The Housing Bubble

It’s desk clearing time for this blogger. “Tom Kunz, chief executive of Century 21, predicted a slight fall in prices this year. ‘Sellers have finally figured out that this is a buyers’ market. For too long they were hung up on the couple down the street that put their house on the market at $300,000 and got $350,000. But that is not going to happen anymore,’ he said.”

“‘You are starting to see some price reductions. It is already happening in overheated markets like Florida, California and Boston,’ said Mr Kunz, who heads one of the country’s largest real estate companies.”

From Ohio. “The number of home construction permits issued in Butler County last year was down for the second year in a row, reflecting a national slowdown in the housing market. ‘I’ve been in the business for a long time and I’ve never seen a market like this,’ said Maronda Homes Cincinnati VP Bill Pucillo. ‘Everything is in place for a boom market, but it’s not.’”

“Terry Sievers, president of the Midwest Region for Drees Homes, said that inventory levels have started to go down, but noted the overage also caused prices to drop. Sievers said, ‘You have to get over the fact that the house you’re selling is going to sell for less than it would have a year ago.’”

From MarketWatch. “Former Fed governor Lyle Gramley says the next move by the Federal Reserve will be to hike interest rates. Gramley: ‘ I would say it is pretty clear that the next move by the Fed is more likely to be up than down.’”

On Spain. “Spain is becoming increasingly vulnerable to a correction in house prices, which have risen sharply in recent years, the OECD said in a report on the Spanish economy. ‘Such an adjustment could occur in an orderly manner. However, a more abrupt adjustment in which prices would plunge cannot be ruled out,’ it said.”

From Australia. “Dan Fritschen, the author of the study, says that the trend towards remodeling is deepening with an increasing cost consciousness. ‘With housing prices falling and interest rates higher than they were a few years ago homeowners are still remodeling. Just a year ago with high home prices many homeowners were influenced by the wealth effect and were remodeling with a blank check attitude.’”

“For the first time in over a decade, the Danish housing market is showing signs of retreating. The slight fall is the first quarter since 1996 that prices have shrunk in the capital. ‘This is a healthier development,’ Steen Bocian, chief economist for Danske Bank, told Berlingske Tidende newspaper.”

“The number of homeloans being approved plunged to its lowest level in almost six years in December, figures published today revealed. The British Bankers’ Association said that during the month a total of 123,518 mortgages were approved, down from 209,669 in November.”

“The figure, regarded as a forward-looking barometer reading on the health of the property market, is also lower than the 140,866 home loans approved during December 2005. The overall figure is the lowest monthly total since January 2001, statistics show.”

The Turkish Daily News. “While the real estate world experienced a lively period between mid-2004 and the first quarter of 2006, a new phase of deep silence has moved across the neighborhood. The stillness of the market and the decrease in prices have created a favorable atmosphere for buyers.”

“Explaining that real estate prices have at least doubled within the past couple of years, Century 21-Uzel General Manager Ahmet Rauf Saatci said the market came to a standstill two months ago. ‘The best time to buy a house is always yesterday,’ he noted.”

From Nebraska. “Real estate agent Jeff Rensch says Omaha has always been insulated from the big price swings that affect the coasts. ‘The problem with the oversaturation is mainly with the new homes and the spec market where there’s an oversupply of new homes,’ says Rensch. He says it’s simply that there are so many new homes out there.”

“Home building has slowed abruptly in the Inland Empire as the building industry seeks to adjust supply to dwindling demand from buyers, according to data released Thursday by the California Building Industry Association.”

“Metrostudy’s Steve Johnson said because there was so much construction already in the pipeline last year, the number of new homes built and unsold more than doubled to 7,542 at the end of 2006.”

“In the Boston area, homes that are overpriced or located on main streets are languishing, says broker Sam Schneiderman. ‘It’s got to be a really good deal,’ he says. ‘An OK deal doesn’t quite cut it. Buyers are holding out.”

“David Lee, who recently moved to Wenham, Mass., has rented a home for his family and says they plan to be ‘quite picky and choosy’ as they look for a home to buy. Dr. Lee doesn’t feel any pressure to decide quickly because he figures prices won’t rise in the near term and could fall further.”

