The Housing Bubble

It’s Friday desk clearing time for this blogger. “Merrill Lynch & Co. has backed away from a threat to dump about $850-million of securities it seized from Bear Stearns Cos. hedge funds, according to people with knowledge of its plans. The decision, and the scrapping of a sale Wednesday by JPMorgan Chase & Co., diminished the risk that a large amount of securities would be liquidated immediately.”

“‘It’s an industry issue,’ said Brad Hintz. Mr. Hintz was chief financial officer of Lehman Brothers Holdings Inc., the largest mortgage underwriter, for three years before becoming an analyst in 2001. ‘How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?’”

“Foreclosure actions against Massachusetts homeowners continued at a high pace in May, and likely will remain so for several more months as rising interest rates and a sluggish real estate market leave delinquent borrowers with few options, according to real estate analysts.”

“The number of homeowners facing foreclosure auctions more than doubled in May compared with a year ago, according to (the) Warren Group. It was the eighth consecutive month that foreclosure notices topped 2,000.”

“‘The Bay State has not yet seen this problem peak,’ said Timothy Warren, CEO of Warren Group. ‘It becomes evident that homeowners are finding it difficult to refinance their mortgage or sell their homes before they reach auction.’”

“Anyone who has purchased a car is familiar with the trade-in routine. Now, with new-home sales in the doldrums, many home builders are encouraging trade-in options.”

“‘Right now, we’re seeing this in select areas, in communities where it makes sense,’ says California real estate consultant John Burns, who singled out Arizona, California and Florida as locations where the bulk of trade-ins are taking place. ‘The whole industry is full of copycats. If others see it makes sense, they’ll jump on board and do it, too.’”

“Compared with May 2006, sales dropped 6.7 percent, according to figures released Monday by the Greater Nashville Association of Realtors. The slowdown in sales helped push the number of homes on the market higher to 20,915 properties at month’s end. That is the most since at least January 2000, according to the Realtors association.”

“Local agents said that more offers come with clauses that let buyers back out if they are unable to sell their old homes. ‘They’re scared now,’ said broker Mike Cherry. ‘I recommend (to clients) that they get their house sold before they even look.’”

“Buying the average B.C. home this month requires $21,150 more in annual income than it did at the start of the year, according to the B.C. Real Estate Association. Kyle Liu with his wife Jenny, was able to jump in and buy a home in North Burnaby for under $460,000.”

“For him and his wife, however, there is a sense of relief from having gotten into the market when they did. ‘I feel for the people trying to get in again now,’ Liu said.”

“New Zealand faces a ’significant downturn’ in housing as three interest-rate increases this year threaten to end a 5 1/2 year real-estate boom, Finance Minister Michael Cullen said.”

“‘There’s a risk of what could kindly be called a technical correction or a significant downturn,’ Cullen told a parliamentary committee. Higher borrowing costs mean ‘many people find themselves in a negative equity position,’ he said.”

“Increasing interest rates is ‘probably not the optimal way of resolving the issue’ of demand, Cullen said. ‘Eventually the tourniquet will cut off the supply of blood, but maybe we need something less drastic.’”

“ACORN supervisor Adrienne Tissier, whose district includes Brisbane, Colma, Daly City and South San Francisco, said what the San Mateo County Board of Supervisors can do is hold forums to educate people what to look for and avoid predatory loans before contracts are signed.”

“‘In some cases, some people didn’t know what they’re doing,’ Tissier said. ‘Then all of a sudden, they have this huge mortgage.’”

“According to the authors of the book ‘Cities Ranked and Rated,’ Modesto is the worst city in the U.S. But what really hurt the city’s rating this time around, Sperling said, were skyrocketing housing prices, foreclosures and commute times.”

“‘Due to high housing prices, people have been driven out of cities, and a two-hour commute is no longer an anomaly,’ author Bert Sperling said. ‘In places like Modesto and other places in the Central Valley, there are a lot of speculators that moved in because of housing prices.’”

“This month started for Orange County (CA) real estate like the past 20 finished: In a sales slump. Fresh DataQuick figures show local home sales running 30.5% below last year for the 22 business days ended June 12. The last month where sales beat the previous year’s pace was October 2005.”

