The Chicago Tribune reports from Illinois. "The Chicago metropolitan region 'isn't as bad as Florida and California, ground zero in the housing recession, but we have the same problems,' said economist Diane Swonk. The ills ailing the new-home market here include too much speculative building and soaring mortgage default and foreclosure rates, she said. Especially hard-hit are Chicago's inner-city neighborhoods and growing communities like Joliet, Swonk said."

"'Unfortunately, about half of the people having problems with subprime mortgage loans could have qualified for prime loans,' she said. 'This reflects greed all around.'"

"'I worry about the second shoe falling on the downtown condo market,' Swonk added. 'Chicago came late to this housing boom so there still are a lot of units in the pipeline due for delivery in the next 18 months. This year will be a big test.'"

"'This is the first housing downturn that is self-inflicted, although exacerbated by financial institutions offering exotic housing loans,' said Tracy Cross, president of a Schaumburg-based research and consulting firm."

"As the housing market started to slow down two years ago 'builders didn't recognize the bell had tolled and kept on building,' Cross said."

"Prices climbed so high they no longer could be offset by low interest rates or exotic mortgages. 'High home prices were a great culprit in the overall equation,' Cross said."

"At the same time, homeowners trying to sell their houses hesitated to lower asking prices. 'Sellers held on too long, causing a logjam in the market,' Cross said."

"Indeed, new-home sales in the region fell 37.5 percent last year compared with 2006, with a 32.1 percent drop in Chicago and 39.2 percent in the suburbs, he said. Regional home sale prices, including builder incentives, fell 3 to 5 percent, Cross estimated."

"Cherya Jenkins says she has been snagged by a Catch-22 of the mortgage-market mess: She wants to refinance the loans on her West Side three-flat but hasn't been able to -- because she tried to sell the building last year."

"'People who are facing rising payments in the future are being told to try and sell first,' said Jenkins of Chicago. 'But if they can't sell the property, they have essentially ruined their chance to refinance it.'"

"'When your home is on the market or has been on the market, generally, you're not going to be allowed to get a new mortgage,' said Keith Gumbinger, VP of a mortgage-industry publisher."

"At least for a certain period of time. That's because, he and others say, the mortgage business tends to presume that if you refinance your home after a failed attempt to sell, you still might try to sell it soon, paying off the loan and thus erasing any profit the lender might have made."

"It's not a new policy but, in the heat of the housing boom, it didn't come into play very often."

"Times have changed. The inventory of homes on the market in the Chicago area swelled in November to about 111,000, according to data from the MLS of Northern Illinois. In November 2005, when the market was beginning to cool, there were 73,000."

"'I've seen it twice in the last few weeks,' said Dan Green, a mortgage broker in Chicago. One client is now waiting through the 90-day post-listing period his lender stipulated; the other managed to get a loan approved by a lender that had no days-off-market policies."

"And that client is lucky he acted when he did, Green said. 'I'm pretty sure that had we submitted the loan now, it wouldn't have gone' because the lender's days-off-market policies have changed, he said."

"'So far, the people looking for these refi's are people in trouble -- speculators, investors and marginal players who also need to take cash out [of their new loans],' said Ken Perlmutter, president of Perl Mortgage in Chicago. 'People in those situations are going to have a hard time.'"

"Jenkins said that the irony in her situation is that she and her husband intend to hang on to the Austin three-flat for several years, though it was on the market for the better part of 2007. In October, they gave up on selling and decided to keep the building to recoup the money they had spent on repairs, she said."

"But in November, she said, they learned that their payments would go up by $175 a month in February, to nearly $2,400, to cover a shortfall in her property-tax escrow account."

"Her loan representative said that because the appraisal revealed that the house had been for sale in 2007, the couple would have to wait 12 months from the date the listing ended."

"Jenkins began calling other banks, prefacing each conversation with the news her three-flat had been on the market in 2007. Numerous lenders told her the building would have to be delisted for three to 12 months to be considered for a refinance."

"'The issue is not a matter of bank policy but one of what criteria investors on the secondary market set forth when agreeing to purchase loans from lenders,' said Terri M. Wilson, a VP for National City Bank media relations."

"Chad and Jeanine Smith bought a townhouse in northwest suburban Lakemoor in December 2002, the line between profit and breaking even, or losing money, is a fine one."

