The Housing Bubble

The San Francisco Chronicle reports from California. “The sluggish housing market hasn’t stalled the overall California economy so far, but researchers at the UCLA Anderson Forecast expect lower construction employment to drag growth lower next year. The UCLA report stresses construction and real estate jobs, but may not give enough weight to other areas affected by the languishing home market, said Esmael Adibi, director of the Anderson Center of Economic Research at Chapman University (not related to the Anderson Report at UCLA).”

“‘In the stock market, corrections are very quick,’ Adibi said. ‘But in the real economy, the adjustments and corrections are very lengthy. This is going to linger because I think home prices are going to continue to decline and sales will stay in the doldrums.’”

The Contra Costa Times. “Some potholes have surfaced for the East Bay’s labor market, causing a loss of hundreds of jobs at four employers in the region. WMC-GEMB Mortgage eliminated 103 jobs in San Ramon.”

“WMC-GEMB Mortgage said the slump in the residential real estate market and the meltdown for certain kinds of loans serving that sector triggered its job cuts.”

“‘WMC is a business that caters to the subprime market,’ said spokesman Gene Ullrich. ‘The action was a reflection of the current environment in subprime lending.’”

“Besides the 103 workers in San Ramon, WMC dismissed 255 workers in Burbank and 59 in Costa Mesa, state records show.”

The Record Searchlight. “Shasta County’s jobless rate last month was higher than May 2006’s 6 percent. As home sales in Shasta County continue to lag from a year ago, the real estate sector has taken a job hit. State statistics show that 900 people were working in real estate last month, down from 1,100 in May 2006.”

“There also were 200 fewer people working in finance and insurance, from 2,200 in May 2006 to 2,000 in May 2007.”

The Record.net. “Sean Snaith, consultant to University of the Pacific’s Business Forecasting Center, said there’s no doubt that the weight of the ‘housing adjustment’ is bearing down on the national and California economies.”

“But Snaith still stands behind his well-known description of the housing market as a soufflé that deflates but doesn’t collapse. The collapse of the subprime market hit the housing market hard, pulling the economies down more than expected, he said.”

“‘I think the housing hangover is going to last a little longer than we thought,’ he said.”

“Brian Catalde, an El Segundo home builder who is president of the NAHB, said builders continue to report that tighter lending standards are hurting home sales and resulting in some cancellations. Builders are still cutting prices and offering a variety of sales incentives to try to sell off excess inventories of homes.”

“‘It’s not just California. It’s broad-based,’ said Joe Anfuso, president of Stockton-based Florsheim Homes. ‘It’s affecting everybody; the entry-level market and the first-time move-up market. And there are no signs that expect me to believe we’re going to have a quick fix to this.’”

The Union Tribune. “Some real estate agents say it is a buyer’s market, with housing inventories high and interest rates still near historical lows. A quarter-point interest increase is not expected to scare consumers away, they hold.”

“That was true at an open house in Rancho Peñasquitos last weekend, where shoppers were calm and unhurried.”

“‘Our time is flexible because we’re renting,’ said Iwan Thomas of University City. He and his girlfriend are searching for their first home. ‘We’re hoping to find something in the next two or three months, but we can wait that much or longer.’”

“University of San Diego economist Alan Gin said he has given up hope that the Federal Reserve will come to the housing industry’s rescue by cutting interest rates this year.”

“Laguna Beach-based mortgage broker Steve Dexter agrees. Government concerns about inflation outweigh fears about how a slowing housing market will harm the economy, he said. ‘The Fed will throw the housing market under the bus in order to stay ahead of the inflationary curve,’ Dexter said.”

“Sue Olivier, president of the Pacific Southwest Association of Realtors, said things could be worse. ‘We are seeing the market starting to improve a little bit, but not a great deal,’ she said. ‘Our market right now is where it used to be six years ago.’”

“In San Diego County, a record 532 dwellings were reclaimed by lenders or sold at auction in May, according to DataQuick. That was a slight gain over the previous record of 525 in April. Foreclosures for the first five months of 2007 totaled 2,239, compared with 336 for the same period in 2006.”

