The Housing Bubble

It’s Friday desk clearing time for this blogger. “New second-quarter data from Horry and Georgetown (SC) counties’ MLS shows…sales are still on the decline from last year, equaling the drops seen in the first quarter, condo sales down 41 percent and home sales down 20 percent from last year. Yet, analysts point out that today’s sales show an increase compared to 2004, meaning if you pulled out the ‘boom years,’ you’d get an upward moving slope for single-family homes.”

“‘It’s a slow market, not a whole lot of activity relative to what people became used to over the last couple of years,’ said Don Schunk, research economist at Coastal Carolina University. ‘But if you look at the sales levels [compared with 2004] they are roughly where they used to be. The tremendous surge created unrealistic expectations in people that we’ll be able to put our home on the market and we’ll be able to get what we want for it.’”

“More than 3,000 Jackson County homes are available, according to Southern Oregon MLS, which reported a 20 percent jump in homes on the market as of July 1. ‘There are so many homes on the market that you have to be careful with clients, because you can confuse people by showing them too much,’ says Rick Chezik in Medford.”

“The median price for existing homes, according to SOMLS, declined 2.7 percent to $272,000 during a three-month rolling quarter ending June 30, down from $279,500 a year ago. New home sales prices slumped 15.7 percent to a $295,000 median during the rolling quarter, down from $350,000 in 2006. Ashland’s median for existing homes fell to $405,000 for the three months, down from $439,000 a year ago.”

“‘If you’ve got a $400,000 home that you really want to sell, you’d best price at $390,000 or $380,000,’ says Colin Mullane of RE/MAX Realty Group in Ashland. ‘Otherwise you’ll just have to adjust it down and you’ll be catching up to the market.’”

“While the Kansas City area has had the luxury of being insulated from the pitfalls in the home-building and home-mortgage industry nationwide, it is clear now that what is happening elsewhere is also happening here.”

“When the rate of foreclosures skyrockets, it means there is something seriously wrong with the way business is conducted in the buying and selling of homes. Records from the Clay County recorder of deeds office shows that home foreclosures have been spiraling upward since 2005, and there are no signs that the trend is slowing.”

“When it comes to markets, we hold these truths to be self-evident: (1) It’s never different this time, and (2) Every boom leads to financial excesses that spark its undoing. (That’s why they’re called business cycles.)”

“‘The necessary conditions for a bubble to form are quite simple and number only two,’ investor Jeremy Grantham noted. ‘First, the fundamental economic conditions must look at least excellent, and near perfect is better. Second, liquidity must be generous in quantity and price: It must be easy and cheap to leverage.’”

“That pretty much sums up the world we’ve been living in, a world where prices skyrocketed for Miami condos, Indian stocks, and office towers in Dubai.”

“Georgia has enjoyed a building boom in the last several years. But economic sobriety may be growing faster than the high-rise buildings. Economic analyst Gia Khukhashvili warns of a coming crisis in the construction business.”

“Georgians both here and abroad are investing their money in local real estate, which has seen enviable appreciations since the Rose Revolution. ‘The critical limit has been reached; there aren’t any new buyers on the market. Soon, quantity will exceed demand,’ predicts Khukhashvili in the newspaper Akhali Taoba.”

“He adds that as banks have made huge loans for new buildings, a coming crisis in the market could be heavily felt in the banking industry.”

“Real estate agents from all three Baltic countries agree that more higher-income families have driven up demand for suburban houses. Prices for new housing in Lithuania increased 10 - 15 percent in the first four months of the year to reach 500 - 900 litas per square meter, according to In Real.”

“Latvia’s real estate market in general has entered a period of stagnation, albeit temporary, experts say. As part of the government’s anti-inflation plan, banks have had to implement stricter lending policies. Beginning July 12, Latvians have to provide lending institutions with a statement of income from the revenue service if they are seeking a large mortgage.”

