Banker and mortgage lender Wells Fargo has labeled the Pierce County housing market “soft” in a memo identifying various markets around the country as soft, distressed and severely distressed. Spokeswoman Lara Underhill confirmed in an email this afternoon that Pierce County was considered a “soft” market but said she couldn’t provide any context as to why a market falls into a specific category.

She did say that today’s Reuters story on the topic was accurate. Reuters said Wells Fargo, the fifth largest bank in the country, identified more than 200 troubled markets nationwide that fell into one of the three categories.

Here’s an excerpt from the story about what such a designation means:

“Wells Fargo is tightening its lending standards in the affected markets on February 29, often by limiting the size of loans as a percentage of home values, regardless of borrowers' ability to pay. In some markets, it will not allow purchasers to borrow more than 75 percent of the value of their homes.”

Underhill declined to specify what all this might mean for borrowers in the South Sound.

She did, however, characterize the change in credit policy as a “standard course of business - we had similar instances 3 or 4 times in 2007. It's a routine step in managing credit policy and in meeting our commitment to fair and responsible lending principles.”

For some context on the Pierce County housing market, the median home price in 2007 increased 2.8 percent over 2006 but fell year-over-year in January by 2.5 percent, according to the Northwest Multiple Listing Service. Sales activity last year was down 24 percent compared to a 37 percent decline last month.

Talk about a mortgage loophole: A Bloomberg story reveals that some homeowners around the country are avoiding foreclosure because banks can't keep track of one very important piece of paper. That would be the mortgage note demonstrating ownership.

How could this happen? The story explains that, because mortgages were bundled into securities and sold at such a fast clip in the boom years of 2003 to 2006, the paperwork wasn't always done right.

Here's the story:

Joe Lents hasn't made a payment on his $1.5 million mortgage since 2002.

That's when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton. The Seattle-based lender failed to prove that it owned Lents' mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork.

"If you're going to take my house away from me, you better own the note," said Lents, 63, the former chief executive officer of a now-defunct voice recognition software company.

Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages. The confusion is another headache for U.S. Treasury Secretary Henry Paulson as he revises rules for packaging mortgages into securities.

"I think it's going to become pretty hairy," said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. "Regulators appear to have ignored this, given the size and scope of the problem."

=> Read more!

Despite speaking to a room packed with Realtors today, Gov. Chris Gregoire had limited comments on the topic of real estate.

She did provide a bit of a pick-me-up: “We can go out and say woe is me … don’t by a home or don't buy a car. Or we can truly get the facts out about the truth about our economy. If you want to buy a home, you can buy a home. If you want to sell a home, we’ll find a buyer.”

She added: "Keep it up, don’t let what you see on TV or the presidential debates discourage you about Washington’s economy," which got a lot of applause.

Gregoire had a lot of stats related to exports and the state budget. But none related to housing sales activity or prices. The median home price in Pierce County was down 2.5 percent in January compared to the same month in 2007, according to the Northwest Multiple Listing Service.

For more on what the governor said, see my post on another TNT blog, Biz Buzz, here.

I’ll be spending the lunch hour listening to Gov. Chris Gregoire address local Realtors in Fircrest today.

Any guesses on what she might say? Last month, the same month that median home price ended up declining year-over-year in Pierce County by 2.5 percent, she told a statewide gathering of Realtors in Olympia that it was a great time to buy.

According to an Associated Press story out of the meeting, she said, “There is no good reason for a slowing of home purchasing in the state of Washington today.”

And, like so many others, she blamed the media, saying she sometimes wishes people wouldn’t watch the evening news with its mortgage meltdown and pending-recession stories.

Tune in later for an update on what message Gregoire brings to the South Sound.

Real estate agents have a lot of names for the Hilltop, the centrally-situated and formerly (still?) infamous neighborhood in Tacoma. But not, typically, the Hilltop. In their listings, agents call it New Tacoma, South Downtown, Upper Tacoma.