The Daily News. “The San Fernando Valley had the most foreclosure activity in the city during April, according to a report released Tuesday.”

“In California, foreclosure activity jumped an annual 131percent in 2006. And the Los Angeles/Long Beach area had the 56th-highest foreclosure rate in the country last year, the report said.”

“Daren Blomquist, a spokesman for RealtyTrac.com, and John Karevoll, an analyst at DataQuick, agree that trouble is going to increase in the Palmdale-Lancaster area as well as the Inland Empire. Karevoll noted that housing is newer in those areas and that homeowners typically encounter trouble during the first three years of ownership.”

“Castaic resident Jose Mejia and his wife, who are a month and a half behind on their mortgage and face losing their first house. He said he took a mortgage that was supposed to have a fixed 1 percent interest rate. But his loan was split and sold to other mortgage lenders who hiked the interest rates to 9 percent and 12 percent.”

“‘They misled us,’ he said. ‘How am I going to make the payments? Maybe work 24 hours a day. I’m ready to lose my house.’”

The Daily Press. “Foreclosures are on the rise across the Victor Valley, as are inventories of unsold homes, offering prospective buyers the chance to pursue bargains.”

“‘Real estate is not Wal-Mart. The list price is negotiable, as is everything in real estate,’ said Dana Gordon, a broker in Hesperia. ‘Especially in this market, it’s important for people to know that they may be very pleasantly surprised at the price a seller might take,’ he said.”

“Short sales of homes offer opportunities to find bargains. ‘The clock is running on a short sale,’ Gordon said. ‘The lender may approve an offer that is less than what is owed on the property.’”

The Press Enterprise. “Area housing experts said the Inland region is experiencing trends seen throughout California and the nation.”

“‘The correction is not just a correction in price,’ said Patrick Duffy, of Hanley Wood Market Intelligence. Much of the pullback in new home building, he said, can be attributed to rising mortgage rates and more stringent lending policies brought about by a rise in defaults on subprime loans.”

“The Building Industry Association in May sharply revised its 2007 projections for new Inland building permits downward in San Bernardino County. ‘It’s a tough time for the whole industry,’ said Steve Johnson, a director in the Riverside office of consulting firm Metrostudy.”

“(In) the second quarter, there were 5,568 homes started, down considerably from 9,295 started in the first quarter of 2006.”

The Desert Sun. “A group of investors who’ve poured their money into the upscale Legacy Villas at La Quinta development are suing Centex Homes alleging securities violations and fraud.”

“The homeowners are asking for a cancellation of their purchase agreements to recoup $20 million to $25 million.”

“Because of construction delays and a long list of other ‘misrepresentations’ and problems, investors claim they were stuck with charming Spanish-style villas that they weren’t able to rent out.”

“Investors who were relying on rental income to cover all or part of their mortgage expenses and debt service were left holding the bag, the lawsuit contends.”

“Some three-bedroom, four-bath, 2,200-square-foot luxury villas originally sold for more than $940,000, while others have sold for $800,000 to more than $1 million. To the chagrin of investors, however, prices have since plummeted despite guarantees from Centex that such price-slashing wouldn’t occur, the lawsuit alleges.”

“Some investors who purchased in the first phases claim they can’t refinance now because property values have plummeted. Villas that once sold for $775,000 have recently been selling for about $555,000.”

KXLY 4 reports from Washington. “Downtown Spokane showed off its increasing number of condominiums to the public on Saturday. Developers say they are still selling condos, just not as fast as before. Several major, high-end downtown housing projects are in the works. But soaring construction costs and high condo prices have stalled the market.”

“The number of condos in Spokane has grown considerably in the last two years, fueled by speculative buyers and developers. Real estate statistics show the pace of new units in 2006 above any period since 1979. But even as more projects get announced, it’s taking longer for the plans to be put to use. Developers don’t believe the bubble has burst, it’s just a little deflated.”

“‘In the earliest days, we were selling from plans before they were built. Now we’re having a bit of inventory. A lot of the announced projects that haven’t happened, I think are part of a fraction of the fact speculators are not driving the price like they were for a while when they were buying everything,’ says developer Ron Wells.”

