May 31, 2006

Over-Priced Florida Homes ‘Not For Sale’

Some housing bubble updates from Florida. “Former Orlando Magic star Tracy McGrady recently unloaded some of his local holdings. McGrady sold his 18,000-square-foot home for $5.1 million. Curious thing: At a time when real estate prices have gone sky high, McGrady unloaded the property for about $875,000 less than he paid for it six years ago, according to Orange County records.”

The Naples Insider. “The majority of sellers in the area and their listing brokers refuse to accept the fact that the Naples real estate market had been over-priced, and that a correction was/is occurring. These sellers should have a big sign in their yard reading ‘Not for Sale.’”

“Overall the majority of homes for sale remain overpriced for the market trend, but a significant number of sellers have reduced prices. Some sellers have reduced pricing from an outrageous amount to just an absurd price. But others have reduced prices to year 2004 levels.”

“Let’s examine the group of homes that closed during the two week period ending May 26, 2006. In this group 35% of sellers accepted offers that were 6% to 10% below the sellers’ asking price. And 13% of sellers accepted offers 11% to 20% off of the asking price.”

“But that doesn’t tell the whole story. The majority of sellers had already reduced asking prices before getting the offer. Take the group that got a full price offer for example, sellers in that group had previously reduced their asking price by an average of 9% and some by as much as 25%.”

“Some sellers have to sell, and instances are appearing were they have sold at extremely low prices. I’ve seen some properties sell for 40% off of original list price and 25% off of peak prices.”

“A comparison of actives (homes for sale) vs. pending (homes under contract and waiting to close) is a good measure of the health of the housing market. In a healthy real estate market, pendings might equal 50% of of homes listed for sale in the mid price ranges, and 20-25% in the higher price ranges.”

“In the winter of 2005 that ratio was near or over 100% for many areas and communities. In May 2006, the actives vs. pendings ratio for the Naples area was in the 9% range. An indication of low buying activity.”

“Year-to-date the pace of sales is suggesting total sales for year 2006 will be 30% to 40% less than the previous two years. With a record number of homes for sale, trends suggest that unless bus loads of price-insensitive buyers start arriving, or prices drop significantly, or a combination of both, the Naples real estate market will remain a buyers’ market for a very long period.”

Hovnanian Warns Amid Cancellations, Concessions

Hovnanian has some numbers out. “Hovnanian Enterprises Inc. on Wednesday said fiscal second-quarter profit fell versus a year ago as three months of slower sales, higher cancellation rates, and greater concessions took their toll on earnings.”

“Second-quarter 2006 results included land-sale profit of 18 cents per share and write-offs of $5 million from land option deposits Hovnanian decided not to exercise.”

“During the quarter, the number of net new contracts, after cancellations, including joint-ventures fell 18.5 percent to 4,342, with the Southeast and West seeing the greatest declines. The value of the contracts fell 18.2 percent from a year earlier.”

“‘As many of our housing markets have continued to cool off..we have renegotiated option contracts on numerous land parcels, primarily those negotiated within the last twelve months that no longer adequately reflect the pricing and returns available in the current sales environment,’ CEO Ara Hovnanian said.”

“‘We also walked away from about $5.6 million of deposits on land parcels that we controlled through options when we were unable to successfully renegotiate the purchase terms,’ he said.”

Some housing bubble news from California. “Total building permits issued for single-family homes in California were down about 25 percent in April compared to April 2005, while total permits for the first four months of the year were down about 18 percent compared to the first four months of 2005, the California Building Industry Association announced today.”

“The number of single-family building permits dropped the most in Napa (-71.4 percent), Yuba City-Marysville (-61.3 percent), and Salinas (-60.7 percent) metro areas in the first four months of 2006 compared to the first four months of 2005, the association reported.”