“No doubt this is a much-needed cooling off for the market. Housing loans in Latvia soared 86 percent in 2006, a phenomenal rate by any measure. In…Babite, houses are growing ‘like mushrooms after the rain.’”

“A combination of an uncertain economic scenario with rising interest rates and costs of borrowings, rising conflict and abduction-for-profit, is affecting the real estate market and dampening the condominium housing boom.”

“Developers said property and new apartment prices were coming down while expatriate Sri Lankans are having second thoughts on investing on condos.”

“Nethru Nanayakkara, a realtor, said the Wellawatta property market is currently stagnating as there are no buyers and land values have dropped. Shan Kumarage, of the online real-estate portal ‘Bhoomi.’ also noted a drop in the market. ‘Going by the feedback we get from the brokers and buyers there is no market at all for residential property,’ he said.”

“Fine Gael’s Gay Mitchell has hit out at estate agents and mortgage lenders for raising expectations of house price increases over the past year.”

“Mitchell has claimed that the lenders have been talking up their forecasts in order to sell more houses. ‘I think they’ve been serving their own interests, and I think that they’ve a lot to account for,’ he said.”

“The latest house price index figures show a 2 per cent decline in prices over the first five months of this year.”

“Anyone who’s purchased a home is familiar with a mortgage getting sold to third parties who end up servicing it. According to the Federal Deposit Insurance Corp., the big investing houses have seen the value of the homes they own balloon by 53% from last year. As foreclosures blossom, investment bankers have become homeowners by default.”

“The banking houses must now choose between paying the costs until an appropriate price can be realized on the property, or dumping it below market value.”

“This is a crisis of banks’ own making. By fueling the homebuying frenzy with creative mortgage financing, investment bankers may now become the catalyst of their own devaluation.”

“Forget the notion that metro-area -real estate foreclosures are cooling off. For the first half of the year, the seven-county Denver area logged more than 12,000 foreclosures, a 25 percent increase over the first six months of 2006.”

“And expect them to keep piling up for several more years.”

“In certain neighborhoods, the current foreclosure problem is worse than it was in the late 1980s, said real estate broker Beverly Meade. ‘Some whole areas are being turned into ghost towns,’ she said.”

“She said she recently sold one foreclosed home in Aurora for $80,000. The home would have fetched $200,000 three years ago, Meade said.”

“Meade said she recently searched homes for sale in Denver priced at $105,000 or less and found 85. ‘Three years ago, you wouldn’t have found one home under $105,000 in Denver,’ she said.”

“‘Just a couple of years ago, people were saying it was not that big of a problem and it was a lagging indicator, just a small bump in the economy, (that) the housing bubble is a myth. That turned out to be absolutely incorrect,’ said -Zachary Urban, who heads the Colorado Foreclosure Hotline.”

A report from the Arizona Republic. “Both median housing prices and the number of homes sold in June continued to fall throughout the Southeast Valley compared to a year ago and compared to May, according to Arizona State University’s Realty Studies. Compared to June 2006, Chandler’s prices fell the least, 2 percent to $288,000. Gilbert’s prices dropped the most, 10 percent, to $297,000.”

“‘June’s numbers are a little disappointing in being a little low,’ said Jay Butler, director.”

“He said the Phoenix area still has a high number of homes for sale, new home builders are aggressively wooing buyers with incentives like free pools and gift cards and lenders are tightening mortgage underwriting guidelines.”

“Gilbert: Sales fell to 315 from 330, while the price dropped to $297,000 from $330,000. The median price was $300,000 in May. Condo prices fell to $189,900 from $238,750.”

“Existing home and condominium prices in Scottsdale dropped in June compared to last year, and home sales fell 11 percent. Scottsdale’s median home price declined 4.26 percent to $612,750. Resale condo prices were off 5.6 percent to $249,900.”

“‘While the resale market is following a very traditional pattern, there are increasing risks that the market could move lower, driven by geopolitical risks and tighter mortgage underwriting guidelines,’ said Butler.”