The Bellingham Herald. “Whatcom County continues to climb on a national list of most overvalued home prices, but part of the reason is what’s happening across the country.”

“A housing valuation analysis…estimates this area was 47.1 percent above what housing prices should be in the first quarter of 2007. That continues to be the highest in Washington state.”

“Bellingham is no stranger to this study, having been ranked high on the list since 2005, when home prices began to appreciate significantly.”

“We’re having a softer landing than elsewhere,’ said said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. ‘I don’t want consumers to think their homes will continue to appreciate as we’ve seen in previous years. This is an indication that we are weathering the slowing real estate market better than other communities.’”

“Crellin speculated that the slight rise in home prices may be a result of the slow softening of the market.”

“‘Buyers are seeing some deals out there, but instead of taking the savings, people look at bigger homes,’ Crellin said. ‘So while the number of homes sold is down, the ones that are selling are being bought by people who are getting the maximum their budget allows.’”

The Beachcomber from Washington. “To those who care about affordable housing, the statistics are sobering. Consider that there are currently more houses on Vashon listed at more than $1 million (17) than those listed at less than $400,000 (15, one of which is a tiny cottage).”

“Or compare last year to this year: By this time last year, 19 homes for less than $400,000 had closed; so far this year, 11 have, according to statistics gathered by Emma Amiad, a buyer’s broker.”

“Even as home prices remain high, there are other signs that suggest the market on Vashon, like markets elsewhere, is softening. Houses, especially high-end ones, are sitting longer, said Dick Bianchi, owner of the Windermere office on Vashon.”

“And second-home sales, often a big part of the Vashon’s market, are not nearly as brisk, said Denise Katz, a Windermere agent.”

“As a result, there’s a larger inventory of houses on the market than agents have seen in a while, and the gap between pending sales and active listings is far greater than it was just six months ago, according to an analysis Bianchi recently made.”

“‘I would expect to see a slight turn to a buyers’ market with more moderate growth this year,’ he said.”

“Agents at other firms agreed that Vashon’s housing market is softer than it’s been in a while. Rising interest rates have meant fewer potential buyers; meanwhile, some sellers on Vashon, who have watched housing prices climb 15 to 20 percent year after year, are assuming that kind of escalation is continuing, and are thus asking too much money for their homes, agents said.”

“‘What I see, whether it’s because of agents or the expectations of sellers, is that people are listing their houses above market,’ said Ken Zaglin, co-owner of the John L. Scott franchise on Vashon. ‘I think a lot of the inventory we’re seeing is 10 to 15 percent above the market.’”

“The kind of phenomenon is not unusual in a market that has witnessed several years of rising prices, he added. ‘When you’re in a highly escalating market…no one wants to leave money on the table. But as the market begins to slow, which you see with higher interest rates, you can start to have a sense of invulnerability. When people price ahead of that curve, things languish. And we’re seeing a bit of that.’”

“‘If I were a buyer, I’d be waiting for sellers to become more realistic,’ he said.”

“Joan Newcomb finds Vashon’s current housing market troubling. ‘Manufactured homes are going for $300,000,’ she said. ‘It’s rather insane.’”

“‘It doesn’t feel like a buyers market yet,’ she said. ‘Things are just awfully pricey. They come onto the market just way too overpriced and then they sit for a long time.’”

The Register Guard from Oregon. “In Lane County, 193 condominium units changed hands last year, with a median price of $168,000, said Natalie Middleton of the Regional MLS in Portland.”

“Although real estate people say there is a brisk market for condos, requests for conversions of apartment units to condominiums have slowed considerably, said Linda Dawson, grants manager for the city of Eugene and tracker of conversion permits.”

“Dawson said she’s had only one request besides Westmoreland, and that for only five units, in the past several months. ‘A year ago, even six months ago, I was getting a lot more calls (about conversions),’ she said. ‘But it’s not an overwhelming number any more, it’s really fallen off.’”

“In Westmoreland Village, the four one-bedroom models, with about 500 square feet, will be offered at $94,900, and the remaining 82 units, which have two bedrooms, will start at $99,900, developer Mike O’Connell Sr. said.”

