The Housing Bubble

In Business Las Vegas reports from Nevada. “The price of resale homes fell sharply in May, but a Las Vegas-based analyst said the price drops are needed to reduce the glut of homes on the market. Dennis Smith of Las Vegas-based HomeBuilders Research reported that the median price of resale homes in May dropped $7,000 from April or 2.5 percent to $278,000. That’s $11,000 lower than the price in May 2006, Smith reported.”

“‘It might be strange to call these price decreases good news. However, given the market conditions, it might indicate that some folks are finally facing reality and pricing their listings so they will sell,’ Smith said. ‘This is needed to bring down the resale inventory.’”

“Smith reported there were 2,587 resales in May, bringing the yearly total to 6,600, a drop of nearly 35 percent from the first five months of 2006. Given the pace of nearly 2,500 resales a month, Smith said Las Vegas could finish the year at a total of less than 30,000.”

“That would mean a drop of 11,900, or 28 percent, from the 2006 number, Smith said. And the 2006 resale number was itself a 28 percent decline from 2005, he said.”

“In the new home market, the median price was $308,874 in May, a year-to-year decrease of $14,156 or 4.4 percent, Smith said. When omitting mid-rise and high-rise condos and condo conversions, the median price for new homes was $309,990, a drop of $29,000 or 8.5 percent from last year, he said.”

“There were 8,253 (new Home) sales through the first five months, a year-to-year decline of nearly 44 percent, he said.”

“In an indication of the effects of higher credit requirements by lenders, the average cancellation rate in many parts of the valley was 31 percent, up from 26 percent where it had been most of the year, Smith said. Many buyers have been frozen out of the market because they don’t have credit scores of 700 or higher, he said.”

“‘How many young potential buyers have a 650 to 700 credit score, but are being rejected?’ Smith asked. ‘I don’t know the answer to the question, but I assume that’s a very large number.’”

“For nearly 30 years, Richard Rizzo has seen much of the development in Las Vegas from the ground up.”

“Q: What about challenges of laborers? A: ‘People have criticized me for saying there is a limitation for how much this community can absorb construction work. I don’t see how all that’s being planned can get built in a reasonable period of time without some kind of order as to how it goes forth.’”

“‘What that does for me is give me great concern that there may be others making commitments out there that can’t be supported and that’s only a passageway to failure. Hopefully, the market will drive them to a point where they say, ‘I can’t afford it, it’s too expensive right now and I don’t have confidence you can get it done. I will just have to wait.’ That seems to have happened with some degree to the condo market, which has been so successful as an investment product.’”

“‘It is not a condo market as we traditionally know it. The ones that were designed for the locals to live and reside in were too expensive. They didn’t fit. Those who had already taken reservations had to back off and the other ones just went away.’”

“‘The majority of those units are not true condo units. People like you and I are not going to move into those units. They are buying them as an investment. As I understand, certain people are buying blocks of them, five and six of them. You can only use them from what I understand six weeks out of the year. The rest of the time you have to put them back in the pool or leave them empty.’”

“‘So with the occupancy rate over 90 percent, the chances are you are going to able to rent the damn thing. It is a good gamble. Even if you are paying premium prices for it, they are getting premium rents. You can justify the numbers as an investment but not to live there. The salary structure of this community doesn’t support somebody paying $800 to $1,000 a square foot for a place to live. They can’t afford it.’”

“Q: What about the condo market? A: ‘The ones that came first got overcommitted. They ended up starting them and not really knowing what their market was. Panorama is a good example of that. Look at the prices on those things.’”

“Q: What about the residential market? A: ‘The residential market in Las Vegas has suffered from overbuilding. The prices on single-family units are reducing themselves 15 to 20 percent. Meanwhile, the condo prices have to be up here. I think they are less attractive than they were even a year ago until you absorb some of this single-family residential stuff that is underpriced right now.’”