The Orange County Register reports from California. “Jeff Lazerson, president of Mortgage Graderin Laguna Niguel, said weakness in the housing market and lending industry will force lenders to cut rates by summer. ‘Realtors are starving right now,’ Lazerson said. ‘There is not a lot of demand to borrow money here or anywhere in the country.’”

“The median price of a resale detached home in Orange County slipped in December to $692,980, said the California Association of Realtors. That’s down $6,220 from November and down $9,310, or 1.3 percent, from a year ago. Leslie Appleton-Young, chief economist with the association, described the county’s home prices as more flat than falling.”

“‘There’s not a fire sale going on, but the market has definitely slowed,’ she said. In December, there was 9.4 months’ worth of inventory on the market, according to the association.”

The Daily Bulletin. “Home sales were off nearly 41 percent in the Riverside/San Bernardino area in December 2006, a sign that a mixed price picture may be about to turn down.”

“‘Nobody really knows for sure what will happen in the housing market,’ regional economist John Husing said. ‘But my guess is that by the end of this year, we will see a price decline locally of about 5 percent. There is just too much inventory on the market,’ Husing said. ‘Whether it’s overbuilding or homes in foreclosure, I think we’ll be waiting all year to see supply get down to a reasonable level.’”

“Husing said a lot of would-be sellers have lost the stars in their eyes. ‘I’ve got three different friends who have pulled their homes off the market,’ he said. ‘They got used to hearing what their home was worth and if they couldn’t sell it for that, they didn’t want to sell.’”

“‘I think the only people selling right now are people who either have to move or who have financial problems from some of these crazy mortgages,’ he said.”

The Ventura County Star. “The frenzy phase when homes were swooped off the market in a few days has passed, but that might be a good thing for buyers. Sellers are becoming more realistic and lowering their prices after about a year of flattening in the market.”

“‘Trees don’t grow to the sky; they have to stop sometimes,’ Realtor Associate Janet Scarborough said. Motivated sellers often lower their asking price in order to sell. But some refuse, expecting prices to shoot back up in March, when the market tends to start to pick up. Don’t count on it, Scarborough said.”

“She initially listed her ocean-view Ventura home at $995,000, but since has dropped it $36,000.”

“Mortgage defaults in Ventura County soared 204.2 percent on an annual basis in the fourth quarter of 2006, shooting past a historical average to the highest level in eight years.”

“‘It may be simply that lenders are sending out notices with a lot more zeal because of the weak real estate climate,’ said Mark Schniepp, who tracks real estate through the California Economic Forecast Project in Goleta. ‘It’s slightly surprising they ran up this fast,’ he said, but added that ‘we don’t see intended problems.’”

The Press Democrat. “American Home Shield is moving almost half of the jobs at its 200-employee Santa Rosa call center to other states, saying it is too expensive to operate a telemarketing facility in Sonoma County. The home warranty company, a major employer in Sonoma County for two decades, said Thursday it will move all 90 telephone sales jobs in Santa Rosa to call centers in states with cheaper business costs.”

“Home sellers and real estate agents often purchase service contracts as a sales incentive for buyers. ‘It was a very challenging year in real estate,’ spokeswoman Susanna Weston said.”

“‘It’s largely a reflection of real estate. They boomed during the boom. And now that home sales are down, it ripples throughout the economy,’ said Ben Stone, executive director of the Sonoma County Economic Development Board. ‘Obviously it’s a setback.’”

“The job losses are another blow to the region’s economy. Sonoma County has been losing jobs monthly since the middle of last year and the housing slump has contributed to the weakening.”

The Record.net. “Mortgage default notices in San Joaquin County soared to a record high in the last three months of 2006, as statewide filings hit the highest level in eight years, a real estate information service reported.”

“Lenders notified 1,293 county homeowners they were in default in the fourth quarter, nearly three times the 464 filings seen in the same period of 2005, DataQuick said.”