“Eventually, each duplex and fourplex building will be sold, ‘probably 90 percent to investors’ who will maintain them as rental units, he said. Prices have not been established for those buildings.”

The Idaho Stateman. “Steve Hosac is president of The Hosac Co., which is building the CitySide Lofts, a 77-condo project at the southeast corner of 13th and Myrtle streets.”

“What is the status of the CitySide Lofts? ‘We’re in the final stages of completion of Phase 1, which is 42 units. We’re in the neighborhood of just under 30 sales. We have eight or 10 units where people have already moved in.’”

“What’s the price range? ‘We start at about $220,000. I think our most expensive condos are in the low $400s.’”

“Is that what is considered affordable housing today? ‘There are as many definitions of affordable housing as there are people who have an opinion. But there is no doubt that, across the board, we are significantly lower than any other condo project planned or under construction.’”

“There are about 1,000 condos planned or under construction Downtown. Are we over-saturating the market?”

“‘If everything that is being planned were to go online all at once, it would be too much for the market to absorb. Everybody is saying ‘We want to get started, we want to get started.’ But the reality is that with financing and marketing, getting approvals and taking reservations, it’s unlikely that’s going to happen.’”

Some housing bubble news from Wall Street and Washington. CNN Money, “Merrill Lynch has seized about $800 million of assets from troubled hedge funds managed by Bear Stearns, throwing in doubt the chances that the funds will survive. The assets, which were collateral for underperforming loans made by Merrill Lynch to the two funds, are mainly bonds backed by other securities that are now expected to be sold off later in the day, a person familiar with the situation told CNNMoney.com Wednesday morning.”

“The two funds suffered double-digit losses through April after making bad bets on securities backed by subprime loans, Reuters reported.”

“Just a few months back, an industry insider had warned of a ‘catharsis’ and coming collapse in the bond market. ‘We’re looking at somewhat immature markets that are going through a growth phase,’ Ralph Cioffi, senior managing director of Bear Stearns Asset Management, said at a bond conference in New York in February. ‘There is a catharsis and a cleaning-out process.’”

“Cioffi warned investors attending a CDO and Credit Derivatives conference about inexperienced managers who may not understand the risks of the market. ‘Up until now, any CDO manager, primarily new CDO managers with light staffing, very little technology and unbalanced capability, was able to get a CDO done,’ Cioffi said at the time. ‘I don’t see that going forward.’”

The Street.com. “Observers fear the dissolution of the Bear funds could spell bad news for other hedge funds and managers of so-called collateralized debt obligations, pools of debt including leveraged loans and mortgages, because it may force a broad repricing in those largely illiquid mortgage securities.”

From Reuters. “The CDOs for sale are mostly rated ‘AAA,’ but at least one is rated ‘BBB,’ according to the lists.”

The New York Post. “As a Bear Stearns internal hedge fund begins collapsing, all of Wall Street is wondering if other funds might follow suit.”

“One hedge fund portfolio manager at a $4 billion fund told The Post that auctioning off the assets of Bear’s High Grade Structured Credit Strategies Enhanced Leverage fund would unleash Wall Street’s dirty secret.”

“‘These CDOs [collateralized debt obligations] are probably marked 30 percent higher than where they should be,’ he said.”

From Bloomberg. “Bear Stearns Cos., the biggest broker for American hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset-management unit, a person familiar with the situation said.”

“Bear Stearns, seeking to stave off liquidation of the fund, made the commitment Monday in a meeting with creditors after losses forced the sale of $4 billion of mortgage bonds last week.”

“Merrill Lynch and JPMorgan had planned to sell another $800 million of bonds of so-called collateralized debt obligations owned by the fund this week, the person said.”

“‘It’s tough to tell whether this was an isolated event or whether there will be other funds like this that have bought this type of paper and are facing mark downs or redemptions,’ a product portfolio manager who runs the CDO business at Smith Breeden Associates Inc, Peter Nolan, said. The firm manages about $34 billion in fixed-income assets, about a third of which are asset-backed bonds.”

“The bond market’s most battered players, the hedge funds and trading desks specializing in mortgage-backed securities, now have to handle a total of $2 billion or more hitting a market that is still licking its wounds from the first burst of sub-prime woes.”

