October 31, 2006

“It Will Get Bumpier Before It Gets Better”: California

The Sacramento Bee reports from Califonia. “It might seem the worst time to start building houses in the Sacramento region with prices dropping and so many homes for sale. But a pair of deep-pocketed newcomers, divisions of a U.S. timber products giant and a major Japanese conglomerate, are positioning themselves to make sizeable new splashes in the region’s home building market.”

“‘Personally, I would like to see the upside last a little bit longer. But there are opportunities in a down market as well,’ said David Ragland, VP for Los Angeles-based Pardee Homes, which plans 4,000 new homes in the coming years in Natomas, Rancho Cordova and north Stockton.”

“Also new to the local market is Irvine-based MBK Homes, which plans to start constructing the first of its planned 600 homes in the region within weeks in Citrus Heights.”

“‘We have almost 4,000 lots and over $100 million invested and committed in Northern California markets as we speak,’ Ragland said.”

“A division of the Japanese general trading firm Mitsui & Co. Ltd., MBK plans still more houses in Folsom and Roseville. Long-range, it’s eyeing expansions into the East Bay, Interstate 680 corridor and Reno from a Sacramento-area headquarters. ‘We have the capital and desire to grow,’ said Jon Tattersall, president of MBK’s Northern California unit.”

“‘I don’t see the trend slowing down in Sacramento,’ said said Kathryn Boyce, an analyst in Hanley Wood’s Sacramento office. ‘I see the boom has stopped. The craziness has stopped. But builders are going to keep coming in here.’”

The Sierra Sun. “The nationwide housing trends are mirrored in the Tahoe-Truckee area, where sales volume slumped by 24 percent in Tahoe and 11 percent in Truckee in the first six months of 2006, according to a Chase International market report.”

“Now, with winter approaching, sellers are either pricing their homes aggressively in attempts to sell before winter, or taking them off the market and ski leasing them, said broker Gayle Blair.”

“The local market is still softening along with national trends, she said. The change does not surprise her. ‘I’ve been in the business for 30 years and I’ve seen it go up and down and sideways,’ said Blair.”

“Shari Chase, president of Chase International, warned of the market cool-down in the company’s market report released during the summer. ‘The period of huge increases in home values has come to a screeching halt,’ she wrote.”

The Desert Sun. “Home sales in the Coachella Valley dropped nearly 39 percent in September compared to year-ago figures. In September, 704 new and resale homes and condos sold across the valley, compared with 1,142 properties sold during the same month last year, according to DataQuick.”

“A month earlier in August, 788 homes sold; that represented a 41 percent drop in home sales compared with August 2005. Realtor Douglas Balog said the valley is in a ‘contraction period’ that should bring about price corrections.”

“Greg Berkemer, executive VP of the California Desert Association of Realtors in Palm Desert, said the local real estate market ­ based on third-quarter MLS figures looks as if it will get ‘bumpier’ before it gets better. ‘The (economic) fundamentals are in place to make it more short-lived than the last time we went through this nine years ago,’ Berkemer said. ‘The first thing that comes down in a market shift is asking prices. And that’s the toughest thing for sellers.’”

“New-home sales dropped 19.6 percent to 267 in the valley last month, while closings for resale condos in the Coachella Valley plummeted 62 percent to 109 condos. The weak sales in condos may have helped send asking prices downward, because the median price for resale condos in the valley dropped 10.6 percent from a year ago to $283,500.”

“The inventory of existing homes in the valley climbed to 8,358 on Monday compared with about 4,700 last year, which has some sellers realizing there’s a lot more competition out there. Buyers are realizing they may have to adjust their asking prices and overall expectations, said Patrick Veling, founder and president of Real Data Strategies in Brea.”

“‘This is the biggest slowdown we’ve seen, locally,’ said Resa Harbord, manager of North American Title Co. in Rancho Mirage. ‘In Orange County, I’ve seen these kinds of slowdowns several times, but not out here in the valley. Buyers are few and far between.’”

“Home sales dropped by double digit percentages in most cities across the valley, with the exception of Coachella and a portion of Desert Hot Springs, DataQuick reported. In Palm Desert, for example, 65 homes sold, more than a 60 percent drop in overall home sales from September 2005. In Palm Springs, 92 homes sold, more than a 40 percent drop in home sales compared with year-ago figures.”

“Home sales in Cathedral City dropped 57 percent, while La Quinta showed a nearly 55 percent decline from the same time a year ago.”

“Mikki Wood, a real estate broker in Indian Wells, noticed that sellers have begun responding to the changing market. ‘There have been 78 price reductions throughout the valley (Monday) alone,’ Wood said. ‘The market had to make a correction, and it’s doing that now. I think it’s for everybody’s benefit that this is happening, because homes were becoming too unaffordable.’”

“The Numbers Are What They Are” In Colorado

The Durango Herald reports from Colorado. “Durango home prices are up 11 percent compared with a year ago, but home sales have fallen 39 percent. The median price of a Durango home was $436,050 in the third quarter. Durango’s newest median price is $12,000 lower than last quarter’s record high of $448,000.”

“The story is similar throughout La Plata County. The median price of a Bayfield home in the third quarter was $306,000, up 13 percent from a year ago. But home sales dropped 57 percent.”

“It is too early to make concrete forecasts about the local housing market, said Dave MacLaird, president of the Realtors Association, but this could be the beginning of a buyer’s market. ‘They are definitely negotiating a lot harder than they were at the beginning of the year,’ MacLaird said.”

“Don Ricedorff, a broker associate in Durango, said that median prices are affected by the sale of expensive homes. As Durango settles into a more balanced market, median prices will come down. ‘When we get into more of a balanced market where we have buyers throughout all price ranges, those median prices will actually come down some,’ he said.”

“Liza Tregillus and her husband, Peter, bought a home in 1989. ‘If we moved here today, we couldn’t afford the house,’ she wrote. ‘Our son just paid more for a one-bedroom condo than we paid for our four-bedroom house. We had to loan him money for the down payment.’”

The Rocky Mountain News. “A Dallas company plans to auction about 75 foreclosed homes in Denver next month, a sign of the continuing high rate of foreclosures plaguing Colorado. Colorado foreclosure activity jumped 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure, the eighth-highest foreclosure total in the nation.”