Sure, the Hilltop has its share of image baggage. Two decades ago, the Hilltop was a mess of gangs, violence, drugs and run-down properties. Not so now. Certainly, developers have noticed, finding enough merit in the neighborhood to build several dozen new condos there in recent years. The Hilltop stretches from Division Avenue to South 28th Street and to South Sprague and Tacoma avenues.

What do you think? Does the Hilltop’s baggage make it the kryptonite of real estate marketing? Or should we call a place by its name?

Of the new neighborhood names floating out there, I don’t see any yet that’s stuck. Is one among them better than the others? Or how about a suggestion for an altogether new name? Any votes for the Hilltop?

Today’s S&P/Case-Shiller report on housing prices revealed a not-great end to 2007, nationally and closer to home. The Seattle-Tacoma market remained one of three in the country to see price appreciation, but just barely – December prices were nearly flat with year-over-year growth of just 0.5 percent, according to the widely followed index. (For some recent context, Pierce County home prices declined year-over-year in January by 2.5 percent, according to the Northwest Multiple Listing Service.)

Prices in the 20 U.S. market areas tracked by the Case-Shiller report showed a far greater decline at 9.1 percent.

The best market, according to the report, was Charlotte, N.C., with 2.3 percent price increases. The worst: Miami, with a year-over-year price drop of 17.5 percent.

Champions of the local market will likely say that 0.5 percent growth is better than the double-digit declines seen in several of the other markets. But many of the worst-off areas have farther to fall than Seattle-Tacoma. The Case-Shiller index tracks the value of a typical home tied to a base value from Jan. 2000. While Seattle-Tacoma area prices have increased nearly 85 percent in that time, Los Angeles prices appreciated 133 percent and Tampa saw appreciation of 100 percent.

Also significant: December was the fifth consecutive month the index has revealed a lower rate of appreciation in the Seattle-Tacoma area. As recently as July, the index reported Seattle-Tacoma’s price growth was nearly 7 percent.

November: 1.8 percent
October: 3.3 percent
September: 4.7 percent
August: 5.7 percent
July: 6.9 percent

Any thoughts on the numbers? Any thoughts on where they'll be headed in 2008?

Washington state continued to hold on to its middle-of-the pack position in January foreclosure-related filings. Washington came in No. 27 with only a 3.5 percent increase in filings from the same month in 2007, according to figures released this morning by research firm RealtyTrac.

The No. 1 state was Nevada with Vermont ranking No. 50.

RealtyTrac follows default and auction notices and bank repossessions.

Not only have mortgage rates pushed past their year-ago level, but fees attached to the home loans have also gone up, making a home loan not the bargain it was just a matter of weeks ago.

Fannie Mae, the country’s largest home lending source, will begin charging an “adverse market delivery charge” March 1, though lenders started pricing the charge into loans about a month ago, said David Erickson, president of the Washington Association of Mortgage Brokers. (Freddie Mac’s version is a “market condition delivery charge.”) The fees are 0.25 percent of a home loan, which would amount to $700 on a $300,000 house – not the kind of money likely to dissuade most prospective buyers. But such a fee could make a difference for first-time home buyers and, perhaps, for homeowners looking to refinance into a more affordable mortgage.

Why would Fannie Mae add such a fee? The company’s announcement cites “an accelerated deterioration of market conditions,” including price declines and the number of unsold homes. These figures no doubt are for the nation as a whole but markets doing better than others, such as Pierce County, aren’t being spared the fee.

And perhaps even more problematic for borrowers, Fannie Mae has tiered pricing tied to credit scores. So while borrowers were previously approved or not for a rate, Fannie Mae’s standards now attach additional charges to ranges of certain scores. For example, a credit score of 650 on a 30-year loan for at least 70 percent of the home’s value would see an additional fee amounting to 1.25 percent of the loan. A score of 675 would be charged a .75 percent fee.

Fannie Mae and Feddie Mac are the backbone of the secondary mortgage market, ultimately purchasing most home loans. So lenders tend to follow guidelines from both on standard home loans.

While the fees do mean more expensive loans for consumers, Erickson said of bigger concern to him is the nearly full-point swing in mortgage interest rates.

“The fee hits are a drop in the bucket compared to the fluctuation we’ve seen in the rates in the last month or so,” he said.

