The Morning Call reports from Pennsylvania. "Average home prices in the Lehigh Valley fell last month, the surest sign yet that the local home market is in retreat from the sales frenzy of the past few years. The number of homes sold, which has fallen six consecutive months."

"Buyers have their pick of properties, and agents say they can make offers that are below the listing price. 'The sellers who are getting good buyers are pricing their homes very competitively, because buyers have just so many options they will walk away and go to the next house,' said Ellen Shaughnessy, a real estate agent in Easton."

"Experts have said the rate of home appreciation in the Valley was unsustainable. The market was bolstered by strong demand from home buyers moving to the Valley from more expensive towns in New York and New Jersey, and to a lesser extent the Philadelphia area. The newcomers found Valley home prices more affordable and often offered more than the asking price."

"'We were expecting it to slow down. The market took much longer to give, but eventually it happened,' said Bethlehem economist Kamran Afshar."

"Last month, the number of homes sold fell 22 percent, compared with last year, and the number of pending sales fell 25 percent. It was the lowest number of pending sales contracts since December 2003, according to LVAR statistics."

"The glut of homes on the market is slowing the pace of sales, experts say. The number of homes listed this year is almost double the number that have sold. There have been more new listings in the first 11 months of the year than all of last year."

"As supply outstrips demand, an unavoidable consequence is a decline in home prices, said Afshar, the Bethlehem economist. 'We expect further declines in volume, and maybe further adjustments to price,' Afshar said."

"Agents say sellers still want to set their own prices. Deb Dahlinger, an agent in Hanover Township, Northampton County, warns sellers they may have to consider a price reduction if the home does not sell after a month on the market."

"I tell them: 'Don't expect the house to sell right away. It is going to be sitting like all the other ones,' Dahlinger said."

The Providence Journal from Rhode Island. "One classified newspaper ad says '1st Mo. FREE.' Another: 'Free Heat, Free Hot Water and FREE RENT!'"

"The latest 'promotional giveaways' to lure new tenants even include a free spa getaway weekend. If that’s not enough, one property manager offers $500 to anyone who makes a referral that lands a new tenant."

"The reason is simple: rental properties are going empty. 'Our occupancy rates are off anywhere from 2 to 5 percent' from last year, said Cheryl Martin, VP of Residential Property Management of Warwick. 'We need to do something to be more aggressive in order to compete.'"

"Property managers and real-estate agents say the demand for rentals priced at $1,100 per month and up has gone soft. Not since the recessional mid-1990s, Martin said, have they resorted to freebies to lure new tenants."

"The large number of rentals going empty is reflected statewide in the 'rental vacancy rate,' which has nearly doubled in the last three years, to 7.7 percent last year, according to U.S. Census data."

"'We’re flooded with inventory,' said Diane Barone, a real-estate agent in Cranston. 'The rental market is terrible; it’s just terrible. You get a bunch of people and you show, you show, you show, and they’re just sitting there.'"

"The construction of hundreds of condos, many in downtown Providence, has also flooded the real-estate market, and some of the spillover is driving up the inventory of rentals as condo owners who can’t sell their units decide instead to rent them out."

"'I have a client right now, he’s got a little house on Ninth Street for $1,600 a month, and he’s down to $1,300 and nobody even wants to look at it,' said Suzanne Knight, a real-estate agent on Providence’s East Side. 'It’s been vacant for four months now. … There’s just much more supply than demand.'"

"East Side property owners are competing with new downtown properties, Knight said. 'There are hundreds of rental units downtown that weren’t here two years ago,' Knight said. 'You’d think landlords would lower their rents, but it takes a while. So they’re empty.'"

The Baltimore Sun. "One-fifth of the 'subprime' mortgage loans that Marylanders took out this year will end in foreclosure and home loss, according to a report released yesterday that predicts problems nationwide."

"The findings are especially worrisome for Baltimore, where, according to one recent survey, about half of mortgage loans made to homebuyers in recent years are subprime."

"Several independent experts said the center's forecasts, though disturbing, seem reasonable. 'It's based on very sound assumptions,' said Greg McBride, senior financial analyst with Bankrate.com. 'Let's hope it's one of those worst-case scenarios that never comes to pass.'"

"Mark Zandi, chief economist of Economy.com, said he too expects significant increases in subprime loan defaults, fueled by 'bad underwriting,' weaker house prices and a softer job market."

"Nervous regulators and lenders now are tightening standards, he said. Though that's good news down the road, it's bad for people stuck in mortgages they can't afford, he said: 'It's going to be harder for homeowners ... to refinance out.'"

"Carol Gilbert, co-chairman of the Baltimore Homeownership Preservation Coalition, thinks the state needs to offer temporary loans to homeowners in danger of losing their homes; to better promote its new 'lifeline' refinancing loan that can get Marylanders out of bad mortgages; and to help connect more people with nonprofit housing counselors."

"'It's very troubling, but there are some things we can do,' said Gilbert."

"The root of the problem is that residents have taken out loans they clearly cannot afford over the long term, said Vinnie Quayle, executive director of the St. Ambrose Housing Aid Center in Baltimore."

"Speaking in support of the report's conclusions, Pat Vredevoogd Combs, president-elect of the National Association of Realtors, said: 'We want to make sure that Americans who achieve the dream of homeownership do not see it turn into their worst nightmare.'"