 2010. However, sales within the city of Chicago dropped 7.2 percent from 2010, to 17,715 homes sold. For the year as a whole, median prices declined 11.9 percent and 13.8 percent for the Chicago area and the city, respectively.”

“‘People are gravitating toward foreclosures and short sales right now and that’s causing the median prices to drop,’ said Loretta Alonzo, a real estate agent at Century 21 Alonzo & Associations in La Grange and president of the Illinois Association of Realtors.”

“‘There’s this deflation-like attitude among buyers that the longer I wait, the better price I’m going to get,’ said Jack Ablin, chief investment officer at Harris Private Bank. ‘It’s a cat-and-mouse game with sellers. And buyers believe time is on their side. If we can get a couple months where homes stabilize, it will give buyers a sense of urgency.’”

The Newark Advocate in Ohio. “There were 778 homes sold in Licking County the last half of 2011, up from 666 during the last six months of 2010. But, the expiration of the home buyer tax credit likely stifled activity late in 2010. Anna Kuhns, a Newark resident in temporary housing since returning to the area in November, continues searching for a home for herself and her husband. ‘I’ve been a little disappointed, especially in the Newark-area older homes,’ Kuhns said. ‘People may have an overestimation of what their home is worth. Some look like they’ve been on the market a long time, but there hasn’t been a dramatic price cut.’”

“Kuhns said she bought a much larger home in Indiana for the same mortgage payment she made in Newark, before leaving for six months. She seeks a four-bedroom, two-bath home here for $210,000 or less. She finds some homes too old without proper maintenance, some newer homes too small, and others overpriced. The sellers are either downsizing or underwater on their mortgage and can’t afford to negotiate much on the price.”

“Still, she describes herself as optimistic about the market in 2012. ‘It really has nowhere to go but up,’ Kuhns said. ‘It’ll probably stay the same or go up a little bit.’”

“Stephen Johnson, the city of Newark’s auditor, bought a new house, but has been unable to sell his old house, so he’s stuck with two homes, for now. His former home has been on the market for six months. ‘I don’t believe anybody has looked at it the last several months,’ Johnson said. ‘I think it must just be uncertainty on the part of the buyer. People are afraid of losing their jobs or (having) their pay frozen.’”

“Johnson said he might resort to renting his former residence if it doesn’t sell by the summer. ‘We reduced the price once,’ Johnson said. ‘I’m willing to entertain any offers, but I don’t want to lower the price right now. Price doesn’t seem to be the issue. It’s just (lack of) traffic.’”

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I suggested a topic on recent government actions and the internet. “I’d like to know what readers here think of government attempts to restrict internet freedom. Not so much about this blog, but what it would mean for financial issues like the housing bubble, or just plain free speech.”

One said, “Unless people are willing to pay for content, there will be less and less of it. The piracy issue is real, and not just overseas. On the other hand, I understand the bill over-reaches, in some way that is hazy. That’s what I get from a brief debate I saw on TV. The issue is ‘fair use,’ I suppose — quoting something with attribution rather than simply republishing it without attribution.”

A reply, “I would characterize it as over-reaching in ways that are not ‘hazy’ at all—but rather downright unconstitutional IMHO. There is no right to due process before your site is taken offline, and you get to argue about getting it back online. Of course, our current crop of SCOTUS PTB would likely not find it unconstitutional, unfortunately.”

One had this, “I think it is clear that the legislation was targeted at sites that specialize in the distribution of copyrighted movies, music, tv shows, entire books, etc. The problem is the difficulty is in drafting legislation that allows them to shut down sites clearly created to assist in the pirating of copyrighted materials, and a site intended as a discussion forum where the owner of the site can not prevent people from posting copyrighted materials.”

A reply, “I think internet freedom relates to our guaranteed freedom of privacy in our papers. The federal government has no right to monitor what we write. No right to read it, shut it down, take it away or censor it.”

Another said, “I had enough of 1950’s-type censorship in the 1950’s. We anti-war activists got a little taste of it during the run-up to IW2 when you were ‘either with us or with the terrorists.’ Having to live, work, write, with that sort of mentality leads to both creative deadlock and a strong desire to circumvent the law— neither of which bodes well for a vibrant, functional society.”