“Some local experts, including Kathi Williams, executive director of the Colorado Division of Housing, and Chris Holbert, president of Colorado Mortgage Lenders Association, question whether RealtyTrac’s numbers are accurate.”

“‘We are not trying to make the numbers worse than they are,’ Rick Sharga, a VP at RealtyTrac said. ‘But if I were representing a state-based mortgage lenders association or a state political entity of some sort, I would really want to downplay the numbers. But the numbers are what they are.’”

“Such auctions were common in the late 1980s, during the last foreclosure crisis. But in recent years, most of the auctions in the Denver area have been for expensive real estate rather than distressed properties.”

“‘Basically, they go to the highest bidder,’ said Dave Webb, co-owner of Hudson & Marshall. ‘They can be opportunities in a declining market,’ he said. ‘The lenders are motivated to sell.’”

“He said he expects to hold more large auctions in Denver as the market continues to worsen. He said that foreclosed homes aren’t the bargains they were in the late 1980s, although he said there likely will be opportunities at the auction to buy homes below the asking price. ‘Back in those days you could buy a HUD condo for $12,000,’ he said.”

The Denver Post. “Personal incomes rose faster than expected in September, boosting hopes that the U.S. economy can overcome the drag of a housing downturn.”

“Economists are divided on whether weakness in housing will tip the economy into recession, but most lean toward a ’soft landing.’ Consumers are leery and not spending as robustly as they have in the past, said Jeff Romine, an economist in Denver.”

“Romine said a study he did a year ago found that 20 percent of retail spending was due to the ‘wealth effect,’ or consumers cashing in on higher home and stock values. ‘We are moving into an economic slowdown and will probably have a soft landing,’ he said. ‘The big question is what will happen this Christmas.’”

“U.S. Bank regional economist Tucker Hart Adams, who has forecast a recession for the second half of next year, said wage gains won’t overcome the hole of debt that consumers have dug for themselves. ‘The problems are too large for a little jump in income one month to help out,’ Adams said, noting that many homeowners face large increases in their adjustable-rate mortgage payments next year.”

Price Declines Are “Almost Inevitable Now”

The Washington Post. “A housing developer who had offered to give a Virginia town an unprecedented amount of money to build a luxury subdivision has abandoned plans for the community, blaming a cooling housing market as a factor in the project’s failure.”

“‘I am personally saddened by the prospect of not moving ahead with the . . . project,’” Centex Division President Robert Davis wrote. ‘Unfortunately, in my world, as in yours, everything must be couched in terms of economic and political viability; it is a harsh reality for all of us indeed.’”

“Centex’s announcement this month ended any hope for a new deal. ‘All in all, it’s a significant disappointment,’ said Town Council member John V. Albertella. ‘Then again, we understand the commercial reality of the present time.’”

“A recent report from the National Association of Realtors showed that there was a record number of unsold homes on the market during the summer, when home prices declined for the first time in five years.”

The Delaware State News. “If you look in the real estate section these days, you’ll probably notice two words rarely seen in the past few years - ‘price reduced.’ It’s something homebuyers have been longing to see - a sign that the pendulum has swung in their direction.”

“Experts knew it was only a matter of time before the real estate bubble would burst. ‘It was an anomaly and it couldn’t be sustained,’ said Ruth Briggs-King, executive VP of the Sussex County Association of Realtors. ‘It would’ve priced too many people out of the market.’”

“And with the housing market slumping in other areas, Mr. Martin said there aren’t as many out-of-state buyers coming to Delaware, because they are having a hard time selling their homes. ‘The New Jersey and Pennsylvania markets are not as healthy, and they do have an impact on our market,’ he said.”

“‘Sellers are beginning to realize that they’re not going to get premium price for their property, but more realistic values,’ said Charles Martin, president of the Kent County Association of Realtors. In the $200,000-plus range there are so many options that it’s driving prices down. ‘The market is slower at the top, because there are lots of additional properties and not as many buyers,’ Mr. Martin said.”

The Times Online from Pennsylvania. “When Lisa Kusko put her house up for sale last year, she never dreamed she would still own it more than a year later. ‘I had no idea at all it would take this long to sell. I knew it wouldn’t be instant. … I just didn’t think I would own it at this time, this year,’ Kusko said.”

“Kusko said her initial asking price of $112,000 was competitive with other homes in the area. ‘I thought I was starting low, and I guess with the market the way it is, that wasn’t low enough,’ she said. She dropped her asking price to $99,000 a few months ago, and Kusko said she considered a lower offer of $92,000 that fell through.”

“Frustrated with the situation, Kusko, who now lives in Lake Geneva, Wis., decided to take her home off the market Friday and rent it out.”

“Kusko said initially she thought the problem was with her house because it does need some work, but then she realized newly remodeled homes aren’t selling, either. Statistics for home sales in Beaver County show that the drop in sales affected every municipality in the county.”

“‘We’re pretty much seeing a pretty down market, and it’s difficult to keep saying it because we don’t want to discourage people,” said Sally Heimbrook, a real estate agent in Beaver. ‘But there are many, many, many more houses out there than there are buyers.’”

“While Heimbrook said she hasn’t seen many sellers pull their homes off the market, people have reduced the prices of their homes. The decline in the housing market was predicted last year on a state and national level, Heimbrook said. ‘Many people didn’t believe it because we were still booming, and all of the sudden, it came. It’s in Florida and California, too,’ she said.”

From Pittsburg Live. “Two homebuilding associations from Southeast Pennsylvania say they want to set the record straight about the housing market performance in the state — specifically, about the so-called burst of the ‘housing bubble.’”

“‘The bottom clearly has not dropped out of the housing market in our state,’ said Joe Gartner, president, Home Builders Association of Bucks and Montgomery counties, and Ted Moser, president, Home Builders Association of Chester and Delaware counties.”

“They said home builders in the state are ‘troubled’ by news stories that ‘exaggerate the impact of this year’s slow-down in the housing market.’ According to Gartner and Moser, ‘local and regional homebuilders in Pennsylvania are isolated from some of the market volatilities faced by national builders in their operations elsewhere in the country.’”