Still, Erickson said rates remain historically low and can be a good deal for home buyers and homeowners with adjustable-rate mortgages.

Interest rates for a fixed, 30-year mortgage, by the way, was 6.37 percent, according to last week's national Bankrate survey. That’s a big jump from the previous week’s rate of 5.96 percent and above the rate one year ago of 6.29 percent.

A profile of the state’s home buyers and sellers reveals the kind of people they tend to be, what they buy and how they feel about their transactions. This comes courtesy of the National Association of Realtors’ 2007 consumer survey given to brokers this month as part of a thick booklet handed out at a Seattle-King County Association of Realtors meeting.

Few surprises here, though people look at fewer homes than I would have thought and stay in their homes fewer years than they expect.

Here’s a rundown of the more interesting aspects of buyers:
They were a median age of 38 years old.
They looked a median eight weeks and saw a dozen homes.
One-quarter bought brand-new homes.
Typically, the home bought was 13 miles from their previous residence.
They plan to live in their home a median of 10 years.
91 percent used the Internet to search for homes.
68 percent said they would definitely use their agent again.

And the sellers:
They were a median age of 45 years old.
Almost half traded up to a larger home.
Typically, they owned their home for six years.
59 percent believed their home purchase was a better investment than stocks.
Half did not reduce their sale price.
Half used the same agent to sell their home and purchase another.
64 percent said they would definitely use their agent again.

I ran the word “luxury” this morning through a Multiple Listing Service search of Pierce County properties and came up with 266 listings trying to capitalize on an association with elegance. They ranged in price from $132,900 to $4.9 million.

On the high end: A 5,767-square-foot waterfront estate in Lakewood with a greenhouse, a pool, a pickleball court, granite slab counters, a master suite and guest quarters. Sounds very much like luxury.

On the low end: A Central Tacoma condo measuring 545 square feet. There are granite counters, though they are tile not slab, and wood-laminate floors, birch kitchen cabinets and a backsplash with mosaic inlay, according to the listing, which says, “Luxury available now!”

The pictures are nice of both, but I don’t associate luxury with a one-bedroom in a space smaller than some studio apartments. And while I haven’t seen this condo in person, I don’t associate laminate with luxury, either.

Like many words, luxury begins to lose its meaning when over used and it seems to have become code for certain amenities, which might be nice, but don’t necessarily translate to a life of luxury: stainless steel appliances, wood floors, crown moulding, granite of some kind.

But perhaps just the association with something luxurious has allure in marketing. One enterprising real estate agent touted the location of a double-wide manufactured home that is down the street from a luxury house.

Any thoughts?

I’ve written about mortgage ads coming in the form of baby announcements and other highly disguised (deceptive?) mailers. Now it looks like banks are getting in on the invite-as-advertisement action. But, according to a story in the Washington Post, they say it’s all in the name of avoiding something no one wants: foreclosure.

Banks are even turning to nonprofit groups to track down in-trouble borrowers who don’t return phone calls from the bank.

Here’s an excerpt. You can find the whole story here.

Mortgage lenders hunting for delinquent homeowners who have dodged their phone calls and letters are employing aggressive new methods to track them down, potentially making every knock on the door or fancy envelope seem like part of the pursuit. Even wedding invitations are suspect.

The idea, they say, isn't to twist arms. Instead, it's to avoid foreclosures, which have cost the mortgage industry billions of dollars in the past year.

Ocwen Financial is negotiating a deal with HomeFree-USA, a nonprofit group, to go door to door in the Washington area to strike deals with elusive borrowers. Fannie Mae is offering foreclosure lawyers up to $600 to help find solutions for these homeowners. Wells Fargo is disguising its letters in different colored envelopes, including some resembling wedding invitations.

Although some lenders initially resisted paying for assistance, the industry has begun backing community groups that help them find these borrowers. The math is simple: The typical foreclosure costs more than $50,000. It is usually cheaper and less time-consuming to lower the borrower's interest rate, put them on a repayment plan or sell the home at a loss. To stem the foreclosures, the mortgage industry says, lenders need to reach people they call "no-contact borrowers," those who have eluded or rebuffed them.