“The sales are likely to force a serious re-pricing of billions of dollars worth of highly complex and often illiquid securities called collateralized debt obligations, or bonds made from other bonds.”

“Held by both Wall Street firms and hedge funds, the CDOs stocked with sub-prime bonds have not collapsed in price alongside other sub-prime bonds.”

“‘They haven’t collapsed in price because they are often mismarked or just don’t get traded,’ said one hedge fund executive who has evaluated the Bear fund’s positions. ‘That is going to change in a big way today at 4 p.m., when the [Merrill] auction ends.’”

The Associated Press. “Some homeowners in California, Florida and the southwestern U.S. now face more than a 60 percent chance their property will be worth less in two years, according to the PMI U.S. Market Risk index.”

“The index found that 15 of the nation’s 50 largest metro areas have a greater than 50 percent chance of seeing price drops. Eleven of those markets are in California and Florida, including Los Angeles and Miami. The riskiest of all markets are Riverside, Calif., Phoenix, Las Vegas and West Palm Beach, Fla.,each with a greater-than-60 percent chance of depreciation.”

“‘What the markets with the greatest risk of decline have in common is a history of price volatility: rapidly rising rates of price appreciation above the long-term average followed by a recent sharp slowdown in the rate of appreciation,’ said Mark Milner, PMI’s chief risk officer.”

“Applications to buy and refinance homes dropped last week, an industry trade group said on Wednesday, the latest sign that U.S. housing remains mired in a downturn.”

“‘We’re not through with this correction,’ said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta. ‘Price correction is an absolute necessity, affordability got way out of hand.’”

“The jump in 30-year mortgage rates by more than a half a percentage point in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers.”

“The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.”

“‘It’s a blood bath,’ said Mark Kiesel, executive VP of Pacific Investment Management Co., the manager of $668 billion in bond funds. ‘We’re talking about a two- to three-year downturn that will take a whole host of characters with it.’”

“The recent increase in mortgage rates is the biggest spike since 2004. The change means buyers can afford 8 percent less house than they could five weeks ago, Kiesel said. ‘Prices are going lower,’ he said.”

“In addition to their primary mortgages, homeowners had $913.7 billion of debt in home equity loans in 2005, more than double the $445.1 billion in 2001, according to a paper by former Federal Reserve Chairman Alan Greenspan and James Kennedy on equity extraction issued by the Fed three months ago.”

“About a third of that money, extracted as home values surged 53 percent from 2000 to 2005, was used to buy cars and other consumer goods, according to the paper. The interest rate on those loans doubled to 8.25 percent in 2006 from 4 percent in 2003.”

“The share of mortgages entering foreclosure rose to 0.58 percent in the first quarter, the highest on record, from 0.54 percent in the final three months of 2006, the Mortgage Bankers Association said in a report last week.”

“Prime loans entering foreclosure increased to 0.25 percent, the highest in a survey that goes back to 1972.”

“The share of people taking out all types of adjustable-rate home loans averaged 29 percent during the past three years, compared with the 17 percent average of the prior three years, according to Freddie Mac.”

“Higher fixed mortgage rates and stricter lending standards mean some of those borrowers won’t be able to refinance into fixed-rate loans. Many of them have seen their home’s value drop even as their interest rates adjust higher.”

“‘When all these people see their mortgage payment and it’s up 40 or 50 percent, they’re going to say, ‘We can’t stay in this house,’ Pimco’s Kiesel said. ‘And there are millions of people in this situation.’”

“Higher mortgage rates and a glut of unsold homes are prompting many would-be buyers to hold off on purchasing as they await further price declines. The Mortgage Bankers Association’s report, along with figures yesterday showing a decline in home starts, adds to evidence that the housing slump will linger, economists said.”

“‘The message I’m getting is that maybe only about two- thirds of those cases do the builders consider the incentives, even the price cuts, to be effective,’ David Seiders, chief economist of the National Association of Home Builders, said in an interview June 18. ‘In some cases it’s actually making the buyers think ‘wow, there might be something better coming down the line.’”