The Philly Burbs. “Real-estate industry insiders often disagree over what’s going on in the housing market, but this week that disagreement got a little ridiculous. ‘Alleged’ housing bubble? ‘Ostensibly little additional research?’ Them’s fightin’ words.”

“We’ll overlook for a moment that fact that all possible measures of home-sales activity, from the number of sales to the amount of time it takes to sell a house to the median sales price to the inventory of unsold houses to the number of building permits issued, points to a slowing market. We’ll note that most market procrastinators expect prices in this area to hold firm, even as they fall elsewhere.”

“The final comparison numbers show that the number of permits issued in Bucks and Montgomery counties in the first half of this year is down from 2003, as it is from 2005.”

“Spokesman Scott Elliott said the release’s tone was due to frustration on the part of some of the associations’ members. ‘They were concerned that the public was getting the wrong message,’ Elliott said.”

“But what the right message is can be a little difficult to decipher. I heard presentations by Mark Zandi, chief economist at Economy.com, and Bernard Markstein, director of forecasting for the NASB, that I can best described as a one-two punch that should TKO any expectation the housing market might be starting to recover right now.”

“‘You overdid it,’ Zandi told builders. ‘I do think there’s too many homes out there, too many new homes.’ Price declines next year, Zandi said, are, ‘almost inevitable now.’”

“‘Based on our forecasts, clearly we’re not in a soft landing,’ Markstein said. ‘We’re past that.’ It will probably take another year to work out a ‘huge overhang’ in housing inventory and get the housing market back on track, he said.”

“Florida’s Boom Winds Down To It’s Apparent End”

The St Petersburg Times reports from Florida. “As Florida’s real estate boom winds down to its apparent end, Dade City has realized only a tiny fraction of the development seen in areas like Wesley Chapel and Land O’Lakes. At one time, city officials talked of plans to control the growth they saw ahead. Turns out they don’t quite need them.”

“Even the ever-expanding Wal-Mart noticed. This month, company officials announced that they would delay building the city’s first Wal-Mart Supercenter. They want to see more ‘maturation’ in the local market before building the new store.”

“In Dade City, it seems, the development wave has receded before it ever began. When officials for Wal-Mart, the nation’s largest retailer, scope out sites for new stores, they look at several factors. That last factor is based not on projected housing starts but on actual new construction.”

“‘We’re only going to build stores once the homes already exist,’ said Eric Brewer, Wal-Mart’s senior manager for public affairs. ‘Certainly in a place like Florida, you don’t want to be getting in a position where retail construction gets ahead of residential construction.’”

“Earlier this year, Dade City officials approved 2,000 new homes and received applications for 2,500 more. Ten months later, developers still have approval to build the same number of homes but are apparently electing to do so on a more conservative time line. ‘Instead of having 2,500 in two years, because of the slowdown in the real estate market, it will probably be over a period of five years,’ said Karla Owens, the city attorney and planner.”

“She’s confident the neighborhoods will be built, eventually. Why? Because the property has changed hands. ‘I just find it hard to believe that large tracts are going to stay vacant forever,’ she said.”

“The housing slowdown put a lid on more than home prices. Hotel prices, which had been driven by swarms of beach luxury condo/hotel developers, have stabilized at about $79,000 a room across the Tampa Bay market. That’s the same as a year ago, according to Marcus & Millichap.”

“‘The flippers are pretty much gone from the beaches,’ said Tony DeGeorge, a Clearwater hotel broker.”

From Tampa Bay Online. “Developer Reynold Glanz now wants to turn the former Cone Ranch into one of the biggest residential developments in north Manatee, just a few miles south of Hillsborough County. The California developer filed plans last week for a 1,999-home project.”

“Glanz said it is too early to start pricing homes, especially as sales prices continue to drop throughout the area.”

The Orlando Business Journal. “For the Central Florida housing market, Anthony Crocco, director of Metrostudy’s Central Florida division, says the pace of new housing starts slowed during the third quarter. The Orlando metropolitan statistical area of Orange, Lake, Osceola and Seminole counties posted 6,853 single-family starts in the third quarter, a decline of 32.4 percent compared with 10,142 units a year ago.”

“Crocco says the quarterly starts declined to a level comparable to the summer of 2003.”

“Single-family inventory, comprised of units under construction, finished vacant lots and model homes, totaled 22,794 units at the end of the third quarter, an 8.5-month supply. The majority of the unit increase is in the finished vacant category, which rose 123.2 percent from 3,664 units last year to 8,179 units this year, Crocco says.”

“During the third quarter, 11,197 lots were delivered to the Orlando market compared with 10,316 in third-quarter 2005. Vacant developed lot inventory was 50,760 units, up 29.6 percent compared with 39,168 lots last year. Crocco notes that based on the annual starts rate, this level of lot inventory represents a 19.1-month supply.”

“He notes many potential buyers must first sell their existing home before buying another. Because of this pressure on sellers and the continuing introduction of new projects to the market, Crocco says it is likely that the supply of new housing will remain inflated for at least the short-term.”

“Mike Inselmann, president of Metrostudy, there are reasons to be somewhat optimistic that the bottom of the cycle in the housing sector will occur in the next six months. ‘Cutbacks in new production, aggressive incentives by sellers, the exit of the majority of investors and the fundamental demographic support are positive indicators for a housing turnaround by mid-2007,’ Inselmann says.”

The Orlando Sentinel. “Robert Stroh at the University of Florida, said the full economic impacts of Save Our Homes have yet to hit the state.”

“‘This could affect our population in the future,’ Stroh said. ‘Some people who thought about retiring here are probably having second thoughts: What are your taxes here? The answer to that is going to change dramatically. We’ve already got a problem.’”

“Mohammed Battla knew that he would face a larger tax bill when he moved to a 6,100-square-foot home overlooking Lake Buck in the Lake Nona golf community. Still the shock of going from a few thousand dollars in property taxes to paying more than $35,000 was jarring.”

“‘I just saw my property-tax bill and about had a heart attack,’ Battla said.”