One of the bigger potential side effects of flat or declining home prices is how they impact spending. When home owners see double-digit appreciation in their neighborhoods, conventional wisdom says they get spendy. And not just with home equity loans to redo the kitchen or buy a new car but an uptick in overall discretionary spending, such as dinners out. Lackluster appreciation translates to feeling less wealthy and fewer spicy tuna rolls for lunch. (Interestingly and happily, a Salt Lake Tribune story I read on the topic says the downside of the "wealth effect" does not tend to impact charitable giving.)

Now that big home price appreciation has become a rarity, are you pinching pennies more than you did in the boom years of 2004 and 2005?

Here's the Salt Lake Tribune story:

Economists have long marveled at how rising home prices and a vibrant stock market can make people feel really good about their financial situations -- so good in fact, that they spend more freely.

It's called the "wealth effect" -- and even people who haven't actually realized a gain by selling their homes or stocks at a profit can feel it. Although this feeling can make them happy during good times, the wealth effect also can create despair in times such as these, when those paper gains evaporate and real losses loom.

Just ask Laura Polacheck of Salt Lake City.

Polacheck bought her home in April 2006 at the height of a red-hot real estate market. Prices in the area where she bought had been rising by double digits for years, giving many homeowners gains -- on paper anyway -- of $100,000 and beyond.

Polacheck got married and bought a house with her new husband, winding up with a house she no longer needed. She put the property on the market in June, when the latest boom began to sour, and it has yet to sell.

So she has joined the ranks of others for whom the downturn in real estate has been real.

=> Read more!

An Atlantic Monthly story not yet online but in the March issue tries to make the case that home owners are increasingly inclined to head out of the suburbs and into urban, walkable settings. The result, according to author Christopher B. Leinberger, a developer and professor of urban planning? Today’s suburbs and subdivisions could become tomorrow’s “slums characterized by poverty, crime, and decay.”

He cites a study showing one third of respondents prefer an urban, downtown-type setting while just 5 percent to 10 percent of housing stock in most metropolitan areas is located in such places. He also points to lackluster construction materials used on suburban homes that will show their wear far sooner than older, city homes. Leingberger, a visiting fellow at the Brookings Institution, says the characteristics of suburbs likely to decline are ones far from a “central city, not served by rail transit, and lacking any real core.”

Such characteristics could certainly apply to many of the South Sound’s suburban draws. But I often think that when national real estate stories take issue with suburbia, they are envisioning the developments I saw in the Riverside, Calif., area, where homes stretch to the horizon by the thousands. Suburbs of such scale are less common in Pierce County, though many hundreds of such houses have gone up in recent years and there are plans for more. Talk to anyone who makes that nightly drive down Meridian to a subdivision home and, after a few years, they might be thinking a city home and a train ride sounds appealing. (Leinberger does say that homes near Redmond will hold their value, because Redmond is close to a major city and near a walkable core. Microsoft might have something to do with it, too.)

Any thoughts? Are the Southland’s suburbs headed for slum status? Or will people continue to gravitate to big homes with big yards far from work and city cores?

UPDATE
The link to The Atlantic story was just made available. Here it is.

Tacoma landed in the top 50 for U.S. foreclosure filings last year, but just barely, according to numbers released this week by research firm RealtyTrac. The Tacoma metropolitan area was No. 47 on the top 100 list, far below hot spots such as Las Vegas and Sacramento but also far above Seattle (No. 81) and Portland (No. 73).

While Tacoma saw a 39 percent annual increase in 2007 for its foreclosure filings, just 1.03 percent of homes had such filings, which is just under the national average, according to RealtyTrac. For some perspective, the top foreclosure area was Detroit, with 4.9 percent of homes facing some kind of foreclosure filing.

RealtyTrac derives its numbers by measuring default and auction notices and bank repossessions.

I’m working on a story about short sales, and I’m wondering if you’ve participated in one or are thinking about it – on the buy or sell side. A short sale essentially unloads a property for less than what’s owed on its mortgage or construction loan. The bank agrees to the deal and cuts its losses to avoid the hassle of foreclosure.