“Residential building in April edged up a slight 2% to a seasonally adjusted annual rate of $688.7 billion, according to McGraw-Hill Construction. With homes taking longer to sell, the inventory of new homes for sale has been rising, contributing to what has been so far a modest slowdown for construction.”

“April included the start of 18 condominium/apartment projects valued at $50 million or greater, with 8 of these projects located in Florida. Robert Murray added, ‘Although there’s emerging concern that some markets are being overbuilt, especially in Florida, the volume of new multifamily construction to this point in 2006 remains very strong.’”

From Reuters. “America’s booming housing market has clearly slowed, and that cool-down could last at least another year before homeowners see a pick-up in the pace of house price increases again, economists say.”

“Economic data on mortgage applications, sales and construction all point to consistent and sustained easing in the market in 2006.”

“Sales of newly built homes are down too versus a year ago, according to the Mortgage Bankers Association. That trade group’s data also show fewer people are applying for mortgages. In fact, purchase applications year to date are down 10 percent from the comparable period in 2005.”

“‘We’re running at about 2003 levels,’ said Mike Fratantoni, senior economist at the MBA.” “The number of houses up for sale offers a telling sign too, said economist Jeff Taylor. Indeed, inventories are soaring. The number of new homes and existing houses on the market both hit records in April, according to the National Association of Realtors.”

“At the current sales pace, the number of homes up for resale amounted to a six-month supply, the largest in more than eight years.”

‘Barely Scratching The Surface’ For The ‘Vital Public Trust’

Some housing bubble news from Washington. “Worried about the potential for inflation to get worse, Federal Reserve policy-makers at their May meeting considered raising a key interest rate by half a percentage point before opting for a quarter-point increase.”

“(Economist) Douglas Porter said there were no major surprises in the notes given recent signs of economic strength and high oil prices. However, ‘the overall impression the minutes leave is that there’s a bit more concern about inflation that in previous minutes,’ Porter said. ‘I think it comes across loud and clear that these concerns are starting to weigh heavily on the Fed’s members.’”

And on Fannie Mae. “Fannie Mae and Freddie Mac should retain records to allow regulators an on-demand look at the books of the two big mortgage companies, a federal agency said Wednesday. Rep. Richard Baker said he hopes that the Ofheo report will spur legislation tightening rules on the companies, which buy mortgages and free up lending capital at banks.”

“‘OFHEO’s examination of Fannie Mae revealed breaches of propriety and judgment so deplorable in nature and pervasive in reach that it’s almost as if we were barely scratching the surface,’ Baker commented Wednesday.”

From the USA Today. “In early 2004, Fannie Mae’s then-CEO Franklin Raines came to USA TODAY to talk to editors and reporters. He was furious over an editorial that had run a few days earlier criticizing his company for, among other things, its ‘questionable accounting practices.’”

“With barely a ‘good morning,’ Raines launched into a criticism of the editorial and a defense of his company.”

“Last week, government officials said the company engaged in ‘extensive financial fraud’ by doctoring earnings so Raines and other executives could earn ‘unjustified levels of compensation.’”

“These are extraordinarily damning assertions. They show a company whose top executives were contemptuous of criticism and imbued with a sense of entitlement to enrich. According to the report, Raines pulled in more than $90 million in his six years as CEO, $52 million of which was performance pay triggered by bogus accounting.”

“Fannie Mae is no average company. It has a standing letter of credit from the U.S. Treasury. It is exempt from many of the reporting requirements of other public corporations. It can borrow money at lower interest rates than other companies can.”

“It also creates special risks. The company, which pours money into the housing market by buying millions of mortgages from banks, is crucial to the functioning of the economy. For that reason, taxpayers would almost certainly be called on to bail it out if it ever got into serious financial trouble. That makes an honest accounting of its profits, assets and liabilities a vital public trust.”

