The Housing Bubble

The Sacramento Bee reports from California. “The Bee recently invited five real estate analysts to share their opinions. When did you know the boom was over? Greg Paquin: ‘August ‘05. Initially, we saw Lincoln start to struggle. The very first market, and not long after that Centex came out and started paying Mello-Roos fees and incentives and so forth. And they were way ahead of the game.’”

“Scott Syphax: ‘Two falls ago when I was in a sales office and agents were talking about competing with investors who had earlier bought there. It was fall of ‘04.’”

“Leigh Rutledge: It was August ‘05. For us in resale, you do your update, and there’s two new houses on the market in east Sac or wherever. And then the next week there’s 10. So the pending (sales) are slowing and the inventory is growing. This happened in 1991, too. You just go, ‘OK, It’s over.’ And I knew it was over. When you’re doing it every day, you know when it’s over and people didn’t want to talk about it. Didn’t want to talk about it. Just wanted to pretend it wasn’t happening.’”

The Press Democrat. “It was a tumultuous year for many Sonoma County businesses. The real estate industry reeled from a sharp downturn in the housing market. Prices fell for the longest stretch in a dozen years. Having peaked at $619,000 in August 2005, the price for the typical Sonoma County home dropped to $565,000. By one estimate, the housing downturn wiped out 1,300 jobs in Sonoma County.”

The Record.net. “‘The issue is, and the concern we would have, is that if larger builders think they can just build unabated,’ said Tom Doucette, president of Stockton-based Frontiers Community Builders.”

“That could flood the market, said Doucette, who has been in the home-building business for 25 years.”

The Union Tribune. “It will come as little surprise to San Diegans that a big reason for the slowdown is the sluggish housing market. Thousands of construction workers and real estate agents have lost their jobs. Consumers who once relied on home equity loans are keeping a tighter hold on their wallets.”

“‘The biggest question facing the economy is what’s going to happen in housing,’ said James Welsh, head of Welsh Money Management in Carlsbad.”

“‘If you look at the past, housing corrections typically last a lot longer than a year. It seems unfathomable to me that after such a big run-up that home prices have had, we would have just a slight correction and everything would be OK,’ he said.”

The North County Times. “‘We are all sitting on the edge of our seats,’ said Marney Cox, chief economist at the San Diego Association of Governments. Cox puts the possibility of an area recession at 65 percent. ‘North County is at a slightly higher risk for a recession,’ Cox said.”

“Even optimists acknowledge that markets are rebalancing after a full-tilt frenzy. In most Southwest County ZIP codes, prices of higher-end homes are dipping. And signs of pain are frequent. Sales values in parts of Menifee and Sun City have actually fallen below year-ago values.”

“As a result, some families who bought in 2004-05 are finding that it’s not so easy to sell their way out of debt when they’re suddenly hit with medical bills or the end of short-term ultralow mortgage payments.”

“In the July-September quarter, Riverside County had about three defaulted mortgages for every 1,000 residents, according to a firm that provides information to real-estate investors. That was the highest rate in the state in that period, and only modestly below default rates recorded during the recession of the early 1990s.”

The Orange County Register. “No person has personified the O.C. housing outlook game more than Gary Watts. His projection for 15 percent gains in ‘06 was off.”

“Us: How’d you miss on ‘06? Gary: ‘What appears to have affected my numbers for last year were two events: (a) the Fed raising the rates a half percentage point higher than I thought they would…This slowed down sales and then these slower sales ran straight into (b) a huge jump in our spring inventory when those inventory numbers usually decline.”

“‘These two forces caused the sellers, who needed to sell, to liquidate at much lower prices, just to capture the few buyers in the marketplace. Interestingly enough, maybe 30 percent (or more) of the listing market was made up of sellers who were ‘un-motivated’ and just looking to get a specific price. This too added additional pressure on our selling market.’”

“Chapman University’s A. Gary Anderson Center for Economic Research forecasts a drop of 2,000 jobs in Orange County’s construction and financial-activities sectors next year, mainly due to the slowdown in the housing market. Without the commercial construction boom, the job declines would be worse, Chapman economist Esmael Adibi says.”

“Yet the building boom is coming just as mortgage companies are shrinking and moving out of some of their big offices. ACC Capital Holdings, the Orange-based parent of Ameriquest, is leading the trend by putting up 600,000 square feet for sublease after announcing 3,800 layoffs in May.”

“As of Nov. 30, just 33,000 houses, condos and townhomes traded hands, according to DataQuick. That’s down 27 percent from the same period in 2005 and the lowest since 1995. But even as homes began to languish on the market for want of buyers, the median price of local homes continued climbing through the first half of the year, hitting a record $646,000 in June.”

“Since then, the standoff between buyers and sellers eroded and the median price dropped $40,000, retreating to November 2005 levels.”

“Builders, who were caught flat-footed in 2006 by cancellation rates of 50 percent or more, should trim inventory to manageable levels by the second half of 2007, said Jay Moss, regional general manager for KB Home.”

“But competition for buyers will remain stiff among builders, he said. He predicted that the resale market will be ‘dormant,’ making it tough for homeowners to unlock their equity and buy a new move-up home.”

“Mac Mackenzie, a real estate agent who was the county’s top salesman in 2005, worries there will be more homes than buyers in the market next year. Mackenzie is worried about bad debt and poor financial management by homeowners.”

“‘I really think that the potential of a downturn is very, very high, and that a lot of people have overborrowed to the point of insanity,’ he said.”