The Arizona Republic. “Pinal County is taking a big breath. Coming down from two years of dizzying growth, Pinal now finds itself trying to get a grip on development before the next tidal wave of growth strikes.”

“Starting around 2004, growth blindsided Pinal County. People entered lotteries fighting for homes in the newest master-planned communities. The county issued a record-breaking 18,700 permits for new single-family houses in 2005.”

“It’s a different picture today. From a peak of 1,785 sales in the second quarter of 2005, Pinal’s resale market dipped to 840 transactions in the first quarter of this year.”

“‘We’re at a trot now instead of a full-fledged run,’ said Sandie Smith, one of three Pinal County supervisors.”

“The housing market continues to slow in metropolitan Phoenix, but the area still ranks third in the nation for home building. According to the National Association of Home Builders, Phoenix ranks behind only Atlanta and Houston for the number of single-family home permits issued this year.”

“The Valley’s high spot in the home-building ranks comes even as housing permits fell 22 percent this year from 2006’s pace, according to (analyst) RL Brown.”

“Metro Phoenix beat out Atlanta to be the top home-building market in 2004 and ‘05, but, in retrospect, that wasn’t necessarily a good thing. At least 30 percent of the homes built during the market’s high point a couple of years ago were bought by investors who either didn’t move into them or found renters.”

“Those empty homes are now hurting some neighborhoods and their home values as investors can’t sell and their houses fall into foreclosure.”

“As the housing boom faded in metro Phoenix, building slowed, and the area slipped in the national rankings. Here again, the slowdown could be seen as a good thing since there are plenty of already built new homes sitting unsold.”

“Housing analysts estimate anywhere from 10,000 to 20,000 speculatively built houses are sitting empty in the Valley.”

“Some investors signed deals putting very little down, and when the market slowed, they walked away from that earnest money, leaving builders with the house. Other new homes haven’t sold because buyers can’t sell their existing homes and close on the new ones.”

“Brown is currently revising his forecast for home building in metro Phoenix downward.”

“In January, he had estimated 41,000 single-family permits would be issued in metro Phoenix this year. In 2006, there were 42,460 new home permits issued. In 2005, there were 63,570, but how many of those went to investors who artificially inflated demand?”

“‘Even with 35,000 or 36,000 single-family permits in a year, Phoenix still has a heckuva housing market,’ Brown said.”

The Post Dispatch reports from Missouri. “Christopher Miller wanted an old house with the amenities of new construction. Instead, he found a new home with the character of an old house. And despite numerous upgrades, he got it at a bargain price. Miller expects to pay $315,000 for a 2,200-square-foot house in St. Louis’ Shaw neighborhood that would have cost $400,000 not long ago.”

“‘The sales manager at McBride & Son Homes said, ‘Tell me what you want, and we will put it all together and then crunch the numbers,’ Miller said.”

“With sales sluggish, many builders are offering incentives, from free cars to discounts of up to $80,000 or $90,000, said Curt Johnson, vice president of new homes for Coldwell Banker/Gundaker.”

“The executive VP of the Home Builders of St. Louis and Eastern Missouri, Pat Sullivan, said, ‘It seems buyers have gone into a cocoon. It’s not a big deal when it’s just a few people, but when the snowball continues to roll down the hill, it becomes a significant factor.’”

“The biggest hit, Sullivan said, has been in the price range most builders are in: the low $200,000s to $500,000.”

“At Chesterfield-based Taylor-Morley Homes, Missouri permits were cut by more than half from 2005, to 148 last year. Bill Taylor, CEO, said job cuts weren’t unique to his company. ‘We have probably had two to three rounds of unfortunate layoffs over the last year. About a 30 percent reduction in staff overall,’ Taylor said. ‘But that isn’t unlike a lot of other builders.’”