“That was the largest number of default filings for San Joaquin County since DataQuick began tracking the data in 1992, said company analyst Andrew LePage. The slump in the housing market and downturn in home prices is the real culprit, LePage said.”

“‘There are always homeowners in financial distress … even in a good economy, even in a good housing market,’ he said. ‘Now it manifests in default and, in some cases, actually in foreclosure, because without appreciation more of these people can’t bail themselves out.’”

“Aggressive financing schemes may also be at fault, said Art Godi, principal of Art Godi Realtors in Stockton and former president of the National Association of Realtors. ‘We said at the time that some of those wild loans were going to come back and haunt somebody,’ Godi said.”

“Coldwell Banker Grupe is handling increasing numbers of so-called short-sales, where homes are sold for less than the outstanding balance on the mortgage, said Jerry Abbott, president and co-owner of the Stockton brokerage.”

“He warned, however, the short-sale transaction may carry a hidden cost. ‘The government comes in after the sale and says, ‘Well, the bank forgave you $40,000, but you’re going to have to pay income taxes on that,’ he said. ‘There’s nothing like kicking somebody when they’re down.’”

From Scripps News. “The number of California homeowners who fell behind on mortgage payments more than doubled during the last three months of 2006. ‘In some places, the builders got a little bit ahead of themselves and the speculators got a little bit ahead of themselves and now they’re feeling the foreclosure pain,’ said Scott Anderson, senior economist for Wells Fargo.”

“California is experiencing a rise in defaults because so many people took out adjustable-rate mortgages, economists say. About 28 percent of loans in California are adjustable, more than in any other state, according to First American LoanPerformance. ‘California has been tremendously dependent on adjustable-rate mortgage products,’ said Anderson.”

“‘For a long period of time, California had some of best credit quality in the country,’ said Anderson of Wells Fargo. ‘We’re now starting to see some of that unwind.’”

The Tampa Tribune reports from Florida. “It should be no surprise then that sales of existing homes locally fell 35 percent in 2006 after the hot real estate market a year before. Some real estate agents, such as Brenda Wade in Brandon, said she’s seeing homeowners lower asking prices. ‘Homes are down in value, I think,’ Wade said.”

“For example, Wade said, a home in the FishHawk Ranch neighborhood that went on the market in December 2005 listed at $850,000. The seller has gone through several real estate agents and lowered the price to $694,000. It’s still on the market.”

“Another home in the Brandon area was listed for $745,000 in January 2006, she said. The price dropped to $699,000 in June and then to $679,000 in August. In late December, one of Wade’s clients purchased the home for $575,000.”

“‘It’s a good market for buyers,’ she said, ‘and I think this year will be a good year because sellers are motivated and getting realistic. They see the for sale signs in their neighborhoods.’”

The News Press. “Lee County’s housing market took a tumble in 2006, ending the year with December prices of existing homes down 19 percent and sales down by almost half from a year earlier.”

“‘We had a lot of greed in 2006,’ said Larry Johnson, CEO of Old Florida Bank. ‘I had a lot of customers who held out for more and missed the deal’ when prices started to fall.”

“Wayne Watson bought the house next to his in Lehigh Acres for $300,000, intending to pay for it with proceeds from selling a house he owned in Gateway. But despite cutting the price numerous times he has been unable to sell the Gateway house.”

“Four days ago he dropped the price $20,000 to $279,000, Watson said. ‘I have to move this house,’ he said. ‘I told my Realtor, ‘Get it sold.’ This housing market sucks.’”

The Sun Sentinel. “After a five-year boom, Broward’s housing market faded last year. Broward now has 35,362 homes and condominiums for sale, more than double the number from this time last year, according to Keyes Co. Realtors.”

“Sherrie Nemetz of Plantation has been trying to sell her four-bedroom home for nearly a year. She finally fielded her first offer, and it was for more than $100,000 less than the $449,900 listing price. She has reduced the price and switched agents.”

“‘There are just so many houses on the market,’ Nemetz said. ‘If your house isn’t marketed correctly, there’s no incentive for people to look at it.’”