A housing report from the Coloradoan. “Throughout much of the year, Colorado led the country in the number of foreclosures. Mortgage lender Lou Barnes said most of the foreclosure activity stemmed from loans that required little or no down payment or was in areas with soft housing markets. He said soft markets in Larimer, Weld and Adams counties and in eastern Longmont have come to be known as the ‘foreclosure belt,’ where a glut of new housing has depressed prices of existing homes.”

“‘That means the buyer from three years ago who’s in trouble now can’t get out of their house,’ he said. ‘If you’ve got less than 5 percent equity in your house and prices aren’t appreciating, you can’t afford to sell your house.”

“In Larimer County, 1,748 homes were listed in either pre-foreclosure or foreclosure on a Web site. Weld County listed 3,036 homes in foreclosure in 2006. Nearly 800 Boulder County residents defaulted on their mortgages in 2006, making for the highest number of foreclosures in the county in nearly 20 years.”

The Denver Post. “Foreclosures blighted entire neighborhoods from Pueblo to Greeley. They also caused home values to fall for mortgage-paying homeowners across the Front Range.”

“Critics inside and outside the mortgage industry say certain loan terms increase borrowers’ risk of default. In its reporting, The Post found a correlation between 100 percent loans and foreclosures. Of nearly 1,000 foreclosures during one month in Adams, Arapahoe and Jefferson counties, more than half involved no-down-payment loans.”

“Currently, ‘the mortgage broker will find an appraiser he likes to use’ on every sale, said Ivor Hill, an appraiser on the attorney general’s mortgage fraud task force. That makes it too easy ‘to influence the appraiser to the desired value.’”

“‘The perspective on the street is that no one is looking. In the off chance you get caught, nothing will happen to you,’ said Chris Holbert, president of the Colorado Mortgage Lenders Association.”

“Homes nestled in the foothills close to Denver usually have gorgeous custom layouts and are built on large lots with spectacular views.”

“But those unique features haven’t been enough to keep the real estate market from slowing in recent months in the hills above Boulder, around nearby Nederland and in places like Evergreen and Conifer in Jefferson County, according to Metrolist. The housing market in Estes Park is ‘off 10 percent,’ said Tom Adams, a real estate broker in the town.”

“‘We’re picking up the bad PR off the Front Range, in my opinion,’ he said. ‘They don’t understand this is a good market to buy real estate, especially if you are a baby boomer looking to retire.’”

“Homes in all price ranges sat vacant this fall in Evergreen and Conifer as Realtors scratched their heads, trying to figure out how to entice buyers.”

“Two houses priced in the low $300,000s went unsold, as did one at $895,000. In fact, only half as many homes in Evergreen-Conifer sold during October as sold in the same period the year before, according to Realtor Tupper Briggs. ‘Our market had the rug pulled out from underneath it in September. October was very slow,’ Briggs said.”

“In the second quarter, home sales in Conifer ZIP code 80433 dropped 18 percent over the previous year, although sellers got nearly 98 percent of their asking prices. In Evergreen ZIP code 80439, a total of 131 homes sold in the $500,000 range, but prices dropped almost 10 percent from the year before.”

“‘I can’t blame the buyers that are waiting on the sidelines. They didn’t want to buy a property today that would be worth less six months from now,’ Briggs said.”

“Nederland appears to have been hit a lot harder, according to data for ZIP code 80466 from Metrolist. The mountain town west of Boulder, near Eldora ski area, experienced a more than 14 percent price drop on homes averaging $330,000 in the second quarter, and a 30 percent drop in sales, according to Metrolist.”

“Higher-end properties have ‘been very slow,’ said (broker) Bill Goodacre. ‘There was a foreclosure in Boulder County (of a house) that was over $1 million. It was overpriced,’ Goodacre said.”

Readers suggested a topic surrounding the changes in the lending industry. “Which of the big lenders are at the most risk of collapse in 2007? HSBC? Countrywide? etc. I suppose I’ll start looking through their 10KSB & 10Q’s for clues.”

One said, “1. Countrywide, Option One and Ameriquest go bankrupt. What happens to a mortgage when no one wants it at any price? Fannie Mae attempts to turn in a Long John Silver’s placemat as a financial statement, they get another extension and a stern warning that they will be delisted.”

Another said, “Credit will tighten and this means that there will be fewer sources of funding since the MBs holders will begin to demand the appropriate risk premium. Debt is debt and has to be paid back at some point in time. This is why M3 cannot expand indefinitely. Deflation will happen because of credit destruction.”

One hears aircraft. “Bernanke says he will drop money from helicopters. Your argument says people won’t pick it up, or banks won’t lend it. I just can’t believe that. A bank that doesn’t lend is out of business.”

One is doubtful, “He will continue trying to walk the volatile tightrope between death by fire (inflation / possible run on the dollar) and ice (recession / deflation). Discrete helicopter drops will only be used to the extent judged as necessary to stay on the tightrope. Good luck!”

The Wall Street Journal. “As more homeowners skip out or fall behind on their mortgage payments, some lenders have started tightening their underwriting standards.”

“That might not be enough to save them from losses. Mortgage lenders, such as Countrywide Financial Corp., Downey Financial Corp. and FirstFed Financial Corp., try to avoid risky ’subprime’ borrowers and have become more cautious about whom they lend to in general. Also, they’re setting aside more reserves for potential defaults. But the increasing popularity of second mortgages could end up undermining their efforts.”