“Taylor-Morley isn’t the only company trying to sell excess land holdings, said Randy Mayer, CEO of St. Louis-based Mayer Homes. But that strategy has limitations, given the slow market. ‘Reality is, there are no buyers (for the land) out there,’ Mayer said. ‘Most builders have also had too much staff.’”

“When the market was booming, ‘we were receiving price increases from our contractors on a quarterly basis,’ said Brett Hardesty, president of Hardesty Homes, based in Chesterfield. ‘Now we are refusing to accept increases because business is slower. Everyone is working harder on tighter margins.’”

“Although builders are used to ups and downs, most are scratching their heads over the large decline in sales. ‘Other prior downturns have been inflation- and interest-rate-related,’ Mayer said. ‘This was neither.’”

“The president of the Home Builders Association of Greater Southwestern Illinois, Matt Belcher, says problems in the subprime loan market have derailed a recovery. ‘The industry was starting to turn back around, and the subprime market took a swing at the industry,’ Belcher said.”

“The incentives are getting larger, especially in new house subdivisions with only a few homes left to sell, said Tom Malone, broker salesperson for Coldwell Banker/Gundaker. ‘Some of those who bought earlier are having buyer’s remorse for having paid full price,’ Malone said.”

The Detroit Free Press from Michigan. “Michigan’s sour housing market is pushing more sellers to slap rent-to-own signs in their front yards to lure buyers. At the same time, more purchasers are opting to get into homes using this nontraditional method, some real estate agents say.”

“Agents say the surge in rent-to-own deals in the region can be attributed to the increase in foreclosures, bad credit resulting from job cuts, homes sitting on the market too long and people not having enough money for a down payment.”

“Jaye Simpson of Nextpointe Real Estate Service in Troy, said the jump in her business is due to a decrease in subprime mortgage lending. Such loans are designed to assist buyers who have damaged credit.”

“‘Since that particular portion of the industry is shrinking, rent-to-own is now a new and more popular strategy,’ she said.”

“Dennis Fassett, owner of Michigan Property Solutions Group in Franklin, said people just aren’t saving enough. ‘So the result is that when something happens, even something small, people can’t recover and they end up losing their homes,’ Fassett said.”

“Jeff Wilkinson’s Ypsilanti home has been on the market since September 2006. After losing his manufacturing job and moving to Salt Lake City, the 32-year-old is now offering a rent-to-own deal.”

“‘It’s kind of a rough market right now,’ he said. Wilkinson is deciding whether he or the future tenant will pay for maintenance. ‘I hadn’t thought that far ahead,’ he said, adding that he’ll likely have the renter pay for repairs.”

The Sandusky Register from Ohio. “The Erie County Sheriff’s office has a record number of houses that will go on the auction block at 10 a.m. July 10 and 31 at the Erie County Courthouse. Eighteen properties are listed to go on sale July 10 and 49 are listed to go on sale July 31.”

“‘This is the most we’ve ever had,’ said Judy Schwochow, secretary for the civil division of the Erie County Sheriff’s office. ‘We seem to be climbing.’”

“So far this year, the sheriff’s office has received 208 foreclosed properties to sell at its auctions. The sheriff’s office handled 308 properties the entire year last year.”

“Properties for both dates range from the appraised value of $21,000 up to $570,000, which is the most expensive property listed for sale on July 10.”

“A house…in Huron is listed as the highest-priced property up for sale on July 31. The property has an appraised value of $312,000. The starting bid is set at $208,000. Most properties are located in Sandusky, Huron and Berlin Heights and some are in Vermilion and near Vickery.”

“Thom Shaffoe, president of the Firelands Association of Realtors, said the spike in foreclosed properties does not surprise him. ‘We’re probably going to see more sheriff sales as time goes on,’ he said.”

“Shaffoe said there are a number of reasons why foreclosures are steadily rising. Job changes, company down-sizing, mortgage industry changes and national lenders offering loans that borrowers might not be able to pay are just a few of the factors he attributes to the increasing number of foreclosures.”