“Practical considerations aside, living in fear that your words/posts may land you in prison, on unspecified charges, indefinitely, makes for an authoritarian (and unaccountable,) ruling class, and ultimately revolution.”

And another, “My simple conjecture is that limiting information about the real economic situation can serve to cover up and accelerate incipient economic collapse. Exhibit A: The defunct Soviet Union was famous for gross official overstatement of its economic successes, to the point where citizens and non-citizens alike realized the end was at hand.”

“Exhibit B: Enron’s stock price stayed reasonably high right up until the point of collapse, during a period of massive control fraud.”

“Exhibits A and B both are examples of how using deception to cover up economic malfeasance can lead to sudden and ‘unexpected’ collapse. Restricting free speech on the internet would act in the direction of increasing the number of sudden collapses of ‘too-big-to-fail’ economic entities operated under conditions of control fraud, of which I assume Enron and the former Soviet Union are primary examples. (Ironically, both failed, and the world kept on spinning.)”

“The internet has been a great driver of free speech and information exchange. Those who are against freedom of speech and who profit from limiting others’ freedoms will not hesitate to take away American’s Constitutional free speech rights if doing so best serves their avaricious interests.”

And finally, “If it were not for the internet I would have thought I was the only one paying $9 for mayo and inflation wasn’t a problem just like the government said. In 2004 I would have thought I was the only one who thought house prices were way out of whack because there wasn’t anyone where I lived that didn’t buy into the mania that was supported by the media and the PTB.”

“It would be a lot easier for the PTB to control people if they had to take the official government numbers as the truth.”

The Atlantic Wire. “With the U.S. government trying to pass what Google’s Sergey Brin has called ‘China-like censorship,’ China has found a new way to tamp down free expression on the Internet: make people use their real names. After the Chinese government realized that Weibo, a Twitter-esque microblogging service, gave rise to ‘irrational voices and negative opinions and harmful information’ — in the words of Wang Chen the deputy director of Communist Party’s propaganda department — it has decided to clamp down by requiring all bloggers to register their identities with the government, reports The New York Times’ Michael Wines.”

“A lesson for U.S. Internet users, after old-school government control of websites comes censorship 2.0: Total removal of online anonymity. If you think this can’t possibly happen in the U.S., this identity issue is already being debated and enforced, however the main actors have been the tech giants who are championing the SOPA protests.”

The LA Times. “Watching from China, where web censorship is practically a national hallmark, some can’t help but smirk and crack jokes about the controversy raging over Internet freedom in the U.S. The brouhaha has generated some strong opinions in the country Google fled, not the least because opponents of the SOPA and PIPA anti-piracy bills are conjuring Chinese web censorship to promote their case.”

“The consensus here, however, appears to be this: Americans should try a minute in our shoes before invoking online Armageddon. If anything, Chinese bloggers say, the debate underscores how privileged U.S. web-users and Internet companies are, even in times of duress. ‘Only an American company could protest the way Wikipedia or Google has to the government,’ said Zhao Jing, a closely-followed blogger in Beijing who uses the pen name Michael Anti. ‘A Chinese company would never get away with that.’”

“‘It’s hard for people in the U.S. to understand Internet censorship in China,’ said Wen Yunchao, a prominent blogger and outspoken government critic who left mainland China recently for Hong Kong. ‘In China, all the government decisions are done in a dark box. No one knows what’s going on. There’s never any legal reason cited. If these laws are passed in the U.S., every step of the way it will be more transparent. People can challenge it. There’s no comparison when it comes to censorship in China and in the U.S.’”

“Still, Wen supports U.S. activists challenging the bills, saying it’s a slippery slope to lesser web access. He said China’s so-called Great Firewall, which blocks access to many foreign sites like Facebook and Twitter, was first billed as a strategy to stop piracy and pornography. ‘Now it’s being abused and extended to thousands of websites,’ he said.”

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It’s Friday desk clearing time for this blogger. “What’s next for the burgeoning Occupy Homes movement? Should local activists continue to add — one by one — to the tally of foreclosed homes they are defending, as they continue to occupy ex-Marine Bobby Hull’s home in South Minneapolis? Or should they push to broaden the movement? ‘When banks are in the monopoly business, I call that cheating,’ said Bobby Hull, whose foreclosed home has been occupied since early December. ‘I want my money back!’”