“New data in a research report from securities firm UBS show a high percentage of borrowers with delinquent, defaulted and foreclosed loans have second mortgages, which they’ve usually taken out at the same time as their first loans to buy a house. The UBS data suggest these borrowers are so stretched financially by the added debt that they can’t make payments on their first loans on time.”

“Second mortgages underwritten by the same bank that originated the first loan are termed ’silent seconds’ because the loan-to-value ratio lenders report includes only the first mortgage. They can enable a home buyer to borrow more, often to buy a property he or she couldn’t otherwise afford.”

“These second mortgages, sometimes called piggyback loans, started to take off along with other ‘nontraditional’ mortgages, such as interest-only mortgages and payment-option ARMs, as housing prices appreciated in recent years and meeting traditional mortgage requirements became more difficult.”

“Today, adjustable-rate, interest-only loans constitute the highest percentage of silent seconds. In the ‘Alt-A’ mortgage market, where borrowers have good credit but don’t necessarily fit traditional lending standards, 58 percent of the $24.6 billion in adjustable-rate, interest-only mortgages originated in 2006 have second mortgages.”

“The amount borrowed in silent seconds probably is greatly underestimated, says David Liu, a director in the U.S. Securitized Products Strategy Group at UBS. The lack of knowledge among lenders about silent seconds held elsewhere presents a problem as the lenders try to determine how much to set aside for potential losses.”

The LA Times. “Ownit Mortgage Solutions Inc. of Agoura Hills, which shut down abruptly early this month, has filed for bankruptcy protection, saying it owes more than $165 million to Merrill Lynch & Co. and other financial firms that bought Ownit loans now in default.”

“The filing is a sign of the stresses felt by so-called sub-prime lenders such as Ownit, which make higher-cost loans to borrowers with poor credit or limited incomes. In its filing, Ownit listed its assets as between $1 million and $10 million and said it owed $170 million to its 20 biggest creditors. By far the biggest portion of the debt resulted from soured mortgages.”

“Ownit sold its loans on the condition that it would have repurchased them if the borrowers missed payments in the early months.”

“Merrill Lynch demanded that Ownit repurchase mortgages totaling $93 million. Several other Wall Street firms are seeking smaller amounts, and Calabasas-based Countrywide Financial Corp. has $11 million in loans it wants Ownit to buy back.”

“Merrill Lynch was Ownit’s chief backer on Wall Street, having bought a 20% stake in the company for $100 million in September 2005. Merrill also had provided a large credit line to Ownit and purchased two-thirds of its loans to convert into mortgage-backed securities.”

The St Petersburg Times reports from Florida. “Bruce Sparks painted a bright red ‘4 SALE’ sign on his home’s roof in September, hoping to attract a buyer for his waterfront home. It was a desperate attempt by a man who had hoped to flip the house for a quick profit. Now, several months later, the house remains unsold, and Sparks is facing foreclosure, said Richard Doyle, Spark’s real estate agent.”

“‘The market shift is creating hardships for many property owners,’ Doyle said.”

“Four Percent of listed homes that sold in November, less than one-third the sales rate of a year ago. The nmber of homes for sale in Pinellas County in last month was 16,000, compared to 6,000 in October 2005. $192,000 Median price for a single family home in November, down from the January 2006 price of $210,000.”

“Sparks, who could not be reached for comment, bought his 1960s ranch-style home in March. He paid $1.32-million for the property, which last sold for $275,000 more than a decade ago.”

“Sparks then put the two-bedroom home back on the market for $1.6-million, hoping to realize a quick profit. Instead, he found himself with a home that did not sell. Faced with foreclosure, Sparks dropped the price to just over $1-million and, according to Doyle, is taking any reasonable offer to the bank in an effort to forestall foreclosure.”

“‘We hope this will be a short sale,’ Doyle said. ‘We have several offers the bank is considering.’”

The Naples News. “Despite the fact that real estate prices dropped in 2006, mortgage foreclosures were up nearly 300 percent in November in Collier compared with the same month last year, court records show.”

“People like Scott Hopkins are struggling, even though he earns more than the area median income of $66,100 a year. The three-bedroom townhouse Hopkins bought for $367,000 in November costs $9,000 a year in taxes, insurance, and mortgage insurance. By the time Hopkins pays the principal, interest and condo fees, he’s spending nearly half his annual income on housing.”

“‘How is that affordable?’ he asks, anger rising in his voice.”

“The drop in real estate prices has helped some. In 2005, fewer than a handful of single-family homes were selling for less than $300,000. Last week, the real estate MLS showed 305 single-family homes for less than $300,000. And nearly 1,000 condos were for sale for less than $250,000.”

The Herald Tribune. “In a post-boom residential market where sellers are having a tough time making buyers get out their checkbooks, both builders and individual home sellers are throwing in a lot more than the kitchen sink.”

“Southwest Florida is by no means alone in facing a downturn in housing sales. In this region, the news was even worse. Sales fell by the same third, but the median price was 11 percent lower than a year ago.”

“With the home builders wheeling and dealing, it is not surprising to see individual sellers adding special incentives to their listings. Katrina Taylor has been trying to sell her one-bedroom downtown condominium for a year. She has already reduced the asking price from $465,000 to $325,900.”

“Now she is throwing in a $5,000 bonus for the agent who shows up with a contract. ‘There are price reductions everywhere,’ said her agent, Steve Ivan. ‘I’ve got price reductions on every listing I have. They are finally facing the reality that they really have to reduce, and that is with a capital R. But this one in particular has a great bonus.’”