“‘Everything is relative to money,’ he said.”

“Earlier this week, U.S. Sen. Sherrod Brown joined a banking subcommittee hearing on the mortgage lending industry and called for Congress to act to stem the tide of foreclosures. The hearing focused on the mortgage origination process, abuses in the mortgage lending industry, responsible solutions to protect consumers in the home-buying process and the impact of the proposed solutions on the market.”

“‘We face a crisis in Ohio,’ Brown said at a hearing Tuesday. ‘We have the highest inventory of foreclosed properties in the country and the problem is not behind us.’”

Some housing bubble news from Wall Street and Washington. “Agents with the U.S. Securities and Exchange Commission spent Friday monitoring the last day of business at the Irvine offices of Brookstreet Securities, which closed to retail customers this month after failing to meet margin calls on complex mortgage-based investments.”

“Several Brookstreet clients told the Orange County Register this week that they did not understand the risks involved in the investments that led to the company’s collapse.”

“30 Brookstreet Collateralized Mortgage Obligations (CMOs) reviewed by the Register were more complex than most CMOs. Most are ‘interest-only strips,’ which pay investors the interest stream but no principal from mortgages.”

“Stanley Brooks, Brookstreet’s founder and president, said the accounts collapsed because the clearing firm…used what are called ‘notional values’ to price the CMOs. Those values plummeted as confidence plunged in mortgage-backed securities to subprime home loans.”

“‘We never had a performance issue,’ Brooks said of the CMOs. ‘We had a notional pricing disparity.’”

National Mortgage News. “A hedge fund whose identity we know is having subprime-related problems similar to Bear Stearns, one veteran investment banking source told us. We are not releasing the name of the fund until we can confirm more information about the fund and its problems.”

“Meanwhile, several sources tell us that the CDO (collateralized debt obligations) market is in serious trouble. CDOs that invested in subprime assets are being hammered. ‘Most of these are held by insurance companies and foreign accounts,’ said one banker, requesting anonymity.”

The Street.com. “Bond funds may have a reputation for being boring, but anybody who attended Morningstar’s annual mutual fund conference in Chicago last week might have the impression that the fixed-income market is the most dangerous part of the U.S. financial system right now.”

“‘People thought they had triple-A bonds with low risk,’ (said) Jeffrey Gundlach, chief investment officer at TCW Group. ‘They didn’t think that they had high-risk resecuritizations. Most of these bonds shouldn’t have a triple-A rating.’”

“‘What happens to subprime going forward is a debate between bad and horrible,’ said Keith Anderson, chief investment officer of fixed income at BlackRock.”

“He plants the blame for the subprime mortgage mess firmly at the feet of the bond rating agencies, saying, ‘they are a huge concern.’”

“‘These ratings are artificial because they have been relying on recent historical prices in a rising market,’ the fund manager said. He added, ‘You will find the investors in these instruments are either hedge funds or leveraged accounts, but the vast majority is overseas.’”

“Robert Rodriquez, chief executive officer of First Pacific Advisors, was even more blunt. ‘We haven’t seen much of a problem in the subprime area [but only] because the pricing is a fraud; the ratings are bullshit,’ said the two-time recipient of Morningstar’s Fund Manager of the Year.”

“‘I don’t buy these prices, but as long as someone can provide capital to keep the finger in the dyke, the charade will go on,’ Rodriquez said.”

“‘It is estimated that U.S. banks have invested 10% of their assets in collateralized debt obligations,’ he said. ‘And 40% of the CDOs are in subprime mortgages. I’m trying to get details on the components and I can’t get any. This is setting up the next catastrophe?’”

From Bloomberg. “Treasury investors can thank Bear Stearns Cos. for smothering the bear market. ‘It’s a story of yields and risk premiums working their way back to fair value,’ said Colin Lundgren, who manages $40 billion for RiverSource Institutional Advisors. ‘The story has shifted from economic data to the subprime mess and how investors are positioned.’”