“That is not what the public got under Raines and his associates. The company overstated its earnings by $10.6 billion over six years. When people questioned the company’s extraordinarily complex accounting, they were treated to angry rejoinders reminiscent of those delivered by Enron executives at their arrogant heights. When lawmakers or government officials argued that the company needed tighter oversight or fewer privileges, they were outgunned by Fannie’s lobbying machine.”

“The battle against corporate fraud did not end with the Enron verdicts last week. Federal agencies are still evaluating whether to bring civil or criminal charges against individuals. These are not pleasant things to contemplate. But they are the facts.”

‘The Plane Is Going To Land’ In Massachusetts

The head of the Massachusetts realtors did a Q&A. “The red hot housing market in 2005 has begun to cool down this year. But David Wluka, owner of Wluka Real Estate in Sharon, says the market is returning to normal and not crashing. He said the roughly 20 percent decline in sales volume from January 2005 to January 2006 is a sign that prices are stabilizing.”

“Why did the housing market cool down this year? Well, you just can’t maintain an overheated market forever. It’s a natural thing, (housing) markets go up and they go down.”

“Expectations are different. People up until 2000 were looking at houses as an investment (where they would) retire and pay off the mortgage. The cycle of appreciation started and they started looking at it as a source of income.”

“So (the housing market) is cooling down, but the plane is not crashing. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land.”

“How does a cooled-off housing market affect the seller, and on the other side of that, the buyer?”

“We’ve had a major problem educating ourselves as to the realities of the marketplace. And again, this is the short horizon versus the long horizon. All they see is what the neighbor sold their house for last month. For the sellers, even though it’s a short horizon and it’s money they’ve never really had, it’s money they saw come and go.”

“For example, they say, ‘I could have sold the house for $600,000 three months ago and now it’s only worth $550,000, I’ve lost $50,000.’ No, they didn’t and its difficult to (educate them) to overcome that thought in their head.”

“The buyers need education also (because) they were afraid of the (housing) bubble. I must say that I spent most of my last six months talking about the bubble, for which there’s no statistical proof.”

“What kind of role will interest rates play in the housing market over the next year? The (Federal Reserve) is continuing to try to cool a market that’s heating up for non-housing-related issues. People become potential victims of getting into financial trouble. Because you have an expectation, the rates have gone up and there is a great temptation to take a mortgage vehicle that would let you still have (an expensive) house, but become dangerous on such things as zero-interest mortgages.”

“Will we see more foreclosures because people can’t afford to pay their mortgage payments anymore? People who are on the margin and couldn’t afford conventional financing and probably shouldn’t have bought a house or should have reduced their expectations, which is more the case, those kinds of loans are going to be in trouble.”

“It’s important to get the buyers to understand that just because the bank said they can afford it, doesn’t necessarily mean that they can.”

The Lowell Sun. “Until this spring, Northern Middlesex County had managed to buck the statewide trend of increased foreclosure filings. That has now changed in a big way, according to Middlesex North Register of Deeds Richard Howe Jr.”

“In March, the foreclosure process was started on 48 homes in the region, double the number from last year in that month. In April, 58 homes were threatened with foreclosure, up 76 percent from 2005. And during the first 30 days of May, 71 properties were hit with foreclosure filings, a startling 294 percent year-over-year increase.’

“‘It was like a gas pump going up,’ Howe said of tracking the foreclosure numbers this month. Howe suggested that because the housing boom was late in coming to the region, the wave of foreclosures may also have lagged.”

“The conventional wisdom is that buyers, seduced by the booming residential real-estate market of recent times, entered into risky and unconventional mortgages that became huge liabilities when the market cooled.”

“ForeclosuresMass reported that there were 1,227 foreclosure filings in the state in April, 44 percent higher than last year and almost 90 percent more than in 2004. Jeremy Shapiro, president and co-founder of ForeclosuresMass, said things are getting worse.”

“Lowell Realtor Brian McMahon of ERA Morrison said that most properties being targeted for foreclosure belong to first-time homebuyers who do not have the resources to weather a fiscal crisis. ‘They’re used to paying $800 to $1,000 a month for rent, and now they’re paying $1,500 to $2,000 a month,’ said McMahon.”