“‘And I am willing to throw in some of my commission money, not all of it, but I am willing to help out, and she is willing to negotiate, even at that price,’ Ivan said.”

“Steve Rinehart is getting ready to build a 114-unit subdivision in Manatee County, and he needs to clear the decks of some leftover inventory from his last project, a group of homes in eastern Sarasota County.”

“The original prices on the remaining Secluded Oaks homes were $825,000, $740,000 and $700,000. Now they are $750,000, $690,000 and $650,000. Adding fuel to the fire, Rinehart is working with a bank that will offer 100 percent financing on those homes.”

“At this particular moment, appraisals are coming in higher than transaction prices, which makes the 100 percent loan more feasible, he said. During the boom years of 2003-05, appraisals often did not meet market value. Now, the reverse is often true.”

“‘Prices are coming down, people are trying to get out and appraisals are still working with some of the market value that was during our hot time,’ Rinehart said.”

“The time to get that kind of loan? ‘While appraisals are still coming in real good,’ he said.”

“Southwest Florida’s slow-mo real estate market has Bradenton real estate agent Frank Maruca settling into the leather seats of a 2007 Lexus ES 350. Maruca has the distinction of being the only agent who took advantage of Neal Communities’ summer 2006 sales incentive program aimed at moving inventory homes the company built in East Manatee County.”

“In perhaps another sign of the times, Maruca won the prize by selling houses to his own family, one to his brother, one to his daughter and one to himself.”

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

The Tribune News reports from California. “Those looking to buy a house in San Luis Obispo County in 2007 are expected to have a lot to choose from, while those trying to sell may have to lower their prices to stay competitive. The softening housing market of 2006 is expected to continue into 2007, real estate experts say.”

“In 2006, homes took longer to sell than in previous years, leading to a large number of homes on the market. In San Luis Obispo County, 216 homes sold in November, a drop of 38 percent from the previous year when 351 homes sold, according to DataQuick.”

“The high inventory may have led to the median home price dropping for the first time in eight years. September marked the first time it had dropped since December 1998. It decreased again in October and November.”

“The median home price in November was $512,000, according to DataQuick. That’s a decline of 8.4 percent from November 2005 and down from October’s median price of $545,000.”

“‘Buyers should be able to negotiate a little harder to what they think is a good price,’ (realtor) Lenny Jones said. ‘Sellers can expect a lot of competition. Put it on the market at a good price, not a pie-in-the-sky price.’”

“That’s not to say prices are expected to drop drastically. ‘I don’t think we’re going to see huge price reductions,’ agent Richard Watkins said. ‘It’s sort of a nontraditional market.’”

“‘Generally, 2006 was not a banner year,’ Watkins said. ‘But if you go back and look at the last 10 years, it wasn’t that bad.’”

The Sacramento Bee. “We did OK in our predictions for local business doings in 2006. Here’s the report card: Prediction: Developers offer a new proposal for housing and retail at 10th and K streets. Reality: Retail, yes. Housing, no. Prediction: A proposed 21-story project combining lofts, office and retail gets under way at Eighth and I streets. Reality: Nope. Homebuilder D.R. Horton pulled out of the project.”

The Daily Bulletin. “The for-sale signs are up longer now and there are many more of them. You don’t have to be an expert to know that the Inland Valley’s phenomenal housing boom is over.”

“‘There’s no question the boom is over,’ said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp.”

From the Reporter. “The nation’s house party ended with a thud in 2006. The sudden stall in home sales, home construction and home prices was voted the top business story of the year by U.S. newspaper and broadcast editors surveyed by The Associated Press.”

“In 2006, home builders scuttled projects, would-be buyers canceled orders, and the re-sale market hit landmark lows.”

“‘The experienced agents are telling me this is one of the worst markets they’ve seen,’ (broker) Sue Kappel told The Reporter. ‘It used to be get listings, get listings, get listings. Now it’s find buyers, find buyers, find buyers. The paradigm has shifted.’”

“In Solano County, home prices are falling, and sales are now taking an average of nearly three months. Meanwhile, short sales, when a home is purchased for an amount less than the debt owed by the seller, are reportedly on the rise.”

“Bob Solomon, of Vacaville’s Solomon & Associates Real Estate, noted that of his company’s four listings in mid-December, three were short sales. It’s an increasingly common phenomenon, he said, given current market conditions and depending on when home owners purchased their house, what type of mortgage they chose, and whether they’ve spent their equity.”

“‘It could be the best of times or the worst of times, depending on where you are in the game,’ Solomon said. ‘If you bought your house two years ago and you bought it with 100 percent financing and you didn’t see any appreciation, you’re going to be upside down by the time you try to sell the house.’”

The Review Journal reports from Nevada. “Median prices for new homes in Las Vegas continue to rise in November, but at least one analyst believes incentives are keeping those prices high. ‘Factoring out sales incentives offered by most home builders, new home prices would probably be down by double digits, said Dennis Smith of Home Builders Research.”

“‘Home builders that have more standing inventory will be more likely to have larger sales incentives and therefore have seen their prices decline more than those that had fewer standing inventory homes,’ Smith said.”

The Las Vegas Business Press. “Lagging homes sales are weighing on the Southern Nevada economy but they aren’t causing a recession, according to the UNLV Center for Business and Economic Research. Eight out of 10 leading economic indicators declined for the second month in a row.”