“‘I’m personally very cautious about the risky side of the fixed-income market,’ said Daniel Fuss, a vice chairman at Loomis Sayles & Co. whose Loomis Sayles Bond Fund has been the best performer among its peers the last decade. While the losses from Long-Term Capital were contained by the securities firms and banks that traded and loaned money to the hedge fund, ‘this one has certainly fed into the broader economy via the mortgage market,’ he said.”

The Wall Street Journal. “Lehman Brothers Holdings Inc. is a prime example of how Wall Street’s money and expertise have helped transform subprime lending into a major force in the U.S. financial markets.”

“Now, however, that business is in deep trouble, and some consumer advocates and policymakers are pointing the finger at Wall Street.”

“Before the mid-1990s, mortgage-backed securities consisted mostly of loans to borrowers with good credit and cash to make ample down payments. Then investment banks found they could do the same with riskier loans to borrowers with modest incomes and flawed credit.”

“Pooling the loans created a cushion against defaults by diversifying the risk. The high interest rates on the loans made for bonds with high yields that investors savored.”

“At the sector’s peak in 2005, with the housing market booming, loan defaults remained low. Wall Street pooled a record $508 billion in subprime mortgages in bonds, up from $56 billion in 2000, according to trade publication Inside Mortgage Finance. Lehman topped other Wall Street firms over the last two years, packaging more than $50 billion in subprime-mortgage-backed securities in both 2005 and 2006.”

“Twenty-five former employees said in interviews that front-line workers and managers exaggerated borrowers’ creditworthiness by falsifying tax forms, pay stubs and other information, or by ignoring inaccurate data submitted by independent mortgage brokers. In some instances, several ex-employees said, brokers or in-house employees altered documents with the help of scissors, tape and Wite-Out.”

“‘Anything to make the deal work,’ said Coleen Columbo, a former mortgage underwriter in California for Lehman’s BNC unit. She and five other ex-employees are pursuing a lawsuit in state court in Sacramento that claims BNC’s management retaliated against workers who complained about fraud.”

From Reuters. “Mortgage finance companies Fannie Mae and Freddie Mac could face a multibillion dollar loss if subprime assets continue to mount, according to an analyst report.”

“‘Looking only at their non-AAA positions, a writedown of 15 percent to 30 percent would mean a $1.8 billion to $3.6 billion hit for Fannie and a $1.5 billion to $3 billion hit for Freddie,’ the report said.”

“Benchmark subprime mortgage ABX indexes fell to fresh record lows in nervous trading on Monday, as concerns mounted over the rapid deterioration of subprime loans made last year, traders said.”

“‘It’s another big selling wave. There’s really no new information. The repricing in the index is more sentiment driven,’ said one ABX trader.”

“June’s remittance reports, which provide a snapshot of subprime loan performance over the last 30 days in outstanding pools of ABS securities, showed delinquencies were increasing.”

“‘Forced sales represent a looming and relatively new technical risk to ABS CDO valuations, given hedge funds’ mark-to-market sensitivity and leverage. Price volatility is expected to rise as dealers reduce liquidity and willingness to finance these trades,’ said Christopher Flanagan, JP Morgan analyst.”

The Financial Times. “The near collapse of two hedge funds run by Bear sparked fears of a rout in debt markets and of a sudden end to the buy-out bonanza. The doomsday predictions were cut short by Bear’s offer of $3.2bn to bail out the less leveraged of the funds.”

“Without the intervention, the received wisdom goes, credit markets would have been roiled by a “fire sale” of the collateral, slices of subprime loans, held by the creditors (aka other investment banks).”

“By helping its hedge fund, Bear could have changed the future rules of the game. Consider this. Bear, and other banks, treat their hedge funds as arm’s length entities, independent of the parent company. The classification enables financial institutions to keep hedge funds, and their liabilities, off balance sheet, thus avoiding the need for provisioning and other costly regulatory requirements.”