“Consumers who entered into ‘interest-only’ mortgages will not be affected until five years after signing the agreement, Howe said. Interest-only loans require that buyers pay only the interest on their home for five years, then they start paying off the principal and monthly payments skyrocket.”

“‘The interest-only phenomenon is kind of a ticking time bomb,’ Howe said. ‘The real crisis will hit in 2008 when all of those … loans convert and people start defaulting in massive numbers.’”

On The ‘Back Side Of The Hump’ In Las Vegas

A reader posted this Review Journal article. “A slowdown in the housing market is rippling through Las Vegas, with layoffs by home builders, mortgage and title companies and other real estate-related occupations. Don DelGiorno, president of KB Home’s Nevada division, said the company has reduced its local staff by about 10 percent, though it would be difficult to nail down an exact number.”

“‘Sales are being challenged and different builders are feeling different kinds of pains,’ DelGiorno said. ‘With in-migration and jobs, we’ll move through this inventory when people are buying their homes to live in. Now there’s a concept.’”

“Dennis Smith, president of Home Builders Research, said of the layoffs: ‘It’s normal in this part of the housing cycle we’re in, the back side of the hump. Anytime you have that, there’s going to be some cutbacks. That’s the result of added staff that was put in place on the upside of the hill.’”

“Washington Mutual, a home mortgage company with a large presence in Las Vegas, notified 1,400 U.S. workers last week that they would be cut from the payroll as part of a ‘cost-saving strategy.’ Most of the layoffs were in Washington and Florida.”

“Nevada Title Co. has reduced its staff by about 25 percent since peaking at more than 300 employees during the refinance boom of 2002 and 2003, President Robbie Graham said. ‘We’re a locally owned company. We have to stay lean and mean,’ she said.”

“Another field seemingly poised to shrink through attrition is real estate agents. ‘There’s going to be a lot of them cryin’ the blues,’ Smith said.”

“The Greater Las Vegas Association of Realtors doubled its membership to about 15,000 over the last five years as people from all walks of life saw an opportunity to cash in on the housing boom. ‘It was a new challenge,’ (realtor) Debbie Smith said. ‘It seems like you come out here and everybody’s in the business. Realtors, title companies..everything revolves around real estate and development.’”

“Although sales of new homes in Las Vegas slowed 9.1 percent in April, the median price rose 18 percent to $133,117, statistics from Las Vegas-based SalesTraq show. One major difference that’s keeping new home prices up today from last year is that almost every builder is offering buyer incentives, ranging from a few thousand dollars on entry-level homes to $100,000 on luxury homes, SalesTraq President Larry Murphy said.”

A ‘Lull After The Storm’ In Arizona

The Arizona Republic has this housing bubble update. “Pinal County’s molten housing market continued its recent cooling trend in first-quarter 2006, as existing-home sales volume fell and prices stumbled. Sales volume for used houses fell 22.6 percent from first-quarter 2005, to 1,110 transactions, and marked the third consecutive quarterly decline, according to a report by Arizona State University.”

“The median price dipped by about $10,000 (3.9 percent) from $220,000 in fourth-quarter 2005.”

“Bob Rucker, CEO of Arizona Regional MLS, said the number of existing houses for sale in Pinal County had risen to 4,342. The report said new-home sales and prices were up over first-quarter 2005, although 1,000 fewer houses were sold than in fourth-quarter 2005, the first significant slip since the county’s housing market took off a few years ago.”

“‘The Pinal County resale market is slowing as is the overall housing market,’ said Jay Butler, director of the ASU center. ‘The problem is that this market doesn’t have a history so we don’t know what’s normal. This housing market only came into existence five years ago.’”