I have found dozens of short-sale listings in the South Sound, though they amount to less than 2 percent of what’s listed. Still, these discounted yet potentially complicated deals are out there and I’d like to know your thoughts on the concept.

So far, I can offer two anecdotes. One from Browns Point, where an under-construction home originally listed at more than $1 million is now listed for half that with an offer being negotiated. The agent tells me it will sell for somewhere between the new $499,950 list price and the more than $700,000 owed on the construction loan. The second anecdote comes from friends of mine in California who tried to purchase a short-sale condo over the summer. The bank took so long to negotiate (we're talking months), they finally gave up.

Any thoughts or anecdotes of your own?

January numbers on the Pierce County housing market show sales falling year-over-year in condos and houses at just about the same rate -- just under a 40 percent decline.

Take a look at the number of units listed, however, and an entirely different picture emerges. Both had more last month compared to January 2007 but the condo market definitely stands out: There were 925 condominiums listed for sale in January, a 68.5 percent year-over-year increase, according to Northwest Multiple Listing Service numbers. That compares to 6,599 houses, 26.2 percent more than what was listed last January.

Some of the condo increase must be due to units staying on the market longer, but there was a 33.9 percent boost in January of new listings – a bit of a surprise considering that projects such as the new Hanna Heights (to be followed by Chelsea Heights) went from condo to rentals. For some context, new listings for stand-alone houses increased by just 3.4 percent in January.

Less than a week after making my out-with-granite prediction, I ran across a story backing my big decor forecast. OK, so I've only found one writer at Realty Times who agrees with me that granite is out as a counter material. (See last week's post on home trends for 2008.) Nonetheless, Drew Johnson at Realty Times thinks you should know that granite and marble are being replaced by recycled glass.

Looks good and you can feel good about helping to protect the environment, Johnson reports.

Here's the story. There's also a video here, which is mostly a rehash of the print story but gives you a quick peek at what a recycled-glass surface looks like.

Consumers wanting a beautiful-looking home while also doing their part to protect the environment have myriad options for decorating their kitchen.

And those looking to replace or install their counter tops should know, marble and granite are out and recycled glass is in.

Marble looks great, especially in the hands of master sculptors, but it is a limited resource. If you are looking to build or remodel your kitchen, check out recycled glass instead.

Recycled glass surfaces look good, are unique, and come in many different colors and styles. They also last just as long as marble and granite.

=> Read more!

While the Pierce County median home price dipped 2.5 percent last month, a look at 16 areas around the county reveals a range of ups and downs, according to what was released Wednesday by the Northwest Multiple Listing Service.

Pay special attention to the Eatonville area, which enjoyed the largest year-over-year appreciation, and Central Tacoma and Lakewood, where depreciation was in the double digits. Remember, though, this is a one-month snapshot. None of these three areas saw more than 35 homes sell in January.

Here’s how January prices shook out compared to the same month in 2007. (I excluded Anderson Island, because it had just one home sale last month.)

The monthly numbers released today by the Northwest Multiple Listing Service show the year's getting off to a rough start: prices down 2.5 percent and sales down 37 percent year over year.

One of the stand-out numbers, however, came from the north. Check out these percentage increases in number of listings in January compared to the same month a year ago.

Pierce: + 30.3% to 7,524
King: +62.9% to 12,370
Kitsap: +26.2% to 2,342
Thurston: +12.4% to 1,880
Snohomish: +47.2% to 5,979

Look for more stats and perspective on the numbers in tomorrow's News Tribune.

So what home trends do you see fading away in 2008 and which are on the horizon? I spotted a Kansas City Star story packed with predictions that could assist in house hunting or if you're thinking about redoing a room or two.

In
Yellow walls
Natural woods
Overflow tubs

Out
Brushed nickel
TV armoires
Desks

Any predictions of your own?

Here's mine: Heated floors in, granite counters way out. I know granite appears to still be very in, but just wait for it.
Biz editor Marcelene Edwards: Ovens with warming drawers and cold-water stove faucets in (she's remodeling), white kitchen cabinets and jetted tubs out.
Biz reporter Kelly Kearsley: Subway tile and second-floor laundry units in, backyards out.