“Broward had one foreclosure for every 35 households in 2006, said a report released Thursday. The county had more than 21,000 foreclosures last year, up more than 55 percent from 2005.”

The Palm Beach Post. “Palm Beach County’s 37 percent decline in single-family resales in 2006 was second only to the Naples area, where existing home sales fell 41 percent. Naples’ 2006 sales were incomplete, however, partly because the Naples Area Board of Realtors did not report December sales.”

“The standoff between buyers and sellers caused inventory to climb to a peak of 28,886 unsold homes in September, falling to 21,888 by year’s end, a 71 percent increase, nevertheless, over December 2005, according to Illustrated Properties Real Estate.”

“‘The national housing market was like a trauma patient last summer, suffering multiple wounds and at death’s doorway,’ (analyst) Michael Larson said. ‘Since then, a mild decline in interest rates, and aggressive incentives and price-cutting, have helped stabilize the patient. But he’s not getting off the gurney and walking out the door - not for some time.’”

The St Petersburg Times. “In Pinellas County, December’s inventory of unsold single-family homes was 9,876, more than double what it was a year earlier. In Pasco County, condo listings nearly tripled from 2005, with 514 units on the market at year’s end.”

“Ann Guiberson, chief executive of the Pinellas Realtor Organization, said Florida’s coastal areas suffered most in the downturn. ‘The price may stay up, but buyers can get lots of concessions,’ Guiberson said.”

The Miami Herald. “Fewer single-family homes in Miami-Dade and Broward sold in 2006 than in any of the past 12 years, which is as far back as data from the Florida Association of Realtors goes. At the same time, far more houses and condos for sale came on the market — and sat there.”

“‘The current market is lackluster, and I don’t see an upside for several years to come,’ said real estate analyst David Dabby.”

“The clearest sign of a slowdown is in the swelling inventory of unsold homes, which must be reduced before the market recovers, observers say. The number of homes listed for sale actually decreased, albeit slightly, at the end of the year. From December 2005 through November 2006, the number of homes for sale in both counties jumped from 31,351 to 66,477. But in December 2006, it declined to 65,827.”

The Herald Tribune. “The median price for homes last month in the Sarasota-Bradenton market was $284,700, down 17 percent when compared with the same month last year. But sales were down only 7 percent — ‘only’ in the context of a market that has seen declines as high as 50 percent during the past six months.”

“‘What we are seeing is that the 2005 spike is gone and, in the real world, homes are selling for plus or minus what they were worth in 2004,’ said Al Horrigan of RSVP Real Estate in Bradenton. ‘It is not doom and gloom, it is reality. ‘When you see the handwriting on the wall, read it.’”

The Sun Times. “Confusion may be an understatement for the current state of the residential Real Estate market. Everything seems to be for sale. Many homes have literally had ‘for sale’ signs in the yard now approaching three years. Many similar properties have as much as a 30 to 40 percent difference in pricing.”

“Sweeping differences in asking prices, combined with the fact that many ‘asking prices’ are now down as much as 40 to 50 percent from the unsustainable levels just 18 months ago, certainly ‘confuses’ potential buyers, which is evident by the ‘locked tight’ position of their wallets.”

“The old saying, ‘Something is only worth what someone is willing to pay for it’ is clearly lost on many in the Real Estate community. Perhaps reducing the ‘artificially inflated and unsustainable’ current price levels may stimulate some buying activity.”

The News Journal. “Robert McGlone of Port Orange isn’t a Realtor, but he thinks it’s only common sense that the prices of homes in Volusia and Flagler need to come down. The retired engineer has become frustrated watching his 27-year-old son, who works at Lockheed Martin Corp. in Orlando, try to find a house he can afford.”

“‘My first house cost me twice my salary. He is up to four times his salary,’ McGlone said. ‘That’s a virtually impossible situation to overcome.’”

“The Florida Association of Realtors reported Thursday that home prices indeed have come down in the Volusia-Flagler market, as McGlone predicted. McGlone has seen the ‘for sale’ signs go up in his neighborhood. He said one house was on the market almost a year and finally sold after the owner dropped the price from $289,000 to $213,000.”