“The housing boom in the Southeast Valley spilled over into Pinal County. And, sales in the once-rural county will have a ’significant impact on how (the Valley’s housing) market plays out over time,’ Butler said.”

“Pinal County and its municipalities issued a record of nearly 20,000 home building permits last year. Sales dipped by 22.8 percent from 4,715 homes sold in fourth-quarter 2005.”

“Housing analyst RL Brown said the Pinal County market is in the midst of finding normalcy after a bustling 2005. Houses are staying on the market 60 to 90 days or more, which creates a buyer’s market. ‘We haven’t seen ‘normal’ around here in a long time,’ Brown said.”

“Some buyers were eschewing existing homes because they can often get a new house for close to the same price and a builder’s warranty. They also can frequently get purchase incentives from builders, such as free swimming pools, that are worth thousands of dollars, Brown said.”

“Real estate agent Mary Grube recently sold a new home in the San Tan Heights subdivision after builder Richmond American Homes offered incentives of about $50,000. Incentives can be used for upgrades or to reduce the price of a house.”

“The incentives are playing major role in buying decisions as are dwindling price gaps between large new and existing homes. ‘It makes it a lucrative investment to buy new, and most people want to buy a new home,’ Grube said.”

“Deborah Farhat, a broker in the city of Maricopa, said builders in the area are offering commissions to real estate brokers that are reaching 6 percent and 7 percent, and slashing speculative home prices. (Realtor) Joanne George said builders are even offering gas cards to get agents to bring clients to the county.”

“‘They’re pretty much hitting everyone on the buyer’s side,’ Farhat said. George said Pinal County is still affordable but was experiencing the ‘lull after the storm.’ Market pressures were driving sellers to list homes at fairer prices.”

“Butler said when mid year numbers come out in a few months that will give a better perspective on the market’s direction. ‘It will probably either remain stable, or decline a little bit more,’ Butler said. ‘But we really don’t know. Lots of different things are happening.’”

May 30, 2006

Lucky Lottery Winners ‘Extremely Upset’

The Herald Tribune takes us back to Florida. “US Home’s master-planned community Stoneybrook at Venice was red hot when it was unveiled in late 2004. In November 2004, when the first Stoneybrook homes were sold to ‘lucky’ lottery-winning buyers, it was standing-room-only, recalled Realtor Greg Sheller. Getting a Stoneybrook homesite then felt ‘like winning the Lotto,’ he said.”

“No more. The day the music stopped was about eight months ago, and now some investor/owners are scrambling for a chair. The ‘For Sale’ and ‘For Rent’ signs are out in force. The completed neighborhoods sit amid acres and acres of upturned dirt awaiting construction of newer neighborhoods. Many homes appear uninhabited, few cars are evident and the traffic is light.”

“Flippers are increasingly being forced into becoming reluctant landlords. So many flippers got pinched in a situation where they could not sell profitably, or at all, for the time being. Meanwhile the mortgage payments come due month after month.”

“There are issues with Stoneybrook, Realtors say. One is that Lennar/US Home has been aggressively discounting sales prices in many of its developments, including Stoneybrook. A property that US Home sold last year for $440,000 or substantially more can now be bought for about $390,000.”

“Only about 250 of the planned 900 homes are built so far, and on a recent weekday afternoon, the Lennar and US Home welcome centers were quiet. A visitor to a Lennar sales center was greeted by a note on the unlocked model door ‘back in 15 minutes, make yourself comfortable.’”

“During the wait, visitors are greeted with tomb-like silence, no phones ringing, no foot traffic, no buzz at all.”

“‘US Home will keep the sales pace, keep the start pace and keep construction going,’ said Rob Allegra US Home division president in Southwest Florida, adding that he thinks that is the best thing for homeowners. The ‘10-20 percent price cuts’ are simply an intelligent and timely reaction to market predictions, he said.”