Check out the full story:

Wenge, it's been good to know you.

Sunken Jacuzzis, we had some good times.

Blue and brown, I can't believe it's over.

After a couple of years of same-old, same-old on the home front, winds of change are blowing in. Some are driven by fashion, others by economic conditions and lifestyle shifts.

2008 will see waves of mainstream homeowners going green to save green, according to Ann Mack, director of trendspotting at JWT, a New York advertising firm. What Mack describes as a desire for "Prius homes" is being driven in part by financial incentives.

"Major banks are offering energy-efficient mortgages for homeowners," Mack said. Some changes are product-based (installing solar panels), while others are behavioral (holding out longer in summer before turning on the AC).

=> Read more!

Home-buying workshops are scheduled to take place at Sunrise Elementary, 2323 39th Ave. S.E., in Puyallup on Thursday and Feb. 12. Topics include downpayment assistance and programs available to buyers. Lenders will be on hand to answer questions.

Each session starts at 6:30 p.m. and is expected to last two hours. The workshops are being put on by Consumer Counseling Northwest and the Puyallup School District.

To register, call (253) 588-1858, ext. 109.

It might be far below freezing in Bismarck, N.D., but homes are selling and those that aren't for sale are appreciating at healthy -- and sometimes double-digit -- rates, according to an Associated Press story. Of course, the median price is low enough that decent price increases ($161,000 in Bismarck; $145,700 in Fargo) register in a big way.

But I thought you might enjoy reading about how one faraway, snowy housing market is weathering today's economy. (For some local context, December median home prices in Pierce County were flat with the biggest appreciation in the Graham area of 33.8 percent and the largest dip in North Tacoma of -11.8 percent, according to the Northwest Multiple Listing Service.)

Here's the story:

Homeowners in California or Florida may be hurting, but in North Dakota, you can still sell a house for more than you bought it and get a favorable loan, too.

While home sales are slumping nationwide, North Dakotans are finding buyers — even in the winter. The state has managed to duck the worst of the housing crunch thanks to a strong local economy and conservative lending that avoided the worst excesses of the mortgage market bubble.

"One of the reasons I live in North Dakota is that we have a stable economy and a stable real estate market," said Kris Sheridan, a Fargo real estate agent. "We may be freezing to death today, but we're not having the tough times like everyone else in the country."

Sheridan said more interested home buyers are popping up after the Federal Reserve cut a key interest rate. The Federal Reserve sliced rates by a half percentage point Wednesday, following another cut of three-fourths of a point a week earlier.

"It's just frosting on the cake for people in this part of the world," she said.

=> Read more!

If you thought the national housing market was gloomy before, check out this new theory from BusinessWeek: According to its latest housing installment, prices around the nation could fall 25 percent or more, returning them to pre-boom levels.

Here’s an excerpt:

While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch, who until recently had expected a much smaller slide.

Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.

South Sound real estate agents seem to think prices here will increase or remain the same in 2008, primarily because of the region’s strong job market and population growth projections. It’s certainly hard to imagine prices reversing to the point that we’d see an across-the-board return to 2003, when Pierce County’s median price for a house, exluding condos, was $178,500 – that would mean a 36.6 drop in prices. Pierce County’s 2007 median price for houses was $281,400, according to the Northwest Multiple Listing Service. (For some context, the median house price in 2007 increased year-over-year by 4.2 percent. When you add condos to the mix, appreciation was at 2.8 percent.)

Where do you think prices will head in 2008? Is the BusinessWeek theory so dire it’s hard to take seriously? Or do you think it’s possible such declines could reach the Northwest?

Even if you’re not interested in the story, I’d recommend one eye-catching piece of the BusinessWeek package – a slide show that takes you through more than a dozen metropolitan areas and shows how far prices would have to fall or rise to meet what homes were selling for in 2003. (Find the slide show, called "Housing Prices Shed Gains," to the right of the story.) It’s a good way to contrast what’s happening here – and could happen – to other areas around the country.