“Marc Lebowitz, executive officer of the Ada County (Idaho) Association of Realtors. said May was a lean period for his membership. He said that with more than 4,000 members, having 720 closings in Ada County in May meant some Realtors ‘didn’t do a thing last month.’”

“But he said the market is not falling as much as returning to stability after two years of ‘gross instability’ that produced the excess inventory now weighing down the market.”

“Associate broker Shaun Tracy said the market is being held down by sellers reluctant to drop prices on their home to attract buyers. ‘People will make every excuse in the world to keep from dropping their price,’ he said. ‘That’s why momentum is flat.’”

“Industry experts say sales numbers are approaching 2004 levels. That year is considered typical for sales of homes in the Valley. 2005 and the first half of 2006 represented a bubble, with fast-rising prices and a home-building boom.”

“According to the MLS, 1,028 Valley homes sold in May, off 7 percent from the 1,103 transactions in 2004. Buyers had many more homes to choose from than usual: 7,470 homes, or 76 percent more than in May 2004.”

“‘It’s not a bad market out there,’ said Lebowitz. ‘It’s just a different market. And the trend is the same all over the country.’”

The Journal Sentinel reports from Wisconsin. “The housing slump has hit an unfinished phase of a Port Washington condominium development, and Grafton State Bank is trying to break even on its investment in the project, bank President Jeff Larson said Wednesday. Two buildings with a total of 16 units are scheduled to be sold at a sheriff’s foreclosure auction. Another 60 finished condominium units were in the project’s first phase.”

“‘With the housing slowdown, they (Lakeridge) were just stretched too thin, and they basically walked away from the project,’ Larson said.”

The Des Moines Register from Iowa. “The number of sellers competing for buyers in the Des Moines metro area spiked last month, a new report from area real estate agents shows. Active listings in May increased 10.4 percent to 6,718 from 6,086 a year ago, the Des Moines Area Association of Realtors’ report showed. The average price of sales pending dropped.”

“‘If buyers find any little something about the property they don’t like…they’re just going on to the next property,’ said agent Kurt Schade.”

“Two years ago, sellers had to make few improvements before hitting the market ‘and expected them to sell. Now, they’re really trying to make their property stand out,’ Schade said.”

The Kansas City Star from Missouri. “Kansas City area home builders, already gearing back in hopes of clearing a glut of unsold homes, now are confronting a new headwind, rising mortgage rates.”

“There were 559 permits for single-family homes issued during May in the eight-county area, down 40 percent from a year earlier, according to the latest report by the Home Builders Association of Greater Kansas City released Tuesday.”

“So far this year, there have been 2,858 permits issued, down 38.1 percent from the same five-month period last year and 45 percent off the record pace set during that period in 2004. It was the lowest five-month total since 1995.”

“The slowdown is in response to a large number of new homes available on the area market, almost 5,300 in April, according to the Kansas City Regional Association of Realtors.”

“No area county escaped the downturn in permit activity through the first five months of the year. Miami County experienced the steepest drop, 65 percent, followed by Cass County, 55 percent; Platte County, 54 percent; Johnson County, 34 percent; Wyandotte County, 31 percent; Clay and Jackson counties, 24 percent; and Leavenworth County, 20 percent.”

“‘There is no doubt that a significant portion of the buildup in inventory is due to overbuilding of certain home prices and styles,’ said Tim Underwood, CEO of the Home Builders Association.”

The Other Paper from Ohio. “More than a dozen baby boomers packed into a shuttle in front of the Ohio Loft condominiums. A woman in her mid-50s leaned across the aisle to the man sitting across from her and said, ‘Don’t you just love this? I can’t wait to move Downtown.’”

“Then she added, ‘I have to sell my house in Hilliard first, though. It’s been on the market for months.’”

“There’s been a recent sense, fueled by news stories and idle speculation, that the Downtown condo market—the key ingredient in hopes and plans to keep the central city vital after 5 p.m., is in trouble.”