“Jennifer Roemer, an agent who has two homes listed on Dancing River Drive, says her sellers would be happy to get out at $359,000 for homes they bought for about $315,000 in the first auction in 2004. Roemer remembers the initial auction for Stoneybrook sites, saying that US Home ‘knew they were jam-packed with investors.’”

“‘My people are extremely upset,’ says Roemer, noting that ‘nothing has turned over’ other than what US Home is selling.”

“Kim and Chris Tritschler, husband-and-wife agents, represent two Stoneybrook homeowners who are looking to rent so they can pay their mortgages. ‘A homeowner is in no position to compete with a developer’ with hundreds of properties to sell, Chris Tritschler said.”

Builders ‘Walk Away’ From Lots Amid Glut: California

The Sacramento Bee has an update from California. “Nearly one in every 10 homes, apartments and condominiums started last year in California rose in the Sacramento area, led by Sacramento’s Natomas area, the cities of Lincoln and Elk Grove, and unincorporated Yuba County, according to the California Building Industry Association.”

“In fact, builders in California produced 10 percent of the nation’s housing, the CBIA said.”

“‘Twenty thousand permits is a very good number for the region, even though they trailed off some in the last quarter,’ said John Orr, CEO of CBIA’s Roseville affiliate.”

“The number is expected to drop by at least 2,000 homes this year in the six-county region, Orr said. Area builders are scaling back amid a glut of existing homes for sale and rising interest rates, among other reasons.”

“Roseville-based homebuilder consultant John Schleimer said builders have begun backing out of land deals just as buyers are backing out of new homes. ‘I don’t know of a major homebuilder who is not in renegotiations or didn’t walk away from lots in the last three months,’ said Schleimer.”

From the Napa Valley Register. “Napa County’s housing market seems to be slowing down, with fewer sales and a slight drop in the value of the median priced home, new statistics reveal. The median sale price decreased 5 percent between March and April to $609,000, while the number of units sold plunged 39 percent, according to DataQuick.”

“DataQuick reports the ‘typical’ Bay Area buyer has an eye popping $3,048 per month mortgage payment. That tops March’s $2,948 figure and the $2,659 payment reported in April 2005. Not only are homeowners taking on higher monthly payments, the days of hosting a ‘mortgage burning party’ seem to be dwindling, said Silvas.”

“Different generations have different home ownership goals, she added. ‘I don’t think most buyers today are looking at that as a goal,’ said (realtor) Jill Silvas of Morgan Lane.”

‘We’re About One-Third Of Our Way Through This Mess’

Paul Muolo kicks off a look at housing bubble news from Washington and Wall Street. “In a brief interview with National Mortgage News last week, Countrywide CEO Angelo Mozilo predicted that the industry’s correction will last at least another two years. He believes that significant consolidation is now underway. Another executive told us that ‘we’re about one-third of our way through this mess.’ Profit margins continue to be tight in both the prime and subprime sectors.”

“When the going gets tough the tough start exercising their stock options. Fannie Mae directors Ann McLaughlin Korologos and Joe Pickett in early May each exercised stock options valued at $126,250.”

“Both are current board members and served under former chairman Franklin Raines. Mr. Raines, Mr. Pickett and Ms. Korologos, and other executives and directors (past and present), are defendants in a shareholder lawsuit that accuses them of turning a blind eye to the company’s accounting woes because they were involved in ‘mutually beneficial relationships’ with the GSE. The plaintiffs charge the group did not operate as independent directors. Fannie Mae is trying to get the lawsuit dismissed.”

“The Enron convictions were big news this past week and mortgage executives are starting to wonder if criminal charges might be brought in the Fannie Mae case. The Office of Federal Housing Enterprise Oversight and Securities and Exchange Commission formally accused the company and its former top executives of fraud.”

“Of primary interest to criminal investigators are the 1998 bonus payments. One industry veteran who has worked on fraud cases told us that breaking the rules to make money is a ‘criminal act’ and adding that ‘people go to prison for that.’ (Millions of dollars in bonuses were paid that year.) The obvious question in the Fannie case is who was responsible for bending the accounting rules and what did they do, and when.”