“‘I think the prices will keep coming down until the end of the year, despite what Realtors may say,’ McGlone said. ‘The prices have to keep going down until people can start affording houses again without killing themselves financially.’”

Some housing bubble news from Wall Street and Washington. “Sales of new one-family houses in December 2006 were at a seasonally adjusted annual rate of 1,120,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent (±11.7%)* below the December 2005 estimate of 1,259,000.”

“The seasonally adjusted estimate of new houses for sale at the end of December was 537,000. An estimated 1,061,000 new homes were sold in 2006. This is 17.3 percent (±3.4%) below the 2005 figure of 1,283,000.”

“Last year’s plunge in new home sales was the biggest drop since a 17.8 percent drop since the recession year of 1990. Sales of existing homes fell by 8.4 percent to an annual rate of 6.48 million units, it was reported Thursday. That was the biggest decline in the sale of previously owned homes since 1989.”

From Reuters. “Home builder M.D.C. Holdings on Thursday posted a fourth-quarter loss after charges for asset impairments and project cost write-offs, and said new home orders fell during the quarter. It said after-tax charges in the fourth quarter for asset impairments and project cost write-offs were $56.5 million and $4.1 million respectively.”

“It said its new home orders reflect a slowdown in the housing market, with 1,571 orders for new homes in the 2006 fourth quarter, with an estimated value of $515 million, compared with 2,405 homes with an aggregate value of $831 million a year ago.”

“Mandalay Mortgage, Woodland Hills, Calif., a top-30-ranked subprime wholesale originator, is closing its doors at the end of the month and will stop funding loans, sources familiar with the situation have told.”

“Millennium Bankshares will wind down its mortgage banking business to focus solely on core banking services, the company announced Thursday. The Reston-based bank has seven branches in Virginia, including five in Northern Virginia.”

“‘We were concerned about future volatility in earnings as a result of the soft housing market and wanted to eliminate, going forward, the risks normally associated with mortgage banking activities,’ says Carroll Markley, Millennium’s CEO, in a statement.”

“IndyMac Bancorp Inc., a big Southern California mortgage specialist, on Thursday said fierce competition and worsening credit quality may push 2007 profit well below analysts’ forecasts. The Pasadena-based parent of IndyMac Bank also said it has frozen all salaries, stopped hiring non-revenue-generating personnel, (and) plans to outsource 50 percent more jobs by year end.”

“‘People have been predicting disaster in the housing market, and for much of our competition, it is,’ CEO Michael Perry said.”

“The problems affect many lenders in California, which was a big driver of this decade’s housing boom, and which analysts say has many overstretched borrowers. About 45 percent of IndyMac’s mortgage lending is in the state, Perry said.”

“Lower borrowing demand ‘is creating fierce competition and affecting margins,’ Perry said. ‘You have excess capacity; a severely inverted yield curve; slowing housing prices, starts and sales; and credit losses returning to more normal levels.’”

“Loan losses rose to $9 million from $5 million in the third quarter. ‘We expect (loan loss) provisions will likewise be elevated in 2007,’ wrote Lehman Brothers Inc. analyst Bruce Harting.”

“IndyMac said 71 percent of its fourth-quarter mortgage loans were interest-only or adjustable-rate.”

The Indianapolis Star. “A California lender has filed a lawsuit against HMS Title Services of Greenwood and Affordable Lending of Terre Haute, contending their negligence forced it to foreclose on six Westfield and Indianapolis houses.”

“At least three of IndyMac’s Westfield loans appear to trace to Tamara E. Penn, who also is at the center of a federal grand jury inquiry into a massive real estate deal that failed on the Eastside. It pushed an entire neighborhood in the Windsor Village area off 21st Street into foreclosure last year.”

“The failed deal also led California lender Countrywide Bank to file a federal lawsuit in Indianapolis in June, contending it was a victim of a real estate conspiracy.”

The New York Times. “Wall Street’s big bet on risky mortgages may be souring a lot faster than had been previously thought. The once booming market for home loans known as subprime mortgages, is coming under greater pressure. The evidence can be seen in rising default rates, increasingly strained finances at mortgage lenders and growing doubts among investors.”