“Many Downtown developers are tweaking their game plans in response to the lagging sales. Half-million-dollar luxury digs are still being marketed to empty nesters, the majority of the Downtown condo buyers. But recently developers have begun peppering the city with cheaper, smaller condos in an effort to lure young first-time home buyers.”

“The suburban slump has created a vicious cycle, said Rob Vogt, a partner at a Columbus company that provides national real estate market-feasibility information.”

“‘The profile of the buyers Downtown tends to be empty nesters who are moving from the suburbs,’ Vogt said. ‘When you’re trying to sell your $400,000 house in Dublin and there’s no buyer, you’re not going to be able to close on your condominium Downtown.’”

“With most Downtown condo price points traditionally starting near $350,000, Vogt said developers made the mistake in the first round of building of bypassing many first-time home buyers. ‘The lion’s share of the market isn’t being served by the current supply of Downtown condos,’ he said.”

The Cincinnati Post from Ohio. “April home foreclosures in Cincinnati rose more than 300 percent from the same month a year ago, according to a housing agency study released today.”

“But it’s hardly a Cincinnati phenomenon. Ohio’s foreclosure rate rose 64 percent in 2006, to 81,517 filings. Tyresa Hall needs only to look out her Avondale window to see the extent of the problem. Her neighbors on both sides of her home have been foreclosed on, as has a home across the street. That was about a year ago. All three are now abandoned.”

“The results have all been fairly predictable. Homes sit empty, yards overgrow, the properties fall into disrepair and their front porches increasingly become hang-outs, leaving two legacies: litter and falling home values for neighbors like Hall.”

“‘With some, there’s overgrown lawns, there’s litter all over from people hanging on the porches,’ she said.”

The Cincinnati Enquirer from Ohio. “Throughout the turbulence of stock market gyrations and erratic energy costs in the first half of the decade, Greater Cincinnati and Northern Kentucky people who owned homes could count on one constant: Their homes grew in value every year.”

“Between 2000 and 2005, equity in real estate turned out to be a surefire investment. In Greater Cincinnati, the average resale price of a single-family home rose 20 percent during that span to $191,225 from $159,125. In Northern Kentucky, the average price rose to $154,438, from $134,132, up 15 percent.”

“Then came 2006. What had been automatic became idiosyncratic. Average resale prices fell in 137 neighborhoods and towns in the region.”

“Industry experts blame last year’s downturn in used home sales on higher interest rates, tapped-out demand and the dropoff in speculative home-buying for quick resales, or flipping.”

“Norm Miller, director of the University of Cincinnati’s real estate program, hardly blinks at the slowdown in this region because he knows it was much worse, and remains much worse, in cities in Florida, Arizona and California.”

“The stable neighborhoods that have longer-term residents are going to see no price effects, just a little less volume,’ Miller said. ‘The more transient neighborhoods with more turnover, where there are a lot of foreclosures and where banks no longer make subprime loans, could soften up a bit on price.’”

The Journal Group from Michigan. “On June 1, the Wayne County Treasurer’s Office mailed out a record-breaking total of 148,856 notices for 2006 property taxes that have been returned to Wayne County as delinquent from the 43 county municipalities, according to spokesperson Keith Owens.”

“The total amount due to be collected from these delinquent accounts also amounts to an all-time high of over $290 million. That’s a $90 million increase over last year.”

“‘We’re getting foreclosures in at the city at the rate of about five a week, 20 houses a month is pretty bad,’ said Romulus Mayor Alan Lambert. ‘We’ve talked to some mortgage lenders to see if they can help, and they’re concerned, too. They don’t want all of these mortgages to fall back on their laps.’”

“‘When you’re driving around here in the neighborhoods, you tell there are many abandoned houses because the grass is tall,’ Lambert said.”

The Detroit News from Michigan. “They have names like the Ridgemont, the Georgetown and the Hillcrest, sit in swanky suburbs like Rochester Hills and come adorned with rich detail, but even the slickest of the new homes in Metro Detroit aren’t selling.”

“As a result, Metro Detroit builders are dramatically scaling back plans for new homes and condos this summer. Residential building permits fell 51.3 percent from January through May compared with the same period last year.”