Bill Fleckenstein writes about the next big scandal. “‘Make money risk-free!’ That’s usually a costly come-on, as ordinary folks know. But corporate chieftains who sit on their stash of stock options have found a way to turn this unattainable fantasy into reality. The public..outrage will only intensify when folks who’ve speculated in the housing market start to feel the real pain, which will bring about the next big scandal: fraudulent appraisals and bogus financing schemes.”

And the NAR has their latest sales tactic out. “Apartment rents are expected to increase 5.3% this year - about double last year’s increase, the National Association of Realtors says.”

“When the housing market was at its blazing peak, many investors who owned apartment buildings kicked out tenants and sold the units as condos. One out of three apartment buildings sold last year were converted into condos for sale. That took 191,400 apartments off the market, according to the NAR. In addition, the number of new apartment buildings under construction is down this year.”

Inman is going along. “As the housing market cools down in many areas, rental housing is heating up, with rents rising and the amount of available rental housing dropping, experts say.”

“There are two reasons rents have gone up so much in Southern California, Conway said, one of which is interest rates. ‘First of all, now that the housing market is cooling and interest rates are moving up, more people are choosing to live in apartments,’ Delores Conway, director of the Casden Real Estate Economics Forecast said.”

“‘Demand for apartments has gone up as the adjustable mortgage rates everyone was using to try to qualify for mortgage loans are going up. Now lenders are tightening qualifying criteria as well and adjustable-rate mortgages are moving up. They are almost up with fixed-rate loans,’ the director said.”

“Hence, there is more demand for apartments now, Conway said. ‘The second thing is more interesting. Because the housing market has been white-hot and there have been so many condo conversions, the supply of apartments actually went down and the demand went up,’ Conway said.”

Houses Bought Price-Unseen In Alberta

The National Post has this update from Canada. “Consumers in Alberta are now putting down deposits on housing lots without knowing what the final price for the finished home will be, in the latest example of the desperation for housing in the province.”

“The bizarre situation in which consumers are contractually bound to pay a final price yet to be determined has been going on for the past few months, said Allan Klassen, president of the Alberta chapter of the Canadian Home Builders’ Association.”

“‘That’s how people are securing housing now,’ said Mr. Klassen, adding the situation is being driven by demand for housing as opposed to greed from builders.”

“To combat price worries, builders are now willing to let consumers guarantee themselves a space in a development if they are willing to put a deposit on a lot. Mr. Klassen said that deposit can sometimes be about 20% of the value of the lot.”

“For that deposit, consumers are usually signing a contract that binds them to buy the house once it is completed. The final price is dependent on what type of costs the builder incurs. The prices rise as costs rise. The deposit contracts vary from builder to builder but Mr. Klassen said most builders are willing to let consumers have their deposit back if they are unhappy with the final price because the current market conditions are strong.”

“It’s a dangerous game for consumers, according to Brian Hollohan, manager of market analysis for CMHC in Calgary. ‘There are a lot of unusual transactions taking place and people are taking unusual measures to secure a home. It’s not something I would do,’ he said.”

“Consumers looking for more price certainty in the existing-homes market are out of luck. Kevin Clark, president of the Calgary Real Estate Board, said the average price of a home in the city was rising as much as $500 per day.”

“‘The resale market is quite insane,’ said Mr. Clark. Mr. Clark said it’s no wonder people are willing to put deposits on new homes without knowing the final price. ‘If they don’t there is another person right behind who will,’ he said.”

Vacant Houses Indicate Speculators: Tucson

The Tucson Citizen has this update from Arizona. “For sale signs are a more frequent sight in the yards of midtown Tucson houses. Some even advertise reduced prices. Those who check will find that many of the houses on the market are empty of furnishings and have no cars on the driveway.”