“Residential construction permits are off almost 40 percent from last year, and the value of those permits dropped by more than 41.3 percent from 12 months before. The Las Vegas Valley may have become ‘the poster child for an overbuilt housing market,’ remarked CBER Director Keith Schwer.”

“As for recession talk, Schwer put the odds of a national downturn at 25 to 30 percent, but noted, ‘If the national economy goes into a recession, we are not immune.’”

The East Valley Tribune from Arizona. “The Valley’s new home market continued to sag in November, as building permits and sales slumped. Builders took out 1,985 permits for homes last month, down 55 percent from the same period a year before, according to real estate analyst RL Brown.”

“Some 40,125 new home permits were issued in 2006 through November, a 31 percent decrease from last year. ‘The market basically is still reacting to the surge of speculative buying that we saw in 2005 and the first part of 2006,’ Brown said.”

“That resulted in a wave of building contract cancellations when investors grew nervous, he said.” “Hundreds of lots of land have been graded in subdivisions throughout the Valley, but few homes are actually being framed, Brown said.”

“About 43,800 homes are currently up for resale, down from a peak of roughly 48,000 two or three months ago, said Robert Rucker, CEO of the Arizona Regional MLS.”

“Builders have been offering incentives and have cut way back on production, said John Fioramonti with Hanley Wood. ‘The builders are finally coming to grips with reality here,’ he said.”

“Homeowners and builders alike are reducing prices, he said. During the housing boom, home price appreciation rates weren’t sustainable, said Ross Smith, VP at commercial brokerage Grubb & Ellis.”

“‘As the prices went up, people got to the point where they weren’t willing to pay those prices,’ Smith said. When the slowdown hit, some new homebuyers canceled contracts with builders, and others couldn’t sell their old homes to buy new ones, he said. Now, sellers are adjusting their prices or taking their homes off the market, and builders are clearing out excess inventory, he said.”

The Arizona Republic. “A downturn in the housing market is forcing budget cuts in Queen Creek. Facing lower-than-projected revenue from a construction sales tax and building permits, town departments are being told to prioritize projects and shave spending by 15 percent.”

“Council member Lisa Coletto-Cohen said she isn’t sure what will happen. Coletto-Cohen said road projects already promised to residents need to be a priority. ‘I think it’s imperative that we look at ways to develop a revenue base that doesn’t fluctuate and isn’t so dependent on construction,’ she said.”

“The seller’s market of 2005 sharply reversed itself to a buyer’s market in 2006, and Chandler homes became harder, much harder, to sell.”

“Since summer, homes have been selling at their slowest pace in at least four years. In recent months, only about 15 percent of the homes on the market at any time are selling. The MLS listed about 2,160 homes for sale in the city this week.”

“Ahwatukee homeowners saw home values soar in 2005, but like everywhere in the Valley, the market saw big corrections this year.”

“The median price for existing homes, which was a relatively meager $204,000 in 2003, reached close to $400,000 in 2005, but fell back to $347,000 in November. They remained above $342,000 for all of 2006, according to Arizona State University Polytechnic.”

“Despite the downturn, buyers are still balking at what remain high prices. In the last few months of the year, only about 100 homes a month have been selling, and there are at least seven times that many on the market in Ahwatukee Foothills.”

“Sales of existing homes in Scottsdale are on track to reach about 5,200 in 2006, down nearly 40 percent from last year’s torrid pace. Sales of existing condominiums and townhouses are on track to hit just over 2,900, down a third from 2005.”

“A Southern California homebuilder plans to breathe new life into five Pinal County subdivisions, which were abandoned months ago by a bankrupt Phoenix developer.”

“Frontier Homes agreed to purchase the housing developments in Casa Grande and Maricopa, totaling 430 home sites, for $29 million during a U.S. Bankruptcy Court auction last week.”

“Some 132 homes are in various stages of construction at the sites, left unfinished by bankrupt Turner-Dunn. Half finished homes and auction signs can hurt the value of homes in the entire area, which has several other new projects by other homebuilders, said John Russell, a Casa Grande real estate agent.”

“People wonder if they want to move into an area like that, he said.And then there are the people who already bought homes in the largely-vacant subdivisions.”

“‘You just feel awful for them,’ Russell said. ‘They have no neighbors, and there are homes in various stages all around them.’”

The Naples News reports from Florida. “Collier County single-family existing home sales dipped from 333 in November 2005 to 182 last month, a 45 percent decrease. Median sales prices for homes dropped by 13 percent from $479,800 in November 2006 to $415,200 last month. But it’s really not a dismal picture, if one approaches the numbers and patterns logically and systematically, said Realtor Brett Ellis in Fort Myers.”

“The market is leveling off to what it was in 2002 and 2003, before home sales and prices went crazy, Ellis said of Lee County sales. ‘This is positive,’ Ellis said Friday.”

“Naples Realtor Phil Wood is optimistic about sales. ‘Actually, this year looks like it could be the third best in history, a little ahead of 2003,’ Wood said.”

The Sun Herald. “This year saw a sudden slump in the housing market. Barbara Rainey, North Port’s Building Department’s administrative division manager, predicts within six months the city will begin to experience a slowdown in as it reflects with this year’s building permits.”

“Many homeowners who tried to refinance their homes found out their appraisals came out much lower than they was before the market slump. Many others who have tried to sell their homes, have had them on the market for more than eight months.”