“Still, local builders are chugging forward on projects already in the works, even as the housing slump, one that’s hitting Southeast Michigan particularly hard, one economist said, makes it tough to get rid of a glut of new homes.”

“‘Southeast Michigan is the weakest pocket in the nation, with a market that never really recovered from the recession of 2001,’ said David Seiders, chief economist at the National Association of Home Builders. ‘And it’s still sinking.’”

“In today’s market, builders are keenly aware they’re up against tough competition from other developers and deeply discounted existing homes, many put on the market by sellers desperate to rid themselves of property.”

“Winnick Homes, another local developer, is touting ‘ready to own’ single-family homes, ones that are completed but not sold, in communities like Southgate and Novi.”

“In contrast, when the market was more seller-driven just a few years back, many developers could sell an entire neighborhood before a shovel broke ground.”

Some housing bubble news from Wall Street and Washington. The Orange County Register. “In another fallout from Orange County’s subprime mortgage industry collapse, Brookstreet Securities Corp., an Irvine broker dealer, shut its doors and laid off 100 local employees because it could not meet margin calls on complex securities backed by faltering mortgages, company spokeswoman Julie Mains said.”

“The securities, known as collateralized mortgage obligations, lost value as Wall Street confidence in mortgage-backed securities collapsed. Mains said the value of Brookstreet’s securities plunged to 18 cents on the dollar, forcing the company to dip into its capital to meet margin calls, which is when investors must increase deposits to meet minimum account requirements.”

“‘It wasn’t a problem with securities,’ she said. ‘It was a problem with the margins.’”

“Stuart Meissner, a New York attorney and former securities regulator, said he received calls from people whose Brookstreet accounts went from $250,000 to negative value. ‘They were supposedly guaranteed 10 percent returns,’ Meissner said.”

The LA Times. “One Brookstreet broker, who declined to be identified, attributed Brookstreet’s troubles to a bond division at the firm that had set up a special website for wealthy investors. The broker said the site allowed investors to purchase collateralized mortgage obligations with as little as 10% down and the other 90% borrowed, rather than the 50% down that is typically required on such margin accounts.”

“A combination of rising longer-term interest rates and defaults on sub-prime mortgages caused the mortgage bonds to lose value, losses that were greatly magnified because of the heavy borrowing that funded the purchases, the broker said.”

“In some cases this would more than wipe out an investor’s entire position overnight, putting the burden on Brookstreet to make up any amounts owed to the National Financial unit of Fidelity Investments, which held the accounts.”

“In the end, National Financial began selling the assets of investors as their accounts declined, leaving them, like Brookstreet itself, with huge losses, the broker said.”

“‘Disaster, the firm may be forced to close,’ Stanley Brooks said in his e-mail to brokers Wednesday. ‘Today, the pricing system used by National Financial has reduced values in all collateralized mortgage obligations. Many of those accounts were on margin and have suffered horrendous markdowns.’”

From Bloomberg. “Losses in the U.S. mortgage market may be the ‘tip of the iceberg’ as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.”

“‘The large volume of subprime ARMs scheduled to reset at higher rates in ‘07 and ‘08 will pressure already stretched borrowers,’ forcing more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds ‘could be the tipping point of a broader fallout from subprime mortgage credit deterioration,’ they said.”

“Countrywide Financial Corp. and IndyMac Bancorp Inc., two of the largest U.S. home lenders, may suffer more than other finance companies because they hold mortgages themselves as well as selling them on to investors, the analysts wrote. They may not have set aside enough money to cover losses, said Bank of America.”

“Bear Stearns Cos. is proposing a bailout of a money-losing hedge fund by taking on $3.2 billion of loans to forestall creditors from seizing assets, the biggest rescue since 1998, people with knowledge of the plan said.”

“Bear Stearns, the second-biggest underwriter of mortgage bonds, increased efforts to salvage the fund, one of two that made bad bets on collateralized-debt obligations.”

“‘The problem is not what we see happening, but what we don’t see,’ said Joseph Mason, associate professor of finance at Drexel University in Philadelphia and co-author of an 84-page study this year on the CDO market. ‘We don’t know the price of these assets. We don’t know which banks are exposed to this sector. These conditions are the classic conditions for financial crises across history.’”