“A New York man says Occupy Wall Street protestors went too far after occupying his own home where he and his two children lived. Protestors took over a man’s house in Brooklyn and presented it to a homeless family after they found it vacant and believed to have been foreclosed on by the bank. Mr Ahadzi is currently renting out a two-bedroom in a nearby neighbourhood in Brooklyn while he works to pay off the mortgage of the two-story property he says he purchased in 2007 for $424,500 but has since struggled to make payments on.”

“Just a couple years after its purchase, that home price dropped to $150,000 when the housing bubble burst. ‘Why can’t you fight for me?’ Mr Ahadzi says he asked them, himself being a victim of the foreclosure crisis after losing his job in 2009. ‘I paid the mortgage on the house for two years.’”

“Blaize McMonagle, a Florida homeowner who had one of 300 foreclosure cases heard in a courtroom during three days this week, said the judge sped through his case without a chance to defend himself. McMonagle, 30, bought his home in Winter Springs, Fla., in October 2007, but fell behind in his mortgage payments when he was laid off from his job in January 2008. He was able to pay for several months from his savings until July 2008. His bank put him in default in August-September.”

“McMonagle, who is now unemployed, said he came to the court on Tuesday morning ready to defend his case. His defense, he said, is that his bank no longer owns the loan for his home and it has ‘not been willing to work’ with he and his wife regarding a loan modification. ‘The judge asked me when the last time I paid was and then he gave a default judgment to my bank, without giving me any opportunity to defend myself,’ he said.”

“‘I didn’t get to speak,’ McMonagle said. ‘I have a constitutional right to defend myself and at least give the judge evidence and make my case, but he didn’t give me the chance to do that. He just ruled against me. I think it’s an abomination of the justice system.’”

“Mechelle Williams made headlines on Dec. 28, when she told presidential hopeful Newt Gingrich her Spencer home is scheduled for a Feb. 21 sheriff’s sale. Williams has worked at Eaton Corporation for 16 years and is thankful for the job that allowed her to purchase a four-bedroom home in 2008. ‘I was happy to have the house and the kids were so excited,’ Williams said. Though she qualified for 50 percent more than the purchase price, she ‘wanted to be very practical and keep the payment affordable.’”

“Despite that effort, she realized at the end of 2009 that it would be difficult to keep the home. Overtime hours which had been used to offset high food and gas prices were being cut, as were work hours overall. ‘The bank offered a modification that brought the payment down $10 a month. I said, ‘I can’t do this now and, within days, they started the foreclosure process,’ Williams said.”

“RE/MAX New England fired up a distress flare over the impact of the Dodd/Frank banking law. That legislation may be stalling the foreclosure recovery in Connecticut and elsewhere in the region, noted Jay Hummer, RE/MAX New England’s executive VP and regional director. ‘The present law, though written with the intent of protecting homeowners from predatory lending practices, has resulted in incredibly stringent guidelines which have stopped the flow of an open market,’ RE/MAX said in its press release.”

“Hummer specifically addressed ‘unrealistic’ appraisal requirements, saying they’re adding to the downward pull on prices. ‘If the bar for appraisals is set so high it cannot be reached, we will never see an increase in pricing,’ he said.”

“U.S. Census reports show that while the number of total housing units increased nationally by almost 14 percent from 2000 to 2010, the number of vacant housing units ballooned by almost 44 percent. Locally, 14 of 23 Atlantic County municipalities have seen the number of vacant housing units increase by 16 percent or more from 2000 to 2010. In addition, 11 of 16 towns in Cape May County and 10 of 14 towns in Cumberland County have seen a similar jump.”

“‘People are becoming frustrated by the system, and a lot of them are walking away from properties,’ said James Schroeder, an attorney and real estate agent with Keller Williams in Northfield.”

“‘Even those who can afford houses are not convinced housing prices have bottomed. They’re staying out of the market until they’re convinced housing prices have stabilized,’ said Michael Busler, a fellow at the William J. Hughes Center for Public Policy at Richard Stockton College. For example, he said, homes that may have been selling for $300,000 four to five years ago, before the crash, may be selling for $200,000 following foreclosure.”

“‘The last thing they want to do is pay $200,000 this year when they could get it for $180,000 next year,’ Busler said.”

