The News & Observer reports from North Carolina. "When flames destroyed Tricia Warner-Peterson and Scott K. Peterson's dream home in January...the neighbors stood and watched as 61 Shepherd Drive burned. It was another in a long string of disturbing incidents that have them worried about the value of their homes in a small Johnston County subdivision. The charred house is now boarded up with plywood, spray-painted with expletives. Laundry, which Warner-Peterson chucked out of the house's windows, is strewn across the lawn."

"And a broken toilet bowl in which the Petersons once planted pansies adorns the porch. 'I feel like I've moved to a third-world country,' said Kristine Ryan, who lives across the street."

"Although the Petersons have not made mortgage payments since July, they technically still own the house. Until the drawn-out foreclosure process ends, there's little anyone can do to stop them from treating the property however they wish."

"It's an extreme example of what can happen to neighborhoods as the tide of foreclosures rises across the state. 'We cannot sell our homes,' said Ryan, who moved to the subdivision from Boston a year ago with her husband. 'We cannot leave.'"

"Warner-Peterson, who grew up in Cumberland County, blames herself for falling behind on mortgage payments. She said she receives treatment  for her bipolar disorder with some symptoms of schizophrenia."

"'A lot of this has to do with my illness,' she said. 'Sometimes it's spend, spend, spend without a whole lot of thought.'"

"In April, they bought a new home in the Cottonwood Forest subdivision at McGee's Crossroads for $186,000 with add-ons such as an insulated garage. They also invested about $10,000 in other upgrades, including hardwood floors and a Jacuzzi."

"'I've always handled our money,' Warner-Peterson said. 'Most of the time that goes pretty well. ... This is just the time it all went south.'"

"The Jan. 9 fire, which started around the Peterson's Christmas tree, is still under investigation. The Petersons said the insurance company thinks the fire was 'suspicious.'"

"Neighbors say the Petersons' actions have turned them into prisoners in their own neighborhood. Another home in the subdivision has been for sale since last spring. 'People drive in, stare and drive out,' said Kristine Ryan. 'It's a freak show,' Mike Ryan added."

The Carroboro Citizen from North Carolina. "As the subprime mortgage crisis morphed into a debt crisis and led to a slowdown in housing markets across the country, many here were optimistic that the area would once again be insulated from the fallout. But the optimism that the local market would ride out the storm unscathed has waned."

"Even the most upbeat realtors will acknowledge some pain. Many are leading sellers through what Weaver Street Realty’s Gary Phillips describes as 'reality therapy,' telling them to expect much more time on the market and a more modest assessment of the return one can expect."

"The worst of the impact is being felt by homebuilders, especially mid-sized builders who have been riding the housing boom in Chatham County. Nick Tennyson, executive VP of Home Builders Association of Durham, Orange and Chatham counties, said that the slowdown has created a large inventory of homes. Spec house builders...are finding more and more of their cash tied up and are having to make large monthly payments on homes they’d hoped to have sold by now."

"Making that worse, he said, is that the glut is being seen in larger homes. 'How many people want something priced $750,000 to $800,000? The pool of buyers is not as deep.'"

"Michael Chandler, a local custom builder, said local builders are seeing a lot of clients adjusting their timetables. 'Many are not motivated to get started,' he said. 'There’s a loss of urgency in buyers.' The media has fueled the sense, he said, that it’s an 'ultimate buyer’s market.'"

"Builders around here have gotten a bit unaccustomed to having clients balk at prices, Chandler said. 'It used to be you’d say, 'Here’s what it’s going to cost.' Now we’re being pressured on price.'"

"Phillips said the spec builders are feeling the squeeze. 'There’s way too much inventory,' he said. 'Cash has become king in a way we haven’t seen in a long time.'"

The Free Lance Star from Virginia. "Sluggish sales at the Cobblestone Square condominium complex have led the developers of that project to sell what's left to be built to an apartment developer. The partners, which include K. Hovnanian Homes and Garrett Development Corp., are under contract to sell the rest of the development to JLB Partners, an apartment builder."

"Chris Waller, VP of Garrett Development, said JLB's apartments will attract high-end renters. Waller said JLB will likely charge about $1,250 a month for a 1,000-square-foot unit. A letter to current condo owners calls the new concept a 'luxury rental community.'"

"Jonathan Franklin, who moved to Cobblestone with his wife in October, doesn't take much comfort in that description. 'They're just playing semantic games,' he said."

"When he moved into his unit last June, condominium owner Ben Maxwell said, 'We were under the impression that this was going to be a three- to four-year project. Three to four years from now, it's going to be a completely different real-estate market. You would think that one of the largest home builders in the country would understand this is a cycle.'"

The Falls Church News Press from Virginia. "There are no cars are parked in the driveways of many new subdivision cul-de-sacs. 'For Sale' signs litter the yards in outlying areas of Fairfax and Prince William County."

"Some new developments appear to be ghost towns. No children ride their bikes down the sidewalks — instead there are moving trucks loading up personal belongings as families wipe away tears and kiss their dream homes good-bye. The foreclosure epidemic has struck and its effects ripple across the area."

"Virginia ranks 24th in the nation in rate of foreclosure. In Northern Virginia, hardest hit areas include Prince William County, where some newly built neighborhoods are mostly made up of foreclosure homes."