“The first CDOs were created at now-defunct Drexel Burnham Lambert Inc. in 1987. Sales reached $503 billion in 2006, a fivefold increase in three years. More than half of those issued last year contained mortgages made to people with poor credit, little loan history, or high debt, according to Moody’s Investors Service.”

“CDOs may have lost as much as $25 billion because of subprime defaults, Lehman Brothers analysts estimated in April.”

“Bear Stearns’s proposal doesn’t involve taking equity. Instead, the firm would become a lender to the fund, its loan secured by the assets of the fund.”

The Street.com. “Some question the New York investment bank’s effort to salvage the failing funds. ‘The investor in Bear Stearns’ stock is faced with the fact that the company may be lending money at below the rate it earns on capital into an entity where there is nogood way to determinate value of its assets,’ commented Richard Bove, analyst at Punk Ziegel.”

“‘It is also important to understand that $3.2 billion, if this is the right number, is 24.8% of Bear Stearns’ common equity,’ he warns.”

“The sale of the fund’s holdings could cause a significant repricing in the overall market because it will give an indication of where to value these hard-to-parse securities. A repricing is a scary notion because subprime has been a mess for investors, and the value of debt with subprime mortgage ties is much lower than it was several months ago.”

From Reuters. “U.S. credit derivative indexes reached their widest levels since February on Friday on continuing concerns about possible contagion arising from an auction of some troubled mortgage assets.” ”

“The index of high volatility credits, which comprises mainly ‘BBB’-rated swaps, widened one and a half basis points to 97.5 basis points and the index of crossover credits reached an all-time wide of 170 basis points, three basis points wider on the day, according to a trader.”

“Losses at hedge funds managed by Bear Stearns have brought together two of investors’ biggest fears in a nasty confluence of risk. First, there is the spectre of hedge fund failure, renewing long-held worries about systemic risks to global assets. Second, there is the threat of a credit market meltdown.”

“The nature of the investments at issue, collateralised debt obligations (CDOs) which, in this case, contain at least some subprime mortgages, are more worrisome. ‘Hedge fund losses are a minor concern compared to the broader economic damage that would result from an open auction of subprime CDOs,’ Peter Schiff, president of Euro Pacific Capital, said in a note.”

“A rising of credit costs would come as major central banks are generally tightening monetary policy and global bond yields are rising.”

“A major concern from any melt-down would be not just the rise in risks and losses in assets but the potential for a banking crisis as banks were left holding bad debt. The Bears Stearns case after all, does involve at least five of the world’s leading financial institutions.”

“The market has absorbed sales without incident, but lenders to hedge funds may still be hurt as they’re forced to remark positions, said said Christopher Sullivan, chief investment officer at the United Nations Federal Credit Union.”

“A benchmark subprime mortgage bond index fell to record lows this week, putting bond traders on edge about the prospects for spillover to other credit markets. The so-called ‘home equity asset-backed securities’ are backed by bundles of loans to homeowners with the riskiest credit.”

“‘The market is really worried about a contagion,’ said Michael Metz, chief investment strategist at Oppenheimer & Co. ‘It’s an open-ended black hole, and a lot of people are going to take to the sidelines until it’s clarified. Nobody knows how serious it is going to get.’”

“‘The problem is that marking down the assets to where the market will bid them may in fact be the right thing to do, but no one wants to take the loss,’ said Jason Brady, who helps manage $4 billion in bonds at Thornburg Investment Management.”

“Some of the assets also include so-called CDO squared structures, which are CDOs of CDOs and even more difficult to value.”

“‘They only want to sell the higher-quality assets,” said Mirko Mikelic, a senior portfolio manager who oversees $5 billion in fixed-income assets for Fifth Third Asset Management. ‘Right now there’s no trading going on for lower-rated securities.’”

From MarketWatch. “For the second time in a week, the Federal Reserve was urged to draw up tough rules to stem abuses in the mortgage industry on Thursday.”

“Meeting at the Fed’s headquarters, members of the central bank’s consumer advisory council urged regulators to use their legal authority to stiffen regulations about the affordability of subprime loans, to improve disclosure about risky loans and apply anti-abuse rules to as many lenders as possible.”