“Even if regulators fail to notice the double standards, capital markets ought to spot a glaring pricing mismatch. Banks are reaping high-risk rewards for not so risky work with funds implicitly backed by other houses, a situation that could encourage excessive lending.”

“I do sympathise with creditors asking for a parent company’s help in sorting out a financial mess. But neither party can have it both ways: if the funds are independent they should be left to fail. If they are not, Bear and the creditors should shoulder higher regulatory and financial burdens.”

The Associated Press. “No doubt investors have been rattled by the unraveling of other risky debt, namely the near-col lapse of two Bear Stearns hedge funds that had big holdings in subprime mortgages. That came as interest rates here and abroad have been rising, thereby increasing the cheap borrowing cost.”

“The tide has definitely turned. Investors have begun to balk at taking on risky debt. ‘The buyers of debt are saying that things have just gone too far,’ said Kingman Penniman, who heads the bond research firm KDP Investment Advisors.”

“Still, none of what has been going on is necessarily bad news. ‘This wake-up call allows us to focus on some of the market’s excess,’ U.S Treasury Secretary Henry Paulson said this week.”

The Ledger reports from Florida. “It’s going to take time to clear out the 4,500 to 5,000 homes the Polk County Builders Association estimates is waiting in builder inventories. ‘Nothing is hot,’ said Mark Hulbert, president of Hulbert Homes in Lakeland. ‘Everything is moving at a slower pace.’”

“For Highland Homes, which typically produces 750 homes a year, sales are down 30 percent, said Joel Adams, the Lakeland company’s VP. ‘We think we are better off than most,’ he said. ‘Several years ago, we sold off some of our land base. Basically, if you have a high land base now, you are in trouble.’”

“Many of Highland Home’s house packages start between $150,000 and $160,000. ‘If you’re not a price-conscious builder and run a tight ship, you’re going to be in trouble the next eight months to a year,’ Adams said.”

“Southern Homes, which typically builds more than 300 homes a year, is projecting it will not exceed 200 homes in 2007. And while not all of the company’s inventory has been discounted, buyers can find homes up to $30,000 off the sticker price.”

“Traditionally, price cuts of about 10 percent are more common, said John Wood, whose company builds about 50 homes a year. ‘An empty house does no one any good,’ he said. ‘The worst I’ve heard of is a 30 percent cut. To me, that’s a little overboard. Ten percent is more in line with the market. I think just about every builder is offering some incentive.’”

“‘It’s a buyer’s market,’ said Scott Coulombe, executive director of the Polk County Builders Association. ‘It is not a seller’s market. But we are dropping down to what the norm was in 2001-2002, which is what we were expecting.’”

The Herald Tribune. “With the release of his new market study, ‘North Port Revealed,’ (appraiser) Dennis Black is likely to become a household name in record time. The study presents a bleak picture of North Port’s real estate market, a market in which hundreds of homes sit unoccupied and hundreds more are up for sale.”

“‘There is vacant home after vacant home, all of them built on spec with no buyer,’ Black said. ‘It amounts to a gross oversupply.’”

“His advice to people looking to buy houses in North Port: ‘Find out who owns those vacant houses and make an offer. Then just wait till you find someone willing to meet your price.’”

The Atlanta Journal Constitution from Georgia. “Throughout metro Atlanta, agents and brokers are reporting slowed sales and rising inventories of unsold houses.”

“From May 2006 to May 2007, inventories of unsold houses in metro Atlanta soared in every county, climbing between 18 percent and 70 percent in just one year, depending on the area. Hardest hit were Rockdale County, where inventory increased more than 70 percent to more than one year’s supply, and south Fulton, where a 53 percent increase pushed supply to almost 13 months.”

“Dac Carver, marketing director for Metro Brokers GMAC, said Atlanta’s market slowdown began last spring and ‘the bottom fell out at the end of the year.’”