“‘A good percentage of the resale inventory is vacant, which is an indicator that an investor owns that property and has put it up for sale and is moving on,’ (realtor) said Judy Lowe.”

“Investors and speculators, primarily from California, fed record housing price increases in the metro area a year ago. Now they have left or are getting out of the Tucson market, said University of Arizona economist Marshall Vest.”

“The numbers tell the story. In April 2005, 3,640 houses were listed for sale in metro Tucson, according to the Tucson Association of Realtors’ MLS. Last month, the number was 8,131.”

“Real estate executives say many Tucsonans, after seeing housing prices rise dramatically over the past two years, put their homes up for sale in the hope of cashing in on the real estate bonanza. ‘So many people have put their homes on the market that it has increased the supply significantly and is actually slowing the market,’ said (broker) Laura Mance.”

“Lowe said the increased supply is resulting in buyers becoming more critical of a property’s asking price and condition. ‘When property owners aren’t able to sell a home after 30 days, they need to consider making cosmetic improvements to the property or dropping their price,’ she said.”

“Vest said it’s way too early to conclude the housing correction won’t turn into a fire sale. Changing from a boom to a bust mentality takes a while, he said.”

“‘The market psychology has to go from ‘this thing is going to go on forever’ to ‘this thing is never going to get any better,’ Vest said. ‘That doesn’t happen overnight. It takes a long time, as measured in years, to go from one extreme to another.’”

‘The Spiraling Price Increases Had To Stop’: Florida

Some housing bubble updates on Florida. “It may be hard to imagine with all the construction around Brevard County that the local housing market is slowing down. But that’s what the latest figures show. There were 577 housing permits issued throughout Brevard in April, up from 433 permits in March, but down from 735 permits in April 2005.”

“‘I think you’re going to see a continued slowing of permit activity,’ said Franck Kaiser, CEO of the Home Builders & Contractors Association of Brevard. ‘What we’re seeing is a market adjustment. The spiraling increases in prices had to stop.’”

“The median sales price for a single-family home in Brevard rose 1 percent from March to April to $224,800, down from the peak of $248,700 in August 2005, according to new figures from Florida Association of Realtors.”

“Prices at Heritage Isle range from about $230,000 to more than $400,000. The project includes more than 200 condos, which originally were going to be priced above $300,000, but are now priced between $230,000 and $276,000, Lennar representatives said.”

“‘There’s such a glut of condos on the market’ countywide, Kaiser said.”

“In an effort to stimulate sales of the last remaining units at Trump Tower Fort Lauderdale, Donald Trump and his partners are offering the agent who makes the first three sales a little added reward: either a pair of handmade platinum cufflinks, or a signature platinum and diamond necklace worth $10,000. Trump is also boosting commissions.”

From Fort Meyers. “A new car, vacations, money, sounds like a lottery dream but it’s actually the latest marketing ploy to get you to buy a home. The cooling real estate market is giving rise to some hot ticket perks for home buyers.”

“Ashley Dostal got a whole year’s mortgage free, plus closing costs and other giveaways. It convinced her to buy now. ‘The first year, I expect to save about $15,000,’ Dostal said.”

“Sellers of existing homes have started offering free landscaping and lawn care for a year, but that’s nothing compared to what realtors and homebuilders are offering, you think of it, they’re serving it up.”

“The source of this buyers’ grab bag is a dip in home applications, which are down 20-percent from last year. That means too much supply and not enough demand. ‘In a market that has a lot more inventory, many brokers and many sellers have looked to incentives to draw attention to their property,’ Ron Phipps of the National Board of Realtors said.”

“While almost all of the local home builders say they’re not ready to jump on the incentives bandwagon yet, a few of the bigger companies are offering deals that affect the bottom line. Many local companies think the incentives trend may be short-lived, depending on what the market does. But industry insiders say if home sales flounder, buyers will be able to get very creative about the perks they want.”