“A Perception That There’s Going To Be Better Deals”

The Journal News reports from New York. “The chill in the national housing market is sending a shiver through the Lower Hudson Valley. Inventories for housing of all types rose by double-digit percentages in both counties, while the number of sales fell sharply. Sales of houses in Westchester fell by 20.5 percent, the largest increase for the third quarter over the past 17 years for which records were kept. Putnam house sales fell 37 percent.”

“Therese Fokine has been trying since January to sell an investment house she owns adjacent to her own in Mohegan Lake. Originally listed at $315,000, it now is being offered for $269,900. ‘Interest rates went up, and that’s a real killer,’ Fokine said.”

“Greg and Joan Patterson lowered the price on their house at Valeria in Cortlandt after they put it on the market in the spring for $610,000. ‘People are waiting. There’s a perception that there’s going to be better deals,’ Joan Patterson said.”

“Some brokers said part of the problem is the reluctance of sellers to take less for their houses than they could have gotten in the recent past. ‘That’s hard,’ said Carlton Gillman. ‘They don’t want to know theirs is worth less than it was six months ago.’”

“Greg Rand, managing partner of Prudential Rand Realty, agreed. ‘The interest is there. What you’ve got is a standoff. I don’t see the buyers buckling,’ he said.”

“Realtor Ilene Goodman in Croton-on-Hudson said ‘quite a few’ of her listings were marked down this year. ‘One of the first things you have to tell people (who sell) is, you can’t set the price and I can’t set the price. It’s the market that sets the price,’ Goodman said.”

“(Broker) Ross Keating in Putnam Valley sees a different dynamic. ‘People hear things are slowing down, so they start waiting, and it’s a self-fulfilling prophecy,’ he said.”

“Inventories for housing of all types rosing by double-digit percentages in both counties, while the number of sales fell sharply. ‘Considering that third quarter closings normally reflect peak market activity in the spring selling season and that this year’s performance was lackluster, there is little reason to expect a turnaround with the fourth quarter results,’ the MLS said in its report.”

“The median price of a house, representing the midpoint of all prices, was $716,125 in Westchester, an increase of six-tenths of 1 percent over the third quarter of 2005. In Putnam, the median was $405,000, a drop of 4.7 percent.”

The Times Union from New York. “Housing prices sagged in September around the Capital Region, the Greater Capital Association of Realtors said Monday. It was the first year-to-year decline since November 2000. The median price of houses sold during the month fell 4 percent to $187,000. The feverish bidding of just a year ago is just a memory, real estate agents say.”

“Norma Jeanpierre of Colonie has cut the price by $10,000 to $249,900 in the two months the house has been on the market. ‘We’re still waiting on the offers,’ she said.”

“The total number of units sold in Albany, Montgomery, Rensselaer, Saratoga, Schenectady and Schoharie counties also continued to decline in September. There were 940 closed sales in September, compared to 1,027 in September 2005.”

“‘It appears that buyers have more negotiating leverage now than they have had for several years,’ said GCAR President John McNamara. ‘That change in dynamics has caused sellers to readjust their thinking about what their home might be worth on the market.’”

The Connecticut Business Journal. “A surge in the number of foreclosures on both the state and local level has real estate watchers worried that the trend may exert more downward pressure on housing prices.”

“Connecticut’s foreclosure rate jumped 20 percent in the first nine months of this year compared to the same period in 2005, according to RealtyTrac. With 372 homes in foreclosure in September, New Haven County ranked below only Fairfield in sheer numbers of foreclosures and hit a monthly high for the calendar year.”

“Low introductory rates have begun to expire on many ARMs issued in 2004 and 2005, and some homeowners are seeing their payments nearly double. Hardest hit are those with sub-prime loans, marketed to those with low incomes or bad credit, which have rates that often start at seven percent.”

“‘A lot of them are bad loans they just can’t afford,’ says Doris Latorre, for a nonprofit agency. Latorre has seen a big jump in foreclosure calls from homeowners in all income brackets and from all over the region. After a period where most foreclosure calls were from Waterbury, she is now flooded with calls for help from Bridgeport, Fairfield, Stratford, Trumbull and New Haven.”

The Asbury Park Press from New Jersey. “A bankruptcy court judge today gave permission to Kara Homes to move forward with the sale and closing of nine homes. Kara had hoped to get permission to restart construction of up to 300 homes, but a lawyer for the troubled home builder said the short-term financing to get the company started again had fallen through.”

“East Brunswick-based Kara, one of the largest home builders in central New Jersey, owes creditors, including banks, suppliers and employees, hundreds of millions of dollars. Customers who have contracts for uncompleted homes are also listed as creditors.”

“Kara said it also wanted to reimburse customers who had canceled their new home contracts before the builder filed for Chapter 11. A lawyer for the committee of unsecured creditors said he supported the sale of the homes. ‘I hope this becomes the platform, reduce real estate and homes to cash, and we can debate who gets it later,’ said lawyer Michael Sirota of Hackensack.”

Bits Bucket And Craigslist Finds For October 31, 2006

Please post off-topic ideas, links and Craigslist finds here.

October 30, 2006

“This Market Is Going South”: California

CNN Money reports on California. “Five of the cities on the Bottom 10 list are from this region, making the long rural stretch of Highway 99 between Sacramento and Bakersfield look like a treacherous real estate ditch. ‘A market where housing has increased by so much so fast when unemployment is that high is unsustainable,’ says Frank Owens, who sits on the board of Fresno’s builders association. ‘This market is going south.’”

The Fresno Bee. “Real estate agent Twyla Smith is trying to promote herself in what has become a sluggish real estate market. It’s her way of trying to stand out from the throngs of agents who got into the field when the market was red hot and who now find themselves scrambling for business as home sales decline.”

“She got into the real estate business four years ago. So did hundreds of thousands of others looking for sure money. There are plenty of homes for sale and potential home buyers, but properties aren’t moving as fast. For Smith, that means her income is more uncertain now. ‘I have only been used to the booming market,’ she said. Now, she said, ‘you have to work harder.’”

“Now, her name and telephone number is on the sign outside the north Fresno home of Mike Kadrie, who had been trying to sell his home on his own since June with no solid offers.”