“Wall Street firms, which had helped fuel the growth in the market by bankrolling and investing in subprime mortgage lenders, have begun to pinch off the money spigot.”

“‘Pick a company — small, medium or large — they all have the same problem: capital,’ said Marc A. Geredes, who runs a small mortgage company in San Jose, Calif. ‘The economics of the business do not make sense right now.’”

“In one indication that investors are losing their taste for mortgages, hedge funds that specialize in mortgage-backed securities had an outflow of $1.8 billion in 2006, down from an inflow of $1.8 billion in 2005, according to Hedge Fund Research. It was the only category of hedge funds to have a negative flow for the year.”

“‘The pendulum swung too far the other way,’ said Guy D. Cecala, president of Inside Mortgage Finance, which publishes data and newsletters on the industry. ‘At some point, it comes back. But what it usually takes is a little blood on the road.’”

“If that is indeed how the story will play out, William D. Dallas, the founder and CEO of recent bankrupt Ownit, a lender based in Agoura Hills, Calif., would argue that his company has become an early case of road kill.”

“Mr. Dallas acknowledged that Ownit, like other subprime lenders, saw a sharp increase in defaults from new borrowers in 2006, compared with 2005 and 2004 — years when few loans showed early losses. But he said the defaults were still low at 2 percent and insisted that most of those borrowers had simply missed one or two payments because they were confused about where to mail payments, because many of them had two mortgages on their homes.”

“Mr. Dallas acknowledges that standards were lowered, but he placed the blame at the feet of investors and Wall Street, saying they encouraged Ownit and other subprime lenders to make riskier loans to keep the pipeline of mortgage securities well supplied.”

“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”

The Massachusetts realtors report the December numbers. “The number of single-family homes sold in Massachusetts fell 16.6 percent in December from December 2005 and the median selling price declined 5.4 percent to $335,000 as the slowdown in the state’s housing market continued.”

“‘It’s good to see the market coming back to some balance. At this point, the balance definitely tips toward the buyer,’ said Doug Azarian, president of the Massachusetts Association of Realtors.”

“The number of condominiums sold fell 8.2 percent from a year ago to 1,493 units. The number of Massachusetts single family homes sold in December fell to 2,980 from 3,574 for the same month a year ago.”

“Inventory figures for December 2006 show a slight 2.9 percent increase over December 2005, with 30,651 homes on the current market compared to 29,771 homes last year. This translates into 10.3 months of supply in December 2006.”

“The number of condos for sale is up 13.7 percent from 14,581 units last December to 16,581 in December 2006. This represents 11.1 months of supply, up from 9 months in December 2005.”

The talking points. “December median price declined 5.4% from a year ago (from $354,000 to $335,000), 11% below its peak (spike) of $375,000 in July-August, 2005. Last month’s sales total was lowest December volume since 1991, when 2,168 homes were sold. On month-to-month basis, home sales decreased 8.2% from November to December.”

The Boston Globe. “Amid new evidence the state is still struggling to emerge from the housing downturn, economists said it is likely prices for single-family houses will continue to decline this year.”

“‘We’re working through the correction,’ said Larissa Duzhansky, an economist with a Lexington economics and consulting firm. She predicted, ‘We’re going to see home prices going down in 2007.’”

“Jim Gibbons, an agent in Stoughton, said that in some communities in his territory prices were down more than the 5.4 percent statewide average, as much as 7 percent or 8 percent. ‘It’s going to be the same story this year, big inventories, big selection,’ he said. ‘Your house has to be the best house out there in the best condition and priced aggressively, or it’s going to sit.’”

“Gibbons said the current situation, a flood of houses for sale, is unique because there are so many types of sellers in the market. In addition to those who want to trade up, there are investors trying to dump properties purchased three or four years ago at higher prices, homeowners unable to meet rising payments on adjustable-rate mortgages or threatened with foreclosure, and empty-nesters eager to downsize.”