“Real Estate investors also have seen the value of their investments drop. Building lot sales have slowed down. Recent data provided by a local Arthur Broslat, a Realtor in Murdock, said in November, there are 2,986 lots in North Port on the market, and only 10 have been sold.”

“Property owners are also having issues with their tax bills. According to Broslat, many of these tax bills were 100 percent higher than last year. This has also added to downward prices as many owners do not want to pay high taxes on land that has been losing value, Broslat said.”

The Tampa Tribune. “Frank Gregoire, a St. Petersburg property appraiser, couldn’t help but chuckle when an appraisal request came through his fax machine this month. It was sent by a California loan originator, and the message was clear: ‘Please call if unable to attain this value BEFORE INSPECTION.’ Photos of the property, the request said, could not include ‘unfinished construction or damage.’”

“Gregoire knew right away that the loan company was trying to influence his valuation of the home. ‘It was the most blatant request I’ve seen,’ said Gregoire, who is chairman of the Florida Real Estate Appraisal Board. He said he’s seen a recent spike in unethical requests like the one from California.”

“Professional appraisers say they’re under more pressure to value homes at specific, and often inflated, amounts. This type of fraud requires a string of real estate professionals willing to go along. A key to the scheme is having an appraiser willing to overvalue a property.”

“‘Without an appraiser coming in at the magic number, the fraud is stopped in its tracks,’ said Tampa police Detective Jim Bartoszak, who’s working on several loan fraud investigations.”

“Appraisers in such deals usually get little more than their typical appraisal fee of $300 to $500. So why would appraisers risk their licenses for so little? Richard Powers, president of the Appraisal Institute, said appraisers are tempted to overvalue a home when they’re starved for work.”

“Now that the market has cooled, there isn’t enough work to go around. ‘Appraisers who do this are often guaranteed more work from the client,’ Powers said.”

“The pressure to inflate an appraisal, he said, comes from mortgage brokers, loan officers and real estate agents, who are also competing for work in a slow market.”

“Phillip Wallen said such pressure prompted him to leave the business. Wallen worked as an appraiser in Pinellas County for 12 years and owned his own business. ‘Every day I would get calls that I needed to do an appraisal for X amount,’ Wallen said. ‘There are so many appraisers out there willing to give out whatever value a client wants. That makes it tough for the honest appraisers to compete.’”

“Scott Murphy, who owns an appraisal company in Sarasota, said it’s the loan officers that have pressured him to come up with a value to justify a sales price. ‘An appraiser may agree to go up 10 to 15 percent to ‘prove’ a value for a loan officer,’ Murphy said. ‘Before you know it, they get more and more business, and they’re committing serious mortgage fraud.’”

The Herald Tribune. “The sentencing of Taya Parodo closed the judicial door on Todd Kolbe’s scheme of artificially inflating property prices to defraud lenders.”

“Of the eight people involved in the scam, Parodo is the sixth to be sentenced. Parodo acted as closing agent through her Bradenton-based title insurance company. Kelly Abercrombie, a Sarasota mortgage broker was sentenced to 15 months in prison. Mary Bolan, a Manatee County real estate agent, got six months, while Amy Samelson Kolbe was sentenced to four years’ probation for her role as a straw buyer.”

“Properties in Sarasota and Manatee counties were purchased for one price and sold to other members of the gang at much higher prices. In the process, Kolbe and other members of his gang produced fraudulent appraisals, earnings statements, income tax returns and rental agreements.”

“The bogus loans were ultimately exposed by Fannie Mae, the giant government-backed mortgage company, after the loans had been sold in the secondary mortgage market.”

“Home Star Mortgage Services, a New Jersey-based mortgage lender that Kolbe worked for, was forced to repurchase the loans, foreclose on the underlying properties and sell them at a $1.8 million loss.”

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

It’s Friday desk clearing time for this blogger. New York, “After years of inflating, the Island’s housing bubble sprang a noisy leak; prices for homes, the largest investments for many Long Islanders, fell in Nassau and rose barely at all in Suffolk. Sensing the crest, more homeowners put their houses up for sale so that inventory backed up and there seemed hardly to be a street anywhere without for-sale signs.”

“Dede Gotthelf, owner of the Southampton Inn, said that the tony resort seemed to die in the fall. ‘We are dead as a dodo bird - the entire village,’ she said.”

“South Fork real estate brokers conceded that the market in general has slowed. (Broker) James McLauchlen said that 115 properties had changed hands in 2004. In 2005 the number reached 125 sales or trades. This year, only 65 properties were exchanged.”

“‘Those with money don’t want to be the last one who paid the most’ for a property here, (broker) Paul Brennan said. Even the very rich do not want to appear foolish.”

From New Jersey. “Having prices down from their high point is good news for consumers, said Dan Shiver, president of the Passaic County Board of Realtors. ‘More people can afford to get into the marketplace. The market has not crashed; it’s just softened,’ Shiver said. ‘For lack of a better word, it’s more normal.’”

“Maine real estate sales tumbled into the double digit range last month as decreases in prices and sales followed a national track downward, an industry group said Friday. Maine real estate agents emphasized the brighter side of the housing slump.”

“‘Buyers are in a better position than they were a year ago by not having to make an on-the-spot decision to buy a house,’ said John Hatcher in Portland.”

“The Massachusetts Association of Realtors reported yesterday that the 3,246 houses sold in November needed 130 days on average to attract buyers. That’s the longest period ever seen since MAR began keeping such data in April 2005, and association President David Wluka thinks it’s probably the longest period in history.”