From Inman News. “Prudential California Realty is ‘rightsizing’ in recognition of the market realities of slower sales, said Sherry Chris, the company’s COO. ‘All companies are looking at what the right things to do right now are. We’re rightsizing our company, looking at cost-containment opportunities and growth opportunities,’ said Chris.”

“Chris said that the market conditions will present special challenges for the huge group of agents who are relatively new to the industry, and there likely will be a decrease in the agent population over the next 18 to 24 months. ‘This to me is a market correction. It’s just a leveling out of the market. It’s not a downturn that is going to be going on for an extended period of time,’ Chris said.”

The LA Times. “Carl Christoph Nuechterlein plunged into a real estate career in 2004. He’s now folded up his tent, not much richer for the effort. ‘Sales volume dried up,’ said Nuechterlein. ‘I wasn’t making enough money.’”

“‘About half of our Realtors today have been in the industry only four years or less,’ said said Leslie Appleton-Young, the group’s chief economist. ‘Many have not experienced a downturn and find it challenging.”

“Although current data do not reflect a drop in licensees yet, there typically is at least a two-year lag between a market downturn and a drop in new and renewed licenses, according to the California Department of Real Estate, history tells us a fall will come.”

“Nuechterlein found the business a tough slog from the get-go. He had a job earning up to $60,000 a year in commissions, but like so many others he thought he could make an easier buck in real estate. He found his niche in Hemet — a small, mostly blue-collar town in Riverside County.”

“Taking a smaller commission assured him a fair number of sales, but he wasn’t rolling in income. When the market started to slump last winter, he decided to unload his own home and lived for a while on some of the $53,000 profit. It didn’t pan out. When the slump intensified, he quit and found other sales work.”

“Agents who’ve experienced Southern California’s up-and-down real-estate cycles say the housecleaning eliminates some of the fly-by-night and discount brokers. ‘A falling market can freak you out or give you an opportunity to do better,’ agent Syd Leibovitch said.”

From Origination News. “The California Association of Mortgage Brokers has issued a ‘best-practices guide.’ The guide calls for: uniform licensing standards with mandatory pre-education, continuing education, and criminal background checks for all loan originators; the enforcement of existing abusive lending laws; workplace efforts on integrity and consumer education.”

“Michael Faust, the CAMB’s government affairs chairman, said the guide grew out of the recent dialogue over nontraditional products and abusive lending practices. But that dialogue, he said, ‘has broken down, with everyone taking their sides and screaming their interest points as loud as they can,’ affecting the ability to reach a compromise.”

The Central Valley Business Times. “More than 37,000 homes went into the foreclosure process in California in the third quarter, a 171 percent increase over the same period in 2005, according to an Irvine-based foreclosure information company. The California number was up 35 percent from the second quarter of 2006.”

“”What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure. With the volume of these loans, more than $1 trillion of them due to adjust over the next 15 months, this is a trend that definitely bears watching,’ says James Saccacio, CEO of RealtyTrac.”

The North Gate News Online. “The National Association of Realtors caused a stir in the real estate community recently when they released a statement saying that nationwide home sales and selling prices fell in August compared with the same month last year.”

“But San Francisco real estate professionals tend to balk at the findings and insist that the numbers do not apply to the city.”

“References to numbers about declining prices coupled with talk about good sales have made potential homebuyers uneasy. Scott Shapiro, who works in in Novato, currently splits a $2,500 monthly rent for a Russian Hill apartment. He said that about six to nine months ago he started to look into purchasing a home, albeit casually.”

“Shapiro said that he is ‘apprehensive’ about buying a home in San Francisco. In addition to the exorbitant price tags he encounters—ranging from $775,000 to $1.1 million—he wonders about the soundness of an investment in property at this point.”

“Through August 31, average prices for one-bedroom, one bath condominiums have actually dropped from $580,000 to $573,000. These kind of numbers make Shapiro want to take his chances and wait a while longer. ‘I think there’s a more market left to drop,’ he said.”

“Going Through The Great Correction”

The New Mexico Business Weekly. “Albuquerque’s housing market peaked in July, according to sales data. After merely slowing in July and August, sales took a dive in September, when home sales were down 17 percent compared to the same month in 2005. Perhaps more ominous than slowing sales, or possibly because of them, is the increasing number of for-sale signs sprouting in front of everything from Westside tract homes to custom-built residences in the NE Heights.”

“The inventory of existing homes on the market went from 2,319 a year ago to nearly 4,700 this October, according to the Albuquerque Metropolitan Board of Realtors.”

“Some solace can be found in the fact that prices are apparently holding. But agents say prices are now dropping, especially at the luxury-end of the market above $500,000. Anything over $1 million is an especially tough sell. Buyers are moving to the sidelines, agents say, and are waiting to see where the market bottoms.”

“‘The last couple of years, you could place a sign out front and it sold. With twice the number of properties on the market now, sellers have to price it right and it has to be in great condition,’ said Greg Lobberegt, an agent who works the NE Heights.”

“National influences are taking the steam out of housing here. Increases in mortgage rates have taken some buyers out of the market, but there other issues. Speculative investors who were buying up homes in Westside subdivisions are disappearing, moving on to Texas where starter homes are cheaper and appreciation might be higher, brokers say.”

“California’s weak market also is hurting Albuquerque. People there can’t sell their homes and that is reducing the flow of new residents and cash into this market, says Seth Jacob, a veteran East Mountain agent who brokered several sales to Californians earlier this year.”

“‘I just lowered the price of two of my listings in the NE Heights and in the mountains. I’ve seen a lot of price reductions, particularly in the higher price ranges. Things are sitting longer,’ Jacob says.”

“Bankers also are seeing the slowdown. ‘We’re entering a challenging environment right now. The more people read the national media stories about the housing downturn, the more they shy away from making commitments. The more stories they do, the more the consumer says, ‘I ought to wait if the market has peaked,’ Charter Bank’s Lyle Greenberg says.”

“Developers plan thousands of new residences over the next five years, especially along the I-25 corridor. Real estate agents are hoping that banks put the brakes on construction lending to slow the tide of home building. Bankers say developers will slow down if the market drops.”

“‘Demand has slowed and the builders will back off a little,’ says Rick White, head of Compass Bank’s real estate construction and development group. ‘I’d be a lot more nervous doing what I do if I was doing it in Phoenix.’”