“The Valley’s resale-home market in June continued to run below last year’s pace, according to ASU. About 4,910 homes sold in the month, down from 5,220 in May and 5,460 in the year-earlier period.”

“During the first half of 2007, 29,175 homes sold compared with 36,290 during the same stretch last year. That figure was well below the 58,030 resales during the first half of 2005.”

The East Valley Tribune from Arizona. “Jill Lord’s Queen Creek neighborhood is often bustling with activity. ‘Everybody on the street is tight-knit,’ Lord said.”

“So home sellers working together to host a community-wide open house seems to be a natural fit for the more than 1,000-home Cortina subdivision.”

“Lord, whose home has sat on the market for three months now, is one of two dozen owners opening their doors to potential buyers on Saturday.”

“The Valley will likely see a growing number of homeowners combining efforts to host open houses, as the market continues to shift, said Arizona Association of Realtors president Frank Dickens.”

“‘When it starts to lean toward a buyers market, you’ll see all kinds of creativity,’ Dickens said.”

“Neighbors in Cortina, which sits near the southeast corner of Power and Germann roads, want to protect their home values by attracting people who have pride of ownership, said homeowners association secretary Tom Duford, who helped organize the event.”

“‘We have a lot of homes that are owned by investors, that are sitting vacant,’ Duford said. ‘The homes aren’t getting the care that this quality of neighborhood should have.’”

“During the housing boom, agents didn’t have to do much to promote homes, broker Brian Judy said. Now, ‘agents tend to be more willing to participate in one because everybody’s starving for buyers,’ he said.”

“Cortina homeowner Angie Beirdneau said she thinks the open house is a good idea and will be offering a special incentive of $10,000 off that day. More than 50 homes are for sale right now in Cortina, ranging in price from roughly $230,000 to $650,000, said Judy.”

In Business Las Vegas reports from Nevada. “The inventory of homes on the market swelled to an all-time high in June, but this time the jump was caused by a further slowdown in home sales.”

“There were 23,642 homes on the MLS at the end of June, an increase of 18 percent from June 2006, according to the Greater Las Vegas Association of Realtors.”

“The reason for the increase was the number of home purchases declined by 6 percent from May. Only 1,476 homes were sold in June, 42 percent below June 2006.”

“It appears more certain that sellers are beginning to understand they must cut their prices to sell their homes. June’s prices were 3 percent below June 2006. The median price of the new listings in June was $329,835, 2.5 percent below the May price and 5.5 percent less than homeowners asked for in June 2006.”

“Devin Reiss, president of the Realtors group, said…that if sellers are serious about selling their property, they should price it to the market.”

“Las Vegas housing analyst Dennis Smith said…he increase in inventory shows the bottom hasn’t been hit. ‘This is going to be a long process, and we aren’t going to pull out of this overnight,’ Smith said.”

“Major developers will likely have to wait until at least November 2008 for the next major land offering by the Bureau of Land Management. Since November 2005 when the BLM auctioned two large parcels in North Las Vegas, the land offerings have been sparse.”

“That will be the case again in November when the BLM plans to auction about 150 acres in scattered parcels of 2.5 acres to 20 acres in west Henderson and the south Las Vegas Valley. Henderson hasn’t had a major parcel auctioned since June 2004.”

“A year ago, the BLM said it would sit on the sideline if necessary and be more selective in the parcels it offers as part of a strategy to be more market-driven.”

“The BLM has drawn fire from some in the development and real estate industry for not releasing land on a regular basis to keep up with the growth and hold down its prices.”

“‘We can’t be willy-nilly and sell land if cities aren’t ready for that to happen. If there are no developers showing interest in the land, we would spend a lot of money for nothing to get ready for a sale,’ Juan Palma, the Las Vegas field manager for the BLM.”

“BLM auctions are prompted by nominations from area cities and Clark County. None have suggested the BLM auction those larger parcels, said Palma.”

“The housing industry won’t be disappointed if the BLM holds off on any major land auctions, said Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association. With the housing downturn, builders have laid off employees and focused on