"The cause of foreclosures can be attributed to more than one factor, says Stephen Fuller, professor of public policy and director of the Center for Regional Analysis at George Mason University, and member of the Governor’s Advisory Board of Economists."

"'Foreclosures are caused by a combination of several things,' says Fuller. 'Liberal lending policies, people thought they would enjoy price appreciation in ’03 and ’05 and later refinance. The market cooled off in ’06, housing prices decreased and the mortgage was more than the house was valued. They couldn’t refinance because their income hadn’t changed. In some cases, the rates tripled. People had no money in the house, so why not just walk away?'"

"Fuller says that some people were not in the right financial position to be purchasing a home. 'The American dream is to own a home, but in reality, some people should just have been renters,' Fuller explains."

The Washington Post. "A multi-house auction at Walter E. Washington Convention Center (was) fueled by the skyrocketing numbers of local foreclosures, and it fulfilled some hopes and deferred others, as more than 200 homes went on the block."

"While tuxedo-clad auctioneer Mark Buleziuk chattered rapid-fire prices and the public address system blared the '80s hit 'Living in America,' several thousand people bid on ramblers, townhouses, condominiums, bungalows and McMansions in the District, Maryland and Virginia."

"All the homes had been foreclosed on and were owned by banks trying to recoup some of their losses, according to Real Estate Disposition, which ran the auction."

"'It's clear by what's out there in the media that there is a high rate of foreclosure,' said Mary Clare Quella, associate general counsel for the auction firm. 'Lenders do have large portfolios in foreclosed homes.'"

"Investors Leon Segears and Joyce Palmer, who buy, rehab and sell homes for a living, had targeted five dwellings in the auction catalog but managed the winning bid on only one. The three-story rowhouse on Madison Street NW had been valued at $398,000. The starting bid was $149,000. The partners' winning bid was about $275,000."

"The two said later that they had calculated how much each house would cost to renovate, how much they could later sell it for and how much they were prepared to spend. They said that despite the mortgage crisis, there was money to be made by the disciplined investor."

"'We don't get emotional,' Palmer said. 'If the numbers work, we do it. If the numbers don't work, we don't do it.'"

The Daily Times. "Delmarva's real estate roller coaster can't go any further downhill, according to some local housing experts. But it remains a mystery when and if an upswing in home sales will kick in."

"'I think we've already hit the bottom, and most of the buyers know it,' said Kevin Decker, a Realtor in Ocean City." "In Worcester County, there are about 2,400 properties for sale. Of those, 2,000 are in Ocean City, said Rick Meehan, the resort's mayor and a real estate agent."

"'It's a buyer's market,' he said. 'I know it sounds like a cliché, but it's a fact. I think a lot of people have held back, waiting to see what's going to happen.'"

"On Delmarva, new homes sales fell 9 percent between October and November last year, and new construction is down 24 percent from a year ago, according to Bill McCain, an appraiser in Salisbury."

"McCain said the Shore's housing market will yield minimal sales for the rest of 2008, especially for expensive single-family homes and condominiums. It might be another decade, he said, before we're back to peak pricing in that market."

"'There are less purchasers out there who can afford these high-end properties,' he said. 'Add to that the fact that the lending community is much tighter, much more cautious in making loans.'"

"'Some sub-prime lenders were aggressively lending in a rising real estate market,' he said. 'They got away from some of the fundamentals of good lending practices. There were loans being made at ratios of 100 percent of equity, or 120 percent, which is a very, very high-risk practice.'"

"As the market begins to level off, many property owners are finding themselves upside-down -- owing more on the home than its assessed value. It's created a mountain of foreclosures in a short time. Maryland's foreclosure rate exploded from 715 at the end of 2006 to 9,772 a year later, according to RealtyTrac."

"The combination of a lagging economy, an over-stocked housing market and the troubled lending industry has created what McCain calls 'a bit of the perfect storm.' 'It's these negatives occurring simultaneously,' he said. 'Are we in a recession? If we're not in one, we're close to one.'"

The Press of Atlantic City from New Jersey. "There's no sign of bottoming out as New Jersey and the nation continue to witness an upswing in foreclosure activity."

"While the vast majority of homes in foreclosure filings are worth less than $1 million, some properties in the region's wealthier enclaves are in the beginning of the foreclosure process or have been sold."

"One Longport property, just off the John F. Kennedy Memorial Bridge, is assessed at $1.2 million and started the foreclosure process in November. A two-story Beach Haven home assessed at $1.05 million was sold for $1.2 million three months ago."

"The Garden State had 5,598 properties in foreclosure filings in February, ranking it 13th nationwide, where overall foreclosure filings totaled 223,651 properties. In Cape May County, 95 properties were involved in foreclosure activity in February 2008, up from 71 properties in February 2007."

"'It's people who weren't experienced and they decided to jump in late to the housing market,' said foreclosure attorney Brett Wiltsey, who has represented lending institutions against delinquent county homeowners. 'Then the market changed on them.'"

"Watchdog group New Jersey Citizen Action estimates one in five New Jersey subprime loans could default by the end of 2009."

"'It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house,' said Phyllis Salowe-Kaye, New Jersey Citizen Action executive director. 'But it is possible to purchase a mortgage with a one-in-five chance of putting a family out of their house and into the street.'"