The Denver Post. “Carly and Todd Zody got way more than they bargained for when they bought their home in the Villages at Centennial. The couple were set to buy a townhouse when KB Home offered to sell them a larger duplex in the same neighborhood for the same price, plus $30,000 in upgrades.”

“‘The base price on the duplex is $20,000 more than on the townhomes,’ Carly Zody said.”

“In the past six weeks, KB Home has sold 81 homes at discounted prices. It still has 53 homes it wants to unload at discounts of as much as $20,000 each, and it will pay closing costs. ‘We typically don’t have a lot of these,’ said Rusty Crandall, president of KB Home Colorado. ‘I think all the builders have a few more inventory homes on the market than they’d prefer because of the cancellation rates we’ve seen. There are some great values out there for customers who are interested and have the capability of moving in quickly.’”

“In addition to upgrades and other incentives, KB has been holding promotional events in all its neighborhoods, where its inventory homes are offered at sharply discounted prices.”

“The competitive homebuilding market also has caused MDC Holdings, parent of Richmond American Homes, to be much more aggressive in its incentives, particularly on already- built inventory homes, said president David Mandarich. Village Homes is likely to start offering package incentives to real estate agents to sell the inventory homes quickly, said Jennifer Lambert-Pingrey.”

From CBS 4 in Denver. “Weld County was one of the hottest housing markets in the country, until two years ago. ‘At the very best, we’re flat,’ real estate agent Matthew Revitte told CBS News correspondent Sharon Alfonsi. ‘And we could be perhaps contracting.’”

“Revitte sold many homes before oversupply and rising interest rates torpedoed the market. ‘We’ve yet to hit bottom,’ he said.”

“Homebuyers with adjustable rate mortgages faced payments they couldn’t afford. Those forced to sell couldn’t find buyers and hundreds defaulted on their loans. Now Weld County leads the nation in foreclosures, 1 in every 168 households. That’s 700 percent higher than the national average. ‘Almost overnight it’s like somebody turned the lights off,’ Revitte said. ‘Now we are going through the great correction.’”

“While the emotional toll of foreclosure is personal, the financial impact is shared. You can expect your home value to drop $10,000 or more if a neighbor defaults. ‘I don’t think the circumstances here in Weld County are that unique to what perhaps could happen in the rest of the country,’ says Revitte.”

“The Ill Wind Is Not Pleasant”

Some housing bubble news from Wall Street and Washington. Paul Muolo, “Speaking before the National Association of Home Builders last week, Countrywide Home Loans chief Angelo Mozilo voiced his concern that some states may dictate ’suitability standards’ that could force mortgage bankers to make loan choices for borrowers, a proposition he finds alarming.”

“Preliminary survey numbers are starting to roll in, and it’s looking like the third quarter was a challenge for many lenders. Meanwhile, according to exclusive research conducted by NMN, payment-option ARM and interest-only loan production now accounts for almost 30% of industrywide fundings.”

The Washington Times. “The Commerce Department released dataMonday, on U.S. personal savings. The savings rate, personal savings as a percentage of personal disposable income, was minus 0.8 percent, 0.5 percent and 0.2 percent in July, August and September.”

“‘With housing prices falling and household wealth shrinking, savings should continue to improve,’ economist Peter Morici, of the University of Maryland, said. ‘Home purchases will be viewed as less of a near-term speculative investment, and individuals will be more likely to spend less on new homes.’”

From Bloomberg. “U.S. economic growth cooled to a 1.6 percent pace in the third quarter, the weakest pace in more than three years. Most of that slowdown came from a drop in construction spending and a wider grade gap. ‘We are feeling the effects of the housing bubble bursting and while the ill wind is not pleasant, it is not likely to be long-lasting,” said Joel Naroff, president of Naroff Economic Advisors

“Markets around the world are awash in excess cash, fueling a frenzy of investment from London to Tokyo that may lead central banks to push interest rates higher than investors now anticipate.”

“‘Interest rates in the main economies have still not been raised enough,’ says Tim Congdon, visiting fellow at the London School of Economics and one of the ‘wise men’ who advised the U.K. Treasury in the 1990s. ‘here is a buoyancy in asset prices one gets with high-risk monetary growth.’”

“Tim Drayson, global economist at ABN Amro Holding NV in London, says major central banks will all have to tighten credit more than investors now assume. ‘Money supply on a global basis is growing quite rapidly as is overall credit growth,’ says Drayson, a former U.K. Treasury economist. ‘We don’t see much evidence that monetary policy around the world is restrictive.’”

From MarketWatch. “The U.S. economy is strong enough that further interest-rate increases wouldn’t push it into a sharp downturn, said Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, on Monday. ‘The economy is resilient enough to withstand further tightening,’ Lacker said.”

“Lacker said he was not far out of the mainstream of Fed officials. ‘I’m unhappy with inflation where it is now and I’ve heard several other members say the same thing. So I think there is a broad consensus,’ Lacker said.”

From Reuters. “Bank of Canada Governor David Dodge rapped the government housing agency last summer for fueling inflation with new mortgage insurance products, according to a letter released by the central bank on Monday.”

“Dodge told CMHC President Karen Kinsley he was dismayed with a June press release announcing the agency was offering mortgage insurance for interest-only loans and for amortizations of up to 35 years. ‘At a time when the housing market is already overheated, further fuelling demand through CMHC actions would only put further upward pressure on prices and thus make housing less, not more, affordable for Canadians,’ Dodge said in the letter.”

“The central bank explicitly said high housing prices were a key risk to its inflation outlook in July, when it updated its monetary policy report.”

“CMHC’s press release also hinted it would look for ways to reduce the cost of accessing financing for house buyers, a development Dodge said would be ‘very unhelpful’ at a time when housing prices are rising faster than all other items in the consumer price index. Dodge’s concerns dissipated after meeting with Kinsley, central bank and CMHC officials said.”

From theStreet.com. “Land writedowns, along with continued aggressive discounting of homes, helped cut Pulte Homes and Centex’s quarterly earnings in half last week. But another looming hit to gross margins has yet to fully materialize in the homebuilding sector.”

