The Beverly Citizen has this from Massachusetts. "Second-quarter home foreclosures are up across the state and in Beverly, according to figures tracked by ForeclosuresMass.com. The combination of a cooling housing market, increased interest rates and creative financing like no-interest mortgages has put a fiscal squeeze on homeowners and left some unable to pay ballooning monthly mortgage payments."

"'What we’re seeing is a perfect storm,' said Jeremy Shapiro, president of ForclosuresMass. That perfect storm is behind the foreclosure increases, say both Shapiro and Thomas McElligott, vice president and senior lender at Beverly Cooperative Bank."

"Statewide, foreclosures are up 66 percent over the second quarter of 2005 and up 114 percent over 2004. In Beverly, the city has already recorded 53 foreclosures through June 30 of this year. That’s more than all of 2005, which saw 42 foreclosures. In 2004 Beverly recorded only 36 foreclosures for the year."

"Homeowners who gambled on dropping rates and increasing housing prices find themselves in a financial vise that is squeezing them with mortgage payments increasing anywhere from $300 a month to almost $1,000 per month."

"A homeowner with a $300,000 mortgage and an adjustable-rate mortgage has seen payments go up about $240 a month, McElligott said. If that homeowner, with the same $300,000 mortgage, had an adjustable-rate, interest-only mortgage, that monthly mortgage payment would go from about $1,250 to $1,980."

"McElligott said his bank stays away from such 'creative' financing precisely because of that built-in financial time bomb. 'At some point you have to pay,' said McElligott. 'Many consumers are only looking at their monthly payment. They don’t look ahead.'"

"Worse, said Shapiro, once in a creative-financing bind, many homeowners can’t get out by refinancing, even if they do look that far ahead. 'They are damned if they do and damned if they don’t,' said Shapiro. 'They have an adjustable rate and see down the road and try to get into a 30-year fixed. But they either can’t afford the 30-year payment or they don’t qualify. Sometimes, both.'"

The Wellesley Townsman. "Demand for housing nationwide is down and that includes Wellesley, said Wellesley resident Karl Case, a nationally known real estate expert who teaches economics at Wellesley College. Buyers are concerned about rising interest rates and worry about the housing bubble bursting, Case said."

"A local banker agrees. 'There’s a lot of inventory and buyers are waiting for prices to fall,' which hasn’t happened yet, said Brian Lynch, senior VP at the Wellesley Bank."

"'The most remarkable news is what has happened to the ’under $1 million’ market,' said (broker) Elaine Bannigan. There is a glut in the category compared to last year, she said."

"The lower-priced homes are smaller and may need work, and buyers are not as willing to work on them as they have in the past, broker Gail Lockberg said. 'Properties that need work and are perhaps priced on the high-side are getting low-balled,' added Steve Palumbo, executive at Hammond GMAC Real Estate."

"'Right now we’re selling the inventory on the shelf. In the fall, more will come on and we’ll still be heavy in the $400,000 to $800,000 range,' Lockberg said. 'Sellers are starting to get it, that it’s not their house, but the market,' she said."

"One of two things will happen: Prices will drop, or sellers will become more flexible when they get an offer and more willing to negotiate, Lockberg said."

"'People are making price adjustments,' Palumbo said. 'We’re recommending to our clients that we review [the price] after two weeks and determine if price adjustments need to be made.' He added that he has not seen any 'collapse in the market. We’re not in a state where we are seeing bankruptcies or foreclosures.'"