“‘My gut is that it’s the highest (time-on-market figure) ever,’ Wluka said. The expert also said the 53,105 unsold houses and condos listed for sale last month probably represent the biggest November inventory ever, although MAR records only go back to 1997.”

From Wisconsin. “The stateline area’s real estate market may be ‘disinflating,’ said Russ Kashian, an author of the center’s Stateline Economic Report, but it’s never been a bubble in danger of bursting. ‘It can be argued that this is a correction,’ he said. ‘A decline in sales in the years following a record is not necessarily a failure. It is possible to view the slowdown as a reversion to the mean rather than a collapse.’”

“Sales of previously owned homes in Greater Cincinnati plunged 13.5 percent in November, the Cincinnati Area Board of Realtors said Thursday. It was the seventh straight monthly decline in year-to-year comparisons.”

“‘Some buyers are simply taking a breather from the housing market this year,’ said Dave Otto, president of the Cincinnati Area Board of Realtors. ‘It’s happening nationwide.’”

From Washington. “The Seattle-King County Association of Realtors has about 8,800 active members, up more than 80 percent from 1999. The state Department of Licensing reports there are 13,747 licensed real estate salespeople in King County.”

“A growing number of agents are trying to distinguish themselves. Dominic Canterbury, owner of (a) Seattle marketing and public relations firm, said niche real estate marketing can work, if done right. ‘Most agents are awful with their marketing,’ he said. ‘That’s why they’ve sort of become the used car salesmen of our time.’”

“An industry group said homeowners eager to unload their properties in a crowded market cut their prices. While recent signs have led some economists to speculate that the worst of the housing slump has passed, many are taking a wait-and-see approach, including those at the Realtors association.”

“‘Maybe we’ve hit bottom,’ said David Lereah, chief economist of the Realtors association. ‘I’ll need another month before I can get comfortable with that statement.’”

The Camarillo Acorn reports from California. “The housing market softened in 2006 but professionals aren’t anticipating a long-lasting slump. The market is only normalizing itself, experts say. ‘The circumstances bringing the real estate market into balance are happening unusually quickly,’ said Glen Scalise, president of the Conejo Valley Real Estate Association.”

“‘The general trend is that sales of existing homes are down by 30 percent or more,’ said Bill Watkins, executive director for a research program of the University of California at Santa Barbara.”

“John Murray, a Realtor who sells homes throughout the area, said the housing market has definitely softened. ‘I have seen prices drop from 5 to 10 percent versus earlier this year in a number of areas,’ Murray said.”

“Because of the declining market, some homes are now valued at less than what the owners paid for them. Short pays, in which lenders forgive all or a portion of a debt to make up for loss of equity due to decreasing house values, are becoming more common, Murray said. ‘Part of the problem has been the prevalence of interest-only loans,’ he said.”

“Developers are making some concessions to sell homes quickly, but don’t appear overly worried about future demand. ‘The market goes up and down, but developers are used to this,’ said Dave Bobardt, planning manager for the city of Moorpark where several large tract housing developments are underway.”

“Prices also are leveling off in Simi Valley as properties stay on the market longer, said Linda Enderson, a director on the Simi Valley-Moorpark Association of Realtors. ‘It’s more like a normal market,’ Enderson said; lower priced homes sell more quickly. ‘A couple of years ago you couldn’t find a single-family home under $500,000, but now you can.’”

“In the Conejo Valley, the market is being driven by supply and demand basics, said Russ Watson, housing manager for Thousand Oaks. ‘Homes stay on the market a bit longer than they used to, and that causes pressure to reduce the price a little,’ Watson said.”

The New York Times. “The Napa Valley ranch house, built in the 1970s, wasn’t much of a looker. And with a price tag of nearly $1.4 million, it wasn’t cheap either. But its location on Highway 29, on an acre of land in St. Helena caught the attention of Jocelyn Singh.”

“‘We ended up getting it for $975,000,’ said Ms. Singh, noting that the seller’s final price wasn’t too far from her initial offer of $950,000.”

“Thirty percent price cuts in asking prices for homes aren’t the norm, but stories like this, with sellers willing to negotiate or even drop their asking prices, are increasingly popping up in suddenly cooling vacation home markets.”

“Since different factors motivate sellers of second homes, they simply might take their homes off the market or wait longer to reduce prices. ‘That’s one of the reasons the price effect can lag,’ said Cynthia Kroll, an economist at the University of California, Berkeley. ‘It can take awhile for the sellers to accept the reality of lower prices.’”

“The National Association of Realtors predicts that 30 percent of all home sales for 2006 will have been second homes, down from 40 percent last year, and attributes much of that drop to the exit of investors.”

“And the places that saw the biggest influx of investors and the most heated activity are likely to see the biggest price drops. ‘Areas that had the highest appreciation and that were the hottest can cool the most,’ said Edward E. Leamer, an economist at the University of California, Los Angeles.”

“In Northern California, ‘properties under $1 million have reverted back to last year’s prices,’ said Mike Silvas, the owner of a real estate agency with offices in wine country and in coastal areas of Northern California. ‘The Carmel market is the one that has really ground to a halt. Prices got to more than $1,000 a square foot and buyers finally balked.’”

“In Carmel, prices were off 5 percent this year through October, said Mark Wilson, an agent with Morgan Lane in Carmel. Properties in Monterey County, which includes Carmel, are sitting on the market for an average of 113 days, more than twice as long as a year ago.”