“Homebuilders enjoyed record profit margins because they were generally building on cheap land that was priced before the boom. Builders are currently ‘working off all their old cheap land, but eventually they’ve got nothing but the more recent stuff,’ says A.G. Edwards analyst Greg Gieber.”

“‘If you look at land controlled by homebuilders, either owned or optioned, of the group I follow, 35% of those lots were priced in 2005,’ Gieber says. And a year ago, land prices remained high. Now builders are taking charges and walking away from options on that more expensive land, as Pulte and Centex did last week.”

“But much of that newer land is still on the builders’ books. This creates a tough dilemma for the companies. They can either build on their most recently purchased land and possibly lose money as housing prices fall or go flat over coming years. Or the companies can continue to write down their land and walk away from option contracts, as builders like Pulte and Centex continue to do.”

“Sellers Have Yet To Learn What Too Low Means”: Chicago

Chicago Business reports from Illinois. “Like the opportunists who quit their jobs to become day traders during the ’90s tech-stock bubble, a herd of amateur builders in this decade has stampeded into the residential construction business, lured by years of booming sales and rising prices. These newbie developers have contributed to a flood of spec buildings that has, in turn, pushed the number of unsold new homes to its highest level in at least 17 years.”

“In the third quarter of this year, the inventory of finished, unsold homes in the Chicago region reached 5,499, a 13% increase from the second quarter.”

“Jeff Moudry broke ground on his first house in February. Mr. Moudry started construction on spec, but was so confident he could sell the house, a brick-and-stone four-bedroom in southwest suburban Shorewood, that he quit his job to work full time on the construction.”

“Eight months later, Mr. Moudry has seen the torrid pace of home sales in the area slow drastically, and watched the inventory of unsold homes pile up, including another spec home for sale right next door for $649,000, his asking price. ‘It is a scary market for people just getting into the business,’ says Mr. Moudry. ‘It makes you nervous thinking winter’s coming and I’m going to sit on it all winter.’”

“Of the 14 active listings for the subdivision, all but one are spec homes, says broker Nicolette Berardi. That’s a problem for Mr. Moudry, who is paying $3,800 a month on the $500,000 loan he took out to buy the lot and build the house.”

“It looks like the end of a great housing boom that began in the mid-1990s, making thousands of homeowners wealthy and fattening profits at related businesses, from mortgage brokers to construction contractors.”

“Jim Venhuizen feels the sting of Chicago’s worsening housing slump about 10 times a day. Mr. Venhuizen, the owner of Cimarron Construction Inc. in New Lenox, takes that many phone calls from unemployed carpenters looking for work. Some are former employees he was forced to lay off in recent weeks as his business slowed along with home sales and construction.”

“‘It’s not enjoyable,’ he says. ‘Some of them are going to have some real problems with mortgages.’”

“In the first nine months of 2006, sales of new Chicago-area homes fell 20% compared to the year-earlier period, according to real estate consultant Tracy Cross Associates Inc. In the third quarter alone, sales were down 32% compared to third-quarter 2005. Residential construction spending in Illinois fell 9% in the first nine months of 2006 from the year before, according to McGraw-Hill.”

“Homeowners are sweating, builders are suffering and brokers are scrambling. Rick Levin is having his best year ever. Mr. Levin is a real estate auctioneer, putting him in that coterie of countercyclical businesses that profit when the economy turns south, a group that also includes debt collectors, bankruptcy lawyers and bond investors.”

“Revenues at the Chicago-based auction house have tripled in the past year, as Chicago’s residential real estate market has slumped. Mr. Levin’s clients range from well-to-do property owners on the North Shore who can’t sell their $2-million mansions to developers trying to cut their land holdings in a weakening new-home market.”

“Some sellers agree to take any price. Others retain the right to reject a price deemed too low. In Mr. Levin’s view, many sellers have yet to learn what ‘too low’ means in the present slowdown. They continue to expect the massive price appreciation of the past decade. At the same time, buyers tend to exaggerate the slowdown’s effects.”

“The disconnect keeps a lot of his auctions from leading to a closing. ‘Sellers think it is 2005 and buyers think it’s 1929,’ Mr. Levin says. ‘You can’t get either side to blink.’”

“Still, he’s not complaining. Mr. Levin estimates he will auction up to 500 Chicago-area properties this year, up from about 150 in 2005. He’s looking to add about five people to his full-time staff of 10 and is eyeing new markets like Southern California, Arizona and Florida.”

“On Nov. 15, Mr. Levin will auction five new homes in West Rogers Park. Originally priced at $899,000, the homes have been sitting on the market for about a year. The developer ‘elected to sell them sooner rather than later and reduce their carrying costs,’ says the firm’s lawyer, John DeAngelis.”

“Mr. Levin must be brutally honest with clients, especially homeowners who come to him as a last resort. ‘Sometimes dashing their dreams about what their largest asset might be worth is a real sobering experience,’ he says. ‘I’m afraid that I’ve got a lot more of that in the next 12 to 18 months.’”

“No Magic Pill” For Floridas’ Housing Bubble

The Palm Beach Post reports from Florida. “Naples saw existing-home values fall 8 percent in September on 37 percent fewer sales, according to last week’s Florida Association of Realtors report. The really confidence-shaking price drops in Naples occurred this month at JJManning Auctioneers’ sale of 44 homes in the wealthy Southwest Florida enclave.”

“Real estate analyst Tom Lawler looked up the first 15 properties’ Zillow.com values and their sales histories. For those homes with ‘not too silly’ Zillow values and that had sold within the past few years, Lawler came up with some startling discoveries about the Naples market, where the median price of an existing home in September was $446,900, according to the association, down from $497,500 a year ago.”

“Only one auction property sold for more than its last sale. On average, Lawler says, auction prices were down 28 percent from the last sales price. The home at 920 Forest Ave., which sold for $690,000 on July 22, 2005, sold at auction for $400,000. The home at 1848 Crayton Road, which sold for $950,000 on March 10, 2005, sold at auction for $625,000.”

“A random check of all the homes auctioned suggests similar results for the rest of the properties, Lawler says. One reason there’s currently more than a two-year supply of homes for sale in Naples, he says, is that sellers are asking ‘unrealistic prices.’”