“One action the Fed is reviewing is whether to write a rule about lending only to borrowers with proven ability to repay their loans. Edward Sivak, director of policy and evaluation for Jackson, Miss.-based Enterprise Corporation of the Delta, urged such a rule.”

“‘We’re living in the unintended consequence right now,’ he said.”

“The problems in the subprime mortgage market aren’t yet well enough understood for regulators to propose a quick solution, said Cleveland Federal Reserve Bank President Sandra Pianalto.”

“They are complicated by the speed and breadth of financial innovations, Pianalto told a community development conference in Cleveland, and ‘I am convinced that there is no single solution or ’silver bullet’ that will cure them.’”

“Pianalto said financial innovation had driven down costs for borrowers and provided a wider range of credit choices, but had also brought an increasing number of new players into the mortgage market, from brokers and underwriters to servicers and rating agencies, that at times have conflicting incentives.”

“‘For example, because a mortgage broker is typically compensated only when a loan is made, he has an incentive to approve the loan. However, this incentive may conflict with the interest of the potential borrower,’ she said.”

The Gulf Breeze News reports from Florida. “Foreclosures are spiking in Santa Rosa County. ‘It’s the worst I’ve ever seen it,’ said Deputy Clerk Joyce Watkins, who’s been processing foreclosures for over eight years. By the 13th day of June, Watkins and her department already had 31 foreclosures to process. She compared the 71 foreclosures in May to the 48 foreclosures in May of 2003, a 147 percent increase.”

“‘I think it’s as high as it is right now because people, when they plan for a home, have a certain amount they can afford. Everything is going up except salaries,’ Watkins said. Variable interest rates also contribute to the foreclosures.”

“Local real estate broker Sherlyn Waghalter said a lot of homeowners got overextended on equity lines of credit after values spiked after Hurricane Ivan.”

“‘People were taking tons of money out of their equity, buying boats or cars or whatever. Now they want to move or relocate and the value of their homes is 15 to 20 percent less. They can’t afford to close and have to bring money to the closing table,’ Waghalter said.”

“Waghalter said homeowners can avoid foreclosure by putting their homes on the market. However, competition is stiff, with over 1,929 single family homes available on multiple listing service in Santa Rosa County priced over $100,000.”

“‘The home has to be priced right,’ Waghalter said. ‘Our values are dropping, and the home has to show well. Buyers can be picky now.’”

The Palm Beach Post. “In the clearest sign yet that the region’s real estate boom has ended, Miami-based Ocean Bank confirmed Wednesday that it has filed a $50 million foreclosure action against the developers of a Boca Raton condo conversion.”

“The foreclosure may be the largest filed in Palm Beach County since the red-hot residential real estate market began cooling early last year. And analysts say it’s a precursor of things to come as the lenders who fueled the frenzy with easy-to-get loans continue to tighten the purse strings.”

“‘It’s probably just the tip of the iceberg, the first of many more to come over the next couple of years,’ said Jack McCabe of McCabe Research and Consulting in Deerfield Beach.”

“Ocean Bank is Florida’s largest independent commercial bank with $5.9 billion in assets, and lent millions of dollars on condo projects in South Florida, which now has a glut of condo units hitting the market.”

“In March, the Federal Deposit Insurance Corp. issued a cease-and-desist order in which Ocean Bank agreed to reduce and monitor loans to condo conversions and land development. The enforcement action came too late for the NRW loan, however.”

“The Ocean Bank lawsuit says NRW and six other borrowers stopped paying on the loan in December, only seven months after NRW borrowed the $60 million to pay $57 million for the property.”

“NRW had planned to create Villa Mare out of…the last major rental complex on the Boca Raton waterfront. Units were to be priced between $311,000 and $1.2 million. But even that sweet location wasn’t enough to guarantee success, especially when NRW plunked down so much to buy the two-building complex.”

“It’s tough to make the numbers work when you’re paying $356,250 per unit, McCabe said. Even when the sale took place last year, ‘we questioned that deal,’ he added. ‘The price may have been too high.’”

