Chicago Business reports from Illinois. "Slumping home sales are showing the first signs of hurting Chicago-area banks, which are reporting an increase in bad construction loans. Problem construction and land development loans by local lenders increased 58% at the end of 2006 to $169.4 million from $107.2 million at the same point in 2005, according to Federal Deposit Insurance Corp. data."

"The primary culprit, bankers say, is the housing-market contraction, exacerbated by an increase in mortgage defaults and foreclosures. 'It's another manifestation of the housing recession we're in,' says Paul Kasriel, chief economist at Northern Trust Corp."

"Sales of new Chicago-area homes fell more than 30% in 2006 from the year before, according to real estate consultant Tracy Cross & Associates Inc."

"Chicago's Cole Taylor Bank, which lends to homebuilders in the city and suburbs, has seen fallout. 'If there are fewer homes being sold, it reduces the demand for your developed lots and undeveloped lots,' says Robin VanCastle, chief accounting officer of holding company Taylor Capital Group Inc. 'That's the first impact.'"

Reuters reports from Michigan. "With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress. 'Folks, the ground underneath the house goes with it. You do know that, right?' he offered."

"Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince. 'I'm not sure it's congratulations,” said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. 'My wife is going to kill me.'"

The Toledo Blade from Ohio. "A Reuters wire story starts with an account of a 'fast-talking auctioneer' under pressure to sell a house for which bidding came to a standstill. 'After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: 'The lumber in the house is worth more than that!'"

"My hair curls because of the regional prevailing wisdom. You do know what that is, right? As Detroit goes, so goes Toledo."

"I know a guy who sells real estate in this town. His name is Tony Bassett. 'Here's what I want to know, Tony: How many houses are for sale in Toledo that are listed under, let's say, $30,000?"

"So Tony noodled around on his computer with that MLS database, and then I got my answer. 'I'm coming up with right around almost 300,' he said. 'And that's just in the Toledo Board of Realtors [multilist database]. It doesn't include people trying to sell by owner, or anything for sale by a bank that's not using our MLS. So really, it might easily get to 300… [325].'"

"The Board of Realtors, meanwhile, said somewhere close to 3,060 houses are on the market in Toledo - meaning right around 10 percent of the houses up for sale in this city cost less than a run-of-the-mill new car."

"'Inventory's high. There are tons of foreclosures everywhere,' Tony said. 'We're showing [foreclosed] houses in Sylvania, Maumee, Perrysburg, and they're competing with the regular listings. But that's everywhere [nationally] too.'"

The Chicago Tribune reports on Ohio. "Cleveland, with a rapidly growing stable of vacant and boarded-up homes, is known for mortgage foreclosures. Between 1,200 and 1,300 foreclosure filings land every month on the desk of Cuyahoga County Treasurer Jim Rokakis --including a recent one for his childhood home, which his family sold years ago and was auctioned off last week for $19,000."

"Perhaps no place in the Midwest has been hit harder by foreclosures than Cleveland. In Illinois, Cook County reported a total of about 4,260 foreclosure filings in January and February, about 1,700 more than Cuyahoga County, over the same time period. But Cook County, with 5.3 million residents, has roughly four times the population of Cuyahoga County, which includes Cleveland."

"'This just empties out the city,' said Rokakis, who is scheduled to testify Wednesday in Washington before a congressional subcommittee on foreclosure prevention. 'For a lot of neighborhoods, the tipping point has passed.'"

"Ohio has an estimated $24 billion in subprime loans, and Rokakis said about 40 percent of those could go bad. Rokakis speculated that 30 percent to 40 percent of the mortgage loans in Cleveland are subprime."

"Council member Anthony Brancatelli estimates that 60 percent to 70 percent of the foreclosures in his ward involve people who tried to manipulate the subprime mortgage system and bought several homes with the intent of renting or quickly selling, or people grasping for their piece of the American Dream, without the financial means of making regular payments."

The Plain Dealer from Ohio. "You might think the evaporation of high-interest loans is good news for a region where thousands of people have lost their homes to foreclosure. But the timing could not be worse, Cuyahoga County Treasurer Jim Rokakis says."

"High-interest mortgages are often the only option for people who are rebuilding their credit. If the supply disappears when many houses in Northeast Ohio are vacant and begging for owners, it might cause a glut and depress values for years, Rokakis said."

"'Look out below,' he said. 'It's going to get ugly.'"

"Critics, including Rokakis, say sub-prime lenders have fed Northeast Ohio's foreclosure epidemic by locking people into deals they don't need or can't afford."