“‘South Fulton,’ Carver said, ‘a few years ago was the talk of the town. Everybody was flocking there. Then, the months supply [of unsold homes] just rocketed up.’”

“‘Net sales are slower than they were last year, and not only are sales slower but [contract] cancellations are up,’ said Greg Duriez, division president for KB Home. KB Home is reporting about 30 percent of its contracts for new homes in metro Atlanta are being canceled before closing.”

“Metro Atlanta is unquestionably a buyer’s market, with developers sweetening their incentive packages and sellers showing great flexibility in price negotiations. ‘Don’t be afraid to ask for things now,’ Carver said.”

Bloomberg reports from Georgia. “Only the possums are enjoying the backyard of 2035 Lilac Lane in Decatur, Georgia, where Wall Street titan Bear Stearns Cos. is just another homeowner by default.”

“It’s a mess,’ said Kiwanna Ford, who grew up next door to the vacant brick ranch-style house four miles south of the DeKalb County Courthouse. Bear Stearns seized the property three months ago after Ford’s neighbor stopped making payments on his mortgage. ‘If we wanted to sell our house right now with that next door, it would hurt,’ she said.”

“After selling the property last week, Bear Stearns said it still owns 18 houses in the Decatur area acquired since November. Citigroup Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. are listed in public records as the owners of at least 35 homes in the suburb.”

“The value of U.S. homes held by commercial banks swelled 53 percent nationwide to $2.3 billion at the end of March, the highest since 1992, from $1.5 billion a year earlier, according to the Federal Deposit Insurance Corp.”

“The dilemma facing banks is whether to pay maintenance costs or dump the properties at fire-sale prices, said Keith Gumbinger, vice president at a mortgage research firm. Both options can reduce real estate values. ‘No lender wants to own real estate, but at the same time you can’t just unload these properties because you would send home prices into a freefall,’ Gumbinger said.”

“Bear Stearns took possession of the three-bedroom Lilac Lane house for $76,500 on March 6, according to the foreclosure deed. The owner who defaulted had purchased the house in April 2005 for $160,000 using a subprime loan that required no money down. He had been renting it out, according to the neighbor, Ford.”

“The lender was Meritage Mortgage Corp., one of more than 60 subprime home loan companies that have halted operations, gone bankrupt or sought buyers since the start of 2006, according to data compiled by Bloomberg. Bear Stearns had bought the mortgage from Meritage at a discount.”

“The firm sold the Lilac Lane house on June 28 for $84,000, said Elisa Marks, a Bear Stearns spokeswoman. That’s about half the price paid two years ago.”

“Whether selling at auction or using a real estate broker, lenders usually get ‘cents on the dollar,’ which undermines the confidence of mortgage bond investors by showing property values are nowhere near the loans they collateralize, said Keith Shaughnessy, president of Foundation Mortgage Corp.”

“‘It will have a decimating effect on the mortgage-backed securities market when lenders start facing the music and letting property go at whatever price people will pay,’ Shaughnessy said.”

“‘I hope they’d continue to hold them, because selling them at a price that’s too low would have an adverse effect on the neighborhood,’ DeKalb County Commissioner Connie Stokes, who is also a real estate broker, said of Decatur-area foreclosures.”

“In Decatur, JPMorgan owns a brick ranch-style house on Kelley Lake Road, according to the tax assessor’s office. Bear Stearns holds a second mortgage on the property, said spokeswoman Renu Aldrich. The vacant house sits across the street from an elementary school.”

“The former owners bought the three-bedroom property in September 2005 for $155,000 with no down payment, using a so- called piggyback loan, or a second mortgage taken out at the time of sale, according to the deed. Both loans (are) now defaulted.”

“‘It’s sad to see the empty houses,’ said Janette Brown, who has lived two doors away for 25 years. ‘I’m worried about what it might do to the values.’”

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