“‘We’ve never had that at the same time,’ he said.”

From Worcester magazine. “A quick drive through one Main South neighborhood is a telling snapshot. Weave along the industrial back roads off Washington Square, and you can spot condo action dotting the route.”

“It’s not the only neighborhood like this. The country is condo-happy, but the market has slowed so remarkably that is it surprising the development continues. The market sags, yet we build.”

“Real estate agents are quick to blame the sagging market on the media. But numbers are numbers. The University Lofts have been on the market since June, and three have been sold out of 34. Three have sold of the eight built (46 total will be built) as part of The Residences at Vernon Hill. Out of the 24 units at The Granite Mansion, eight have sold in a year and a half on the market.”

“Two big things happened to add to the inflated market, according to Jane Fine, president of Fine Properties Inc. in Worcester. ‘The 55-and-older community started,’ she says. ‘Instead of doing one or two projects, they are blasted all over the place. In Worcester, the three-deckers have been subdivided into condos along with two-family houses. And with prices going up, they are sitting.’”

“‘There is 10 months of supply, meaning condos for sale,’ says Leif Rosseland, senior VP for Coldwell Banker Residential Brokerage in Worcester and Shrewsbury. ‘Back in 2004, I would venture to guess it was less than half that. Ten months of inventory is a lot. It’s usually gauged at five months. We’re definitely in a buyer’s market in the condominium world.’”

“Rosseland adds, ‘There were more foreclosures this year because of those wacky, fangled purchase agreements that weren’t necessarily beneficial for those signing on the dotted line.’”

“Rosseland and others in the business first noticed the plummet in May 2005, and it has ‘only spiraled in the last 18 months.’”

“Alyce Hill has been publishing magazines pertaining to condomimiums for about 20 years. In 1990, she said, the market went crazy, and countless condo developments went bankrupt. By 1996, builders were going full tilt again, and that includes the Worcester market. ‘It went really, really crazy from 2000 through now,’ says Hill. She can rattle off pages of developments in Worcester.”

“‘The builders who were planning to make a condo project are planning to do apartments now,’ says Hill. ‘The whole real estate market is correcting itself. It’s been crazy in New England for five years. It’s gone down about 20%, but I don’t think it’ll go down further.’”

“The biggest run-up, according to Scott Hayman, for the City Manager’s Executive Office of Economic and Neighborhood Development, has been condo conversions. Lots of three-, four- or even five-family dwellings have been and are being converted into condos. ‘That often happens at the tail end of a market cycle,’ says Hayman. ‘So it skews things a lot. There has been a flood of these conversions.’”

“The hottest trend, and one that started as a reaction to movements in cities such as Lowell, Boston and Providence, was the conversion of old, distressed factory buildings into condominiums.’A lot of this idea has to do with the energy,’ says Hill. ‘You’ll see it with Worcester such as with Biscuit Place, where you can walk to the train station. You can take the train. You can work in Boston. You can walk to a restaurant. It’s the New York mentality, where you can just go downstairs for everything.’”

“But that idea applies when there is everything downstairs. We’ve said it a hundred times; This is not New York. This is not Boston. Take a drive through downtown in the heart of a weekend night, and it’s not that difficult to breeze through. Developers and analysts of the Worcester area, though, say a lot of the building that has taken place in the past five years is based on hope rather than the present situation.”

“Many developers across the country hope to salvage their investment by changing strategy until the condo market turns around by going rental. Developer Bill Bibaud’s got faith, but right now, he’s not going crazy. The units he converted in the old Charlie’s Surplus factory and other buildings are rentals for now.”

“‘I’m only doing rentals because the market [for condominiums] is not there,’ says Bibaud. ‘The conversion market seems to have slowed down quite a bit. The market started going bad about six months ago.’”

“‘A lot of the investors bought the cheap multis and turned them into condos. It’s a Catch 22. I follow the closure market and you’re seeing a lot of those same units going into foreclosure. There are a couple on the West Side. Initially, they sold for $250,000 and are now in foreclosure. It was a bit of an artificial bubble that hit,’ says Bibaud.”

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