A look at the 2007 housing market slowdown and its effect on state

By Richard Mize

Published: December 30, 2007

Oklahoma, the product of a series of real estate deals as complicated as they come, was born during the Panic of 1907 with its stock crash, recession and tight money.

In its centennial year, Oklahoma and its property markets endured another wobbly Wall Street, another bout with tight credit and a new specter of recession — in what might be called the Vague Sense of Dread of 2007.

Despite positive price statistics, a pall seemed to fall over the housing market as the year progressed. Maybe the weeks and weeks of rain early in the year, which bogged down builders, sucked in buyers and doused their mood.

A slowdown was due, at any rate, and came as no surprise. Home construction was off more than 10 percent from 2006. Homes sales slowed, too.

But prices held.

Oklahoma home values, in fact, continued to increase in 2007, even as formerly bubbly big-city markets, mainly on the coasts, continued to wheeze, spawning the scariest national headlines seen here since the 1980s oil bust.

Homes did lose value in 2007 — but not in Oklahoma, thanks to its stubbornly strong economy, itself a marvel when so much of the rest of the country seems to be teetering, thanks largely to state's old friend, the oil-and-gas industry.

Oklahoma housing did take some blows during the year.

The subprime mortgage mess — a flood of foreclosures in late 2006 that washed away Wall Street's means, and desire, to keep buying home loans to borrowers with sketchy credit — stung some.

Subprime loans dried up as buyers on the secondary market disappeared and lending standards tightened, and some mortgage shops dealing mainly in that part of the market did close their doors here.

The credit crunch grazed the top end of the housing market, too. Higher-risk "jumbo” loans — those too large to be considered "conventional” and "conforming,” the kind that Fannie Mae and Freddie Mac like to buy, bundle and sell to investors — got scarce.

The sudden drought scotched some home sales at the closing table. The year ended with interest rates on jumbos still higher and lenders reluctant to extend the loans for fear of being unable to sell them on the securitization market.

Tight credit also spooked some sectors of commercial real estate. Some marginal deals based on securitized loans fell apart.

But investors with capital to park somewhere still pulled into Oklahoma to buy office buildings, warehouses, apartment complexes and other income-producing properties, although prices pulled back somewhat from those seen the past few record-setting years.

Here are some specific highs and lows from the real estate business in the Oklahoma City area from 2007:

• Ice damming, rare in Oklahoma and other southern climes, damaged houses at least twice, in January and again in December.

Winter storms loaded roofs with ice, which collected along eaves and around flashing, pushing moisture under shingles and causing leaks. It created another headache for homeowners who spent days without electricity and saw trees crippled by the ice.

• Spring and early-summer rains lasted for weeks and weeks, stalling construction — residential and commercial. It caused the Central Oklahoma Home Builders Association to postpone its popular Parade of Homes until fall to give builders time to finish their show homes. The delays were seen by some as an unexpected treatment for a fevered housing market that needed to slow down.

• In June, Ann Campbell, a prominent Realtor in Edmond, was sentenced to two months in federal prison, plus two years of supervised release, and fined $4,000 for conspiracy to commit wire fraud in connection with mortgage fraud in the sale of homes in Edmond's upscale Oak Tree addition.

Campbell was the most prominent of a dozen people convicted in the scheme.

• Also in June, CB Richard Ellis-Oklahoma acquired Trammell Crow Co.'s transaction services in Oklahoma as part of the Los Angeles-based CB Richard Ellis Group Inc.'s $1.8 billion acquisition of Trammell Crow. It was the most significant change in the structure of the commercial real estate business here in several years.

Oklahomans remained at the helm of both firms, with Trammell Crow concentrating on development in a return to the early emphasis of the company founder, Dallas developer Trammell Crow.

• Also in June, Oklahoma City developer Richard Tanenbaum, chief executive of Gardner-Tanenbaum Group, settled a sexual harassment suit brought by five former female employees, agreed to pay them $145,000 — and lambasted the U.S. Equal Employment Opportunity Commission for bringing the case against him.

Tanenbaum took the highly unusual step of issuing a public statement claiming that the EEOC ignored inconsistencies in the women's testimony, found no corroboration of their grievances and abused its power to administer sexual harassment laws. An agency spokesman said he had never heard of a party to such a settlement publicly castigating the agency afterward.

• In July, SandRidge Energy acquired the former Kerr-McGee office building in downtown Oklahoma City from Chesapeake Energy Corp., which acquired it from Anadarko Petroleum as part of a joint venture on natural gas plays in Oklahoma, Arkansas and Texas.

The empty, 30-story, almost 500,000-square-foot tower loomed over the city's office market for more than a year. Property specialists feared it would be bought by someone to lease out, which would have socked the office market just as it was in full recovery from the 1980s oil bust. SandRidge bought the building to use it, keeping it off the rent rolls.

• In August, Chesapeake Energy Chief Executive Aubrey McClendon made a personal play for land owned by the city of Davis. The city declined his offer of $5 million for most of the 6,131-acre Cross Bar Ranch.

It was a rare rebuff for the natural gas magnate, who has invested in land statewide under the name Arcadia Farm LLC. The public process of trying to buy property from a government revealed just how extensive McClendon's land holdings had become the past 10 years: some 73,000 acres of farmland, ranchland and timberland, including 10,000 acres in Oklahoma County, some of it in Oklahoma City with potential for development.

• In November, Oklahoma's new tough anti-illegal resident law went into effect, causing some landlords to wonder how they were supposed to make sure they were not renting to illegal aliens.

The year ended with landlords still having questions and many of them — including some who supported the law — fearing the next possible step: State Rep. Randy Terrill, R-Moore, who authored the law, revealed plans to write another one giving authorities power to seize property used to harbor illegal residents.

• Also in November, a sea change in the leadership of the Oklahoma City Metro Association of Realtors that began in September 2005 with the controversial election of 2006 directors — outgoing directors sued to get the election overturned but failed — became complete.

Dawn Kennedy was hired as executive officer and moved here from Wisconsin. Kennedy and the association's directors are reorienting the trade group to concentrate on member training and service and state and local issues after several years of emphasizing international business.

• Also in November, the Shawnee Tribe, based in Miami, OK, revealed plans to build a tribal headquarters, hotel and casino in Oklahoma west of Interstate 35 between Britton Road and Wilshire Boulevard.

The project hinges on the land, in the hands of private investors working under an agreement with the tribe, being put into trust for the Shawnees. If the Bureau of Indian Affairs approves the trust application, the property will become the tribe's first, and only, land base.

The tribe's plan immediately drew fire from Mayor Mick Cornett and Remington Park Racing Casino, which complained that an Indian casino would "entirely devastate” Remington Park and harm Oklahoma horsemen.

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