The Miami Herald reports from Florida. “Since South Florida’s raucous real estate party ended, the hangover has taken different forms, sales plunging, foreclosures rising, lawsuits flying. Now, a Hialeah condo conversion company has gone bankrupt in one of the biggest bankruptcy cases yet to come out of the soured housing market. Puig, a private condo conversion company in Hialeah, is seeking protection from creditors who claim they were stiffed for nearly $120 million.”

“The case may be one of many more to come, or so think the law and accounting firms that have launched or beefed up distressed property divisions for months. ‘Unfortunately, I think the ball is just beginning to roll,’ said Bowman Brown, a veteran attorney in Miami.”

“All told, the company converted and sold some 19 projects with 1,400 units. Meanwhile, another 2,900 units were in the works. By 2006, the housing boom was fizzling fast. Yet the company had taken out big loans to buy new apartments for conversions. It became harder and harder to make a sale, and harder to make loan payments to lenders.”

“In late May the company entered bankruptcy, seeking to end the blood-letting. ‘In the real estate business, everything can’t keep going up and up and up,’ said Allen Greenwald, a Miami developer and real estate investor who is among the creditors owed money by Puig. ‘But the market turned so fast. Unfortunately, this was a very fast and severe downturn.’”

“Now, (the chief restructuring officer) must unload the units Puig could not sell to pay creditors like Greenwald back. He has to sell about 2,000 condominium units at a price low enough to entice buyers, yet high enough to pay creditors back.”

From TC Palm. “Even though the housing bubble had burst months before construction began, Janos Gyory was optimistic the new homes his company was building would sell for nearly $300,000 each. Most of them didn’t.”

“This Saturday the remaining 14 finished homes will be auctioned, with bidding starting at $190,000. ‘We were always optimistic that it is a good product,” said Gyory, president of NGG Point. ‘But we are still paying interest to the bank and need to move it somehow.’”

“Auctioneer George Richards expects the homes to sell between $195,000 and $200,000, roughly two-thirds of the original asking price.”

“Gyory’s company purchased the nine-acre parcel for $230,000 in 2003 and construction began in early 2006, months after the start of the national downturn in the housing market. ‘We thought there was still people who might be interested,’ Gyory said.”

“Gyory is still optimistic about the new home market of St. Lucie County. He is in the early stages of developing a 44-unit subdivision in Fort Pierce. ‘We believe the market will turn around by the time we are building there,’ Gyory said.”

The St Petersburg Times. “The official-looking notice appeared in his mailbox last year. To Denith Harrigan, the promise of an interest rate as low as 1 percent was too good to ignore. Disabled and on a fixed income of $2,100 a month, Harrigan could finally pay off credit card debts and fix his leaky pool.”

“Now just a few months into his new mortgage, Harrigan is in serious risk of losing his house. In less than three years, his payment could grow to equal his total income.”

“‘I got into something I had no intention of getting involved in,’ said Harrigan. ‘I believe this should be against the law.’”

“For Harrigan, the lower interest rate initially decreased his mortgage payment from $1,495 to $1,005. But if he covers only the minimum payment, his principal will grow by about $1,000 a month, and in less than three years his payment will equal his total income.”

“Brokers and lenders alike are quick to point out that option ARMs fill a need. For investors, borrowers with fluctuating incomes or people with a lot of home equity and an immediate need for extra cash, the mortgages work.”

“‘It’s a pay-now-or-pay-later situation, and ultimately it’s always the customer’s decision which is best for them,’ said Patrice Yamato, president of the Florida Association of Mortgage Brokers. Yamato acknowledged that people have misused option ARMs and some brokers and lenders have outright lied that the low interest rates were fixed.”

“The broker, Harrigan said, didn’t mention the stiff prepayment penalty or make clear that he could pay the minimum for only so long before triggering a monthly payment of more than $2,000, leaving him only about $100 to live on.”

“While Harrigan regrets getting the mortgage, Premier Mortgage Funding says it was a good deal. Harrigan was able to pay off $12,000 in credit card debts and got an extra $6,000 in cash.”

“‘I see a huge improvement for this gentleman,’ said Peter Forcey, sales manager of the Independence, Ohio, branch that sold the mortgage. ‘It looks like a pretty strong loan.’”