“‘For those who have to sell, these results should be sending chills down their spines,’ he concludes.”

“Auctioneer Perry Diamond stood on the pool deck of the historic home in West Palm Beach’s Flamingo Park and barked into his microphone. ‘Looking for $600,000, do I have $550,000? $550,000? $500,000?’ said Diamond. ‘Let’s kick it in at $500,000.’”

“‘The auction is today,’ Diamond said. ‘You’re going to buy it today, or it’s going to go back to the seller.’ Still nothing. Nevertheless, after 70 seconds of patter, Diamond declared that he had a $500,000 bid for a home that had been listed for as much as $725,000. ‘We can consider it sold subject to seller’s confirmation,’ Diamond said.”

“But there was no bid for seller John Neuharth to confirm. Neuharth waited out the auction at a friend’s house, and two days later he said he was still ‘totally confused’ about what happened at the auction.”

“Amid a slow market for home sales and a growing glut of properties, frustrated sellers increasingly are turning to auctions in search of quick transactions. Auctioneers hype the process as a way to build buzz and move homes in a moribund market. But as the failed auction on Oct. 14 showed, this marketing method is no magic pill.”

“Longtime auctioneer Karlin Daniel of Stuart derides reserve sales such as Neuharth’s as ‘hocus-pocus auctions’ that give the business a bad name. ‘The worst part is, people go to the auction and say, ‘No one bid. Auctions don’t work,’ Daniel said. ‘I’ve heard that for 30 years. That’s really damaging to auctions.’”

“Diamond, on the other hand, said he will ‘never, ever’ consider an absolute auction because of the danger that a $500,000 house would sell for $50,000.”

“Palm Beach County and the Treasure Coast are no longer the booming sellers’ markets they were between 2000 and 2005. The slowdown has caused an astounding 49-month supply of existing homes for sale in Palm Beach County.”

“Last month, Palm Beach County and the Treasure Coast led the state in declining home sales and tied for the third-largest rate of falling home prices. That has led to thousands of frustrated sellers such as Neuharth looking at everything from auctions to value-range pricing to unload their home.”

“Shortly after he declared the property sold, Diamond acknowledged that there was no sale. ‘Sometimes you want to cry,’ Diamond said while standing in Neuharth’s dining room. ‘Let me introduce you to one of those times.’”

“It’s not uncommon for an auctioneer in a reserve auction to make a bid on behalf of the seller, Daniel said, and Diamond said he declared the home sold simply to save face for the seller. ‘All I was trying to do was to protect the price of the home,’ Diamond said.”

“But the disillusioned seller was upset that his auctioneer went ahead with an auction when only one bidder showed up with the requisite check for $25,000. ‘I am not pleased,’ Neuharth said. ‘There shouldn’t have been an auction because there was only one registered bidder.’”

“Diamond’s auction partner planned to sell another house a block away from Neuharth’s on the same day, but that sale fell flat, too. Sally Markman expected to auction that property, but she said an offer came in just before the auction. Markman canceled the auction, saying she didn’t have enough bidders.”

“Markman’s client, Broward County real estate investor Dennis Bittner, said he rejected the offer for 915 Flamingo Drive because it was well below his $239,900 asking price. Markman even advertised the home as a ‘pre-foreclosure’ sale, although Bittner said he’s in no danger of default.”

“Sellers who want to strike a middle ground can try a ‘minimum-bid auction,’ which auctioneer Marilou MacKenzie recommends to sellers such as Robert Bono, who plans to auction his home next month. The minimum bid is $269,900, a little more than half the home’s list price of $515,000.”

“‘It’s a little frightening,’ Bono said. Still, he hopes the auction brings a quick sale and gets him out from under his mortgage on the house, an investment property that’s producing no income. ‘Listing it is going to make it one of thousands,’ Bono said. ‘And I don’t have a tenant in there, so it’s costing me $3,000 a month.’”

The News Press. “Commercial real estate broker Frank D’Alessandro sent a shock wave throughout the residential real estate community by predicting, in his weekly News-Press column, that the residential market would not recover until the third quarter of 2008.”

“Yet in a July 2005 column, in which I predicted that the housing bubble was about to burst, D’Alessandro disagreed with my assessment and was quoted as stating, ‘While housing prices would be leveling off, the 5 percent annual population growth would be the key factor in maintaining current housing prices.’”

“D’Alessandro, who heads the largest commercial real estate brokerage in Lee County, admits that he was caught off base last year. ‘With homes being grabbed up as soon as they came on the market, I assumed that future snowbirds, buying a second home, were major contributors to the boom. Instead it was speculators and, once the market showed signs of softening, they started to bail out, further depressing the market.’”

“This time D’Alessandro has more hard evidence to back up his prediction, pointing out that Realtor multiple listings have a huge overload of 12,654 single-family homes and 7,819 condominiums on the market at median sale prices far in excess of the current median sales price of $264,100 for homes and $237,500 for condominiums.”

“This residential inventory does not include thousands of houses and condominiums for sale from a score of builders.”

“(Realtor) Barbara Watt says that signs of renewed activity are already taking place, especially in Cape Coral, where prices are already down by almost 20 percent. However, sales figures throughout Lee County do not bear out Watt’s optimism. While there are buyers waiting on the sidelines, they are waiting for prices to drop even further.”

“Buyers are now leery about reducing monthly payments by taking out no-interest or adjustable rate mortgages that, during the boom period, accounted for nearly 30 percent of the mortgage business. Many families who purchased homes last year at peak prices, with little money down and without fixed-rate mortgages are now facing foreclosures.”

“When will the market pick up? When prices begin to drop even more. And there is movement in that direction already from new-home builders who, feeling the pressure from heavy investments in land and infrastructure, still need revenues even if their profit margins have to be cut. Despite the glut on the market, they continue to build.”

“Sunday’s real estate section shows most builders either cutting prices on existing models, covering closing costs or offering free upgrades. However, most existing home sellers are reluctant to reduce their asking price significantly even though they should realize that few people are ever fortunate enough to sell at the peak of the market whether it is a house or a publicly listed stock.”

Bits Bucket And Craigslist Finds For October 30, 2006

Please post off-topic ideas, links and Craigslist finds here.