Some housing bubble news from Wall Street. The Chicago Tribune, “About 500 Chicago-area workers at LaSalle Bank Corp. and other ABN Amro Bank NV businesses will lose their jobs by mid-2007 as its Dutch parent company looks to cut costs in a competitive environment. ABN Amro has struggled to control costs because the addition of customers in new markets has forced it to set aside more money for loan defaults.”

“And more cuts in the industry may be in the offing, said George Morvis, CEO of Hinsdale-based bank consulting firm Financial Shares Corp. ‘You’ll continue to see more banks get more efficient as business continues to be tough, especially on the retail side,’ he said.”

The Sun Times. “Layoffs are also expected at Harris, Chicago’s third-largest bank, though the timing and the numbers are not yet known, according to spokeswoman Amy Yuhn.”

“Yuhn said that as part of a large cost-management effort across Harris parent Bank of Montreal, jobs will be lost and ‘Harris is not immune.’”

“Harbourton Mortgage Investment Corp., Mclean-based Harbourton Capital Group’s wholly owned mortgage banking subsidiary, stopped funding new mortgage loans and began winding down its operations.”

“The company, which funded $1 billion in loans in 2005, says it was forced to make this move as it was unable to resolve mortgage purchase claims made by its investors who had bought mortgage loans from HMIC.”

“Harbourton Capital Group is likely to write off its full investment in the mortgage company. Harbourton already has taken significant losses this year as a result of the mortgage operations.”

“For the first nine months of 2006, Doral Financial had a net loss of $62.5 million. Doral Financial’s financial performance for the third quarter of 2006, compared to the third quarter of 2005, was principally impacted by (1) lower net interest income as a result of a decrease in net interest spread and margin together with a decrease in the balance of interest-earning assets, and (2) non-interest losses driven primarily by losses on securities held for trading, a servicing loss and lower gains on sales of mortgage loans.”

“The reduction in average interest-earning assets reflects the sale during the second quarter of 2006 of approximately $2.4 billion in mortgage loans as part of a previously reported restructuring of loan transfer transactions with a local financial institution. It also reflects the discontinuance of the practice of purchasing whole loans for subsequent securitization into mortgage-backed securities.”

“Doral Financial’s loan production for the third quarter of 2006 was $329.1 million, compared to $1.4 billion for the comparable period in 2005, a decrease of approximately 76%. The decrease in Doral Financial’s loan production is due to…changes in the underwriting standards…and competition from other financial institutions.”

From Bloomberg. “Low-rated bonds created by Lehman Brothers Holdings Inc. this year through four securitizations of mortgages and home-equity loans to the riskiest U.S. consumers may be cut by Moody’s Investors Service.”

“The potential for losses has ‘rapidly increased’ as consumers face financial difficulties, Moody’s said. Ratings on Lehman bonds from three securitizations of ’sub-prime’ home loans made last year also were put on Moody’s list of possible downgrades. A total of 30 bond issues with $416 million in balances were affected.”

“The Lehman bonds ‘caught our attention’ because of the high levels of late payments and foreclosures piling up early in the loans’ lives relative to the protection for bondholders they carry, according to Nicolas Weill, a managing director at Moody’s.”

“‘It’s hard for us when we just see the numbers to conclude’ why mortgages in specific recent deals, such as Lehman’s, are performing especially poorly, Weill said.”

“Defaults on sub-prime adjustable-rate mortgages made and securitized this year surged 27 percent last month, remaining at the highest level for new loans in five years, Friedman Billings Ramsey said. About 3.2 percent of sub-prime ARM loans, the most common type, were delinquent by 90 days or more, in foreclosure or already seized property, according to the investment firm.”

“As of Nov. 1, about 11 percent of the loans backing one of the securitizations, SAIL 2006-BNC2, were at least 30-days late, with 3.6 percent foreclosed upon, according to a securities filing. Some of the 30 bonds being watched by Moody’s still offer protection to investors similar to what they started with, despite ‘not having had a pretty start,’ Smith said.”

“Anaheim, California-based Fremont’s loans were the fourth- worst performing after the adjustments, while bonds issued by Goldman Sachs, General Electric Co.’s WMC Mortgage unit and Morgan Stanley were the worst, according to UBS. The adjustments reflect things ratings firms consider in assigning ratings.”

“The findings probably mean the ‘watched Fremont deals represent the tip of a wave of potential downgrades of the 2006 deals,’ the firm said.’

From Manufacturing.net. “A slowdown in home building is likely to end the record run enjoyed by lumber manufacturers over the past four years. The Western Wood Products Association said in its forecast that lumber demand fell in 2006 and is expected to slow further during 2007.”

“‘While home prices will still fall in some areas, we think that housing starts and home sales are nearing a sustainable rate,’ said Kevin Binam, the association’s chief economist. ‘But construction is going to be lower than we’ve seen in the past few years and that will mean less demand for lumber.’”

The LA Times. “KB Home has dropped plans for now to build a subdivision upriver from New Orleans, a proposed project that was to be one of the largest housing developments in the hurricane-ravaged Gulf Coast region. The Los Angeles company said Thursday that it let expire a contract to jointly purchase 3,000 acres of farmland west of New Orleans.”

“Developers had hoped to build as many as 12,000 homes. ‘We’re really committed to the area, but things didn’t work out,’ KB Home spokeswoman Caroline Shaw said.”