“Forcey said Premier often directs customers to less risky mortgages, but added that consumers need to take some responsibility for their decisions. ‘We pride ourselves on the level of disclosure,’ he said. ‘There has to be a benefit for the client or it’s gone.’”

The News Press. “Collier County is No. 1 and Lee County is No. 6 on a nationwide list of housing markets where prices are most likely to fall during the next two years.”

“‘I’d probably agree’ that prices are headed down in Lee County, said Joe Cameratta, CEO of Cleveland-based Cameratta Properties, which built High Point Place condominiums in downtown Fort Myers and is building the First Street Village residential/commercial project nearby.”

“LaVaughn Henry, director of economic analysis for PMI, said the forecast is based largely on how sharp past price swings have been in a particular market. ‘Florida’s had a high probability assigned to it because historically it’s had a high price volatility. What goes up will, at some point, come down.’”

“Lee County’s housing market is a shadow of what it was in the boom years of 2004 and 2005. Since December 2005, when the median price of an existing-single-family-home resale reached an all-time high of $322,300 according to the Florida Association of Realtors, both the number of sales and the pace of construction have dropped sharply.”

“The median price was $283,200 in April, off 12 percent from the peak. Meanwhile, the number of single-family permits pulled by developers countywide fell from 1,422 in December 2005 to 424 in May, down 70 percent from December 2005.”

“There’s an unsold inventory of about 15,000 homes in Lee County, about four times what it was a year ago.”

From CBS 4. “When it comes to mortgage fraud, Florida ranks number one in the nation with Miami Dade coming in fourth among all metropolitan areas nationally. A survey found the most common mortgage fraud scheme is South Florida involves a buyer receives a property loan above for thousands above the appraised value and then the seller kicks back cash at the closing.”

“‘There are so many people profiting off of this,’ said a local realtor who did not wished to be identified by CBS4. This realtor told CBS4’s Evan Bacon he became involved in a fraudulent deal this past spring.”

“‘I was approached by a group that I did not know,’ said the realtor, ‘and they asked me directly to ask my seller if I could raise the price of my unit a substantial amount, almost double.’”

“The realtor said the caller then offered to buy the condo for what the seller was asking if the seller agreed to increase the sale price by more than $200-thousand and then give the extra cash back to the buyer at closing. The realtor told CBS4 on the day of the closing the sale documents had been changed to reflect a new buyers name and a much higher price.”

“‘It’s a very typical scheme in South Florida,’ said Miami Dade Police Sgt. Richard Davis, ‘that is now spreading all over the country.’”

“Fraud investigators say if this type of scheme continues it’s going to get to the point where lenders will pull out and not lend any money. ‘When I see mortgage commitments where someone makes $28-thousand a year and they are qualifying for a $900-thousand mortgage, that’s not normal,’ said Nancy Hogan with the Florida Real Estate Commission.”

The News & Observer from North Carolina. “Crosland, which was planning to sell 179 condominiums near Glenwood South, will rent the units instead, a decision that illustrates how surging interest rates could dampen downtown’s growing condominium market.”

“‘It’s a safer opportunity for us to be the only rental when everybody else is condominium,’ said David Ravin, a senior VP at Crosland.”

“When the project was approved in April 2006, the Charlotte developer offered some units for rent and some for sale. But demand from potential buyers was so high that it decided early this year to sell all the units.”

“Since then, however, mortgage rates have spiked. That causes Crosland to worry that, by the time the project is complete, late next year, buyers will have bought elsewhere, or abandoned plans to buy.”

“The number of condos in Raleigh’s core is expected to double to nearly 1,000 within two years. By 2011, there could be more than 2,000. ‘Inevitably, you’re going to see a timeout in downtown for-sale product,’ Ravin said.”

“Crosland’s decision is not the first sign of condo conservatism. Others have abandoned, delayed or shrunk downtown condo plans.”

“The company has refunded deposits for about 80 condo reservations, but will allow the prospective buyers to get back in line if the sales campaign is revived. Meanwhile, renting the units will get the project going. As Ravin points out, ‘A project that doesn’t get built isn’t profitable.’”

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