“Now Ocean Bank has a giant hole in its $4.5 billion loan portfolio, bad news for a bank with past-due loans creeping past the $208 million mark.”

The St Petersburg Times. “Sales of condos and free-standing homes, which mushroomed between 2003 and 2005, have plunged since then to pre-bubble levels.”

“The condo market has become glutted with apartments converted into condos. The new home market became glutted when investors quit buying. If there’s a townhouse glut, it’s smaller.”

“But there are signs. Mobley Homes recently advertised a ‘total appliance package’ plus $8, 000 in closing costs at Stone Creek. liane Balleza, a real estate agent based in New Tampa, said some townhouse developers have slashed prices in response to buyer offers.”

“‘They’re taking $25,000 or $20,000 off the base price,’ she said.”

The Orlando Sentinel. “Florida is in a serious funk. The big question is whether this now turns into a serious recession.”

“In a May report, Goldman Sachs economist Jan Hatzius called Florida the ‘Epicenter of the U.S. Housing Bust.’ Home prices are overvalued by 40 percent, with Florida also having the biggest glut of homes on the market in America.”

“‘I think a lot of people used home equity to fuel spending, and that is not there now,’ says the University of Florida’s survey director Chris McCarty. ‘I don’t think steady employment growth is enough to make up for that.’”

“Hatzius’ report backs this, citing numbers that show Florida residents fueled spending more with equity loans than did homeowners in the nation as a whole. Sales-tax figures from the state show spending is falling fast.”

“Tax collections in April came in $43 million less than what was predicted. And the prediction was made in March. In May, collections came in a whopping $70.3 million below the prediction.”

“Home builders are cutting back because of the housing glut. Construction here accounts for 7 percent of the state’s economy, compared with 4 percent nationally. And that doesn’t include the army of real-estate agents and mortgage brokers that depends on home sales.”

“Florida’s economy is addicted to growth. And there even is a hiccup in that, with a puzzling statewide decline in school enrollment this year.”

“‘Is there a sea change going on in our state?’ says Dominic Calabro, president of Florida TaxWatch. ‘Back in January we heard concerns, and they’ve only been more validated. We’re seeing a yellow light. It’s a great warning sign. We just can’t sit on our laurels and assume we’ll always have population growth and job growth as far as we can see.’”

“For further proof, as if anyone needs it, of the slump in the real estate market, we offer the 17,145-square-foot Belleair estate of pro wrestling legend/reality TV star Hulk Hogan that is back on the market at the reduced price of $17.9-million.”

“Hogan had listed the property at $25-million before taking it off the market last year. The two-story French Country home overlooks the Intracoastal Waterway and has a guest house, boathouse, pool and waterfall, maid’s quarters and four-car garage.”

“The Hogans bought the Belleair property in 1992 for $2-million.”

The Daily News “More than 300 people with a keen interest in the Emerald Coast’s real estate market gathered Wednesday at Destiny Worship Center to ask for God’s blessing. The Real Estate Prayer Luncheon was organized in hopes of breathing life and positive thinking into the area’s slumping housing market.”

“It was the first of what the organizers, co-owner of Crye Leike Coastal Realty Wanda Duke, former Destin City Councilman Mel Ponder and Destiny Worship Center Pastor Steve Vaggalis, hope will become a regular, uplifting event.”

“‘The heartbeat of today’s economic community is on the backs of the real estate community,’ Ponder told the crowd.” “Those gathered had one goal, ‘changing the climate in the area.’”

“‘We need to think positively and get everyone on the same page,’ Duke said. ‘Positive things that come out of your mouth will end with positive results. If we lose hope, we lose everything.’”

“Real estates sales are down all along the Emerald Coast. According to figures from Metro Market Trends, total sales in Okaloosa County in May were down 44 percent compared to May 2006, and year-to-date sales in 2007 are down 36 percent compared to last year.”

“During the luncheon, several speakers, including Buddy Runnels of Cornerstone Development Group, reassured the crowd by reminding them that the market has gone down before, but it always comes back up.’ ‘Work hard. Things are positive; they’re just in the future,’ Runnels said.”

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