"'I don't want to have to take a loss, though I'm afraid that might have to happen,' he said."

"The couple began trying to sell their home in April 2007, with several potential buyers visiting over the summer. But they've had no one look at the three-bedroom unit in several months. They've lowered their price to $203,900 from $207,000 and are thinking about asking $199,000, he said."

"'I'd be happy with $199,000,' Chad Smith said. 'That would represent a profit, but not much.'"

"The Illinois group...said that for all of 2007, home sales in the Chicago area totaled 92,656, down 20.5 percent from 116,527 in 2006. In 2005, the year the market peaked, 133,305 homes were sold."

"Analysts said the reduction of inventory of homes for sale was slightly encouraging, but the figure may reflect sizable numbers of people who took their homes off the market during the holidays and who may soon relist them."

"Then there's the rising flow of homes in foreclosure. Those properties are expected to land on the market in 2008 in record numbers."

The Flint Journal from Michigan. "Pagi Pillen took on a part-time job. Mark Calvert got out of the industry altogether. The slumping local real estate sales market, where foreclosures and listings are high and sales prices have fallen, has taken its toll on real estate agents."

"Membership numbers from the Flint Area Association of Realtors has fallen by about 300 in the past two years to about 1,000 today, said Mark Dickens, the group's CEO."

"Calvert, of Flushing Township said he got out of the business about a year ago, after his income fell by 35 percent to 40 percent. He sold real estate for 10 years."

"Now, he's going back to school. 'It just had to be done,' he said. 'We can sugarcoat the economic realities all we want to. In my particular case, I just felt it was time for me to be retrained.'"

"Both Calvert and Pillen said real estate agents who do foreclosure and bank-owned property work are surviving, but those dealing in traditional sales feel the pinch."

"'I do have another job. I don't have a choice,' said Pillen of Byron. 'I'm a single mom.'"

"The Garrow real estate firm once was one of Genesee County's largest real estate companies, with eight locations and about 170 agents in 2006, when the company then known as Garrow GMAC Real Estate planned to expand into Oakland County, according to Flint Journal files."

"Now called Garrow & Associates Inc., the company lists just three offices - in Vienna Township, Grand Blanc Township and Davison - and about 50 agents."

"Some are also changing their specialty to reflect the market. 'We have a lot of agents who are doing bank repos,' said broker/owner Imad Isaac of the 40-agent RE/MAX Select in Mundy Township."

"As much as 60 percent of the firm's business is foreclosures or bank repossessions, said Issac, who serves on the Flint Area Association of Realtors' board of directors. Isaac estimates that up to 40 percent of the more than 4,700 sales last year by Flint association members were foreclosures."

"'The problem is, it's very difficult to sell a regular house because they're competing against a bank repo,' he said."

The Pioneer Press from Minnesota. "Hard times for homebuilders spelled deals this past weekend at the Minneapolis Convention Center, where local contractors sold 180 of 216 newly built homes they put on the auction block."

"The sales included nearly all of the 62 homes in a batch that had no set minimum price and simply went to the last and highest bidder, an unusual sight for a housing market known for stability."

"Winning bids ranged from 20 percent to 75 percent off the original listing prices, said Brent Berry, president of Minneapolis-based Norman Mitchel International, which co-managed the auction. 'There were townhomes that went for $58,000,' Berry said. 'I couldn't believe it.'"

"Some went to first-time homebuyers such as Marie and Timothy Philippi. They successfully bid on a three-bedroom, three-bath unit with a view of the St. Paul skyline. Philippi said she didn't want to disclose the price, but said they got it for 'substantially lower' than its original $266,000 price tag."

"'I think it was an awesome deal,' she said. 'It's still in the Sheetrock phase, so we get to pick out colors and cabinets and everything.'"

"Bill Johnson, head of the state's No. 9 builder based on 2006 sales, said his company sold 18 homes in the auction, many to young couples such as the Philippis. He sold the homes at a loss, he said, with discounts around 40 percent."

"'Do we love it? No, but it's OK,' said Johnson. 'Empty specs and empty houses do no one any good.'"

"Berry said he's booking another auction with M.W. Johnson for March 15 in Cape Coral, Fla. That auction may involve 50 single-family homes, as well as some land."

"Since builders are still calling him, Berry said he's hoping to hold another auction in the Twin Cities later this spring."