“Foreclosure filings are down across the country and in local official records, but area realtors say that those numbers don’t reflect reality. ‘The number of filings don’t necessarily go in line with how many listings there are, because there are properties we have that we’ve basically been babysitting for over a year because they’re not ready to be listed yet. There are just so many vacant properties that aren’t on the market right now,’ says Jennifer Vozka of Remax Invest in Rhinelander.”

“Boise’s housing market gains a bit of unwelcome and retroactive notoriety, thanks to a New York Times article published this week. Using newly released Fed transcripts, the article details Federal Reserve officials’ apparent lack of concern about the housing bubble and its potential effects on the broader economy.”

“Former Federal Reserve Bank of San Francisco President Janet Yellen relaying information from her region: One builder she spoke with, she said, ‘toured some new subdivisions on the outskirts of Boise and discovered that the houses, most of which are unoccupied, are now being dressed up to look occupied — with curtains, things in the driveway, and so forth — so as not to discourage potential buyers.’”

“According to the article, the anecdote brought laughs in September 2006.”

“Market differentiations are beginning to show up — a shift from 2008 when house prices were down across the board, says economist William Emmons of the St. Louis Federal Reserve. Emmons, who was sharing his own viewpoint and not speaking for the Fed, said he often shows a map of mortgage delinquencies in the St. Louis region when he makes presentations about foreclosure to groups in the area.”

“‘The Mississippi River is the dividing line. On the Illinois side, there’s a higher level of delinquency and distress,’ he said. ‘It’s not because the local economies are that different, but in Illinois everything takes longer.”’

“For a more extreme example, he points to Florida, a judicial state, and California, primarily a nonjudicial state. ‘They both had extreme booms, and they’ve had huge declines in house prices. In 2006 they looked the same: no foreclosures. In 2009 they looked the same: a huge increase in foreclosures. But by late last year you could start to see a difference. California had much less evidence of bottled-up problems and Florida is still as bad as it always was,’ he said. ‘I think it’s going to be 10 years for Florida to get through this.’”

“Emmons believes that Americans have yet to take a hard look at the financial factors that fed the economic collapse, including the reliance on consumer spending and housing for the nation’s long-term economic growth. ‘That was not a good idea,’ he said. ‘That was not a sound long-term growth strategy — to generate long-term economic growth based on people borrowing money to buy Hummers and McMansions.”’

“According to Intermountain MLS, the average selling price of Boise homes has fallen $136,000 since 2007. Christian Eschen has worked as a real estate agent in Boise for seven years. Working on commission, Eschen has been hit hard by the market’s decline. ‘Since homes are selling for 40 to 60 percent less than they were five years ago, this has translated into a drop in income of about 50 percent per transaction for me,’ Eschen said. ‘This is for doing the same amount of work, or more if it’s a short sale or a foreclosure.’”

“For Fallon Eisenbarth, a Boise homeowner of 11 years, renting her property seems the only option. Her family is outgrowing their current home, which has depreciated in value by $62,500 since 2008. In renting, the Eisenbarth family says they are taking on more risk than they had planned but have no choice until the market rises. ‘As real estate appreciated, we stayed excited and planned to sell after a little while,’ Eisenbarth said. ‘Due to the decline in the market some of our plans have changed. Now we will not be selling anytime soon.’”

“While the number of sales he makes is only slightly lower than before the decline, selling prices are drastically lower. ‘Four years ago you could not buy a trailer with a foundation for $100,000,’ Eschen said. ‘Now that gets you a nice three-bedroom, two-bath house.’”

“Lain Walburn said she never imagined buying property at such a young age, but at 26, she signed on the dotted line and became a homeowner. Walburn attributes this opportunity to the plunging real estate market in Boise. While many struggle to pay their mortgages and watch property values diminish, Walburn is reaping the benefits of a system in turmoil. She was given a low-interest rate loan that required only a small down payment. Walburn purchased a four-bedroom Boise home with a swimming pool for a mere $99,000. The original asking price was $150,000.”

“Walburn purchased a home in foreclosure. ‘When the market was good, there was no way we would’ve been able to buy a house,’ Walburn said. ‘If it weren’t for the super low prices, we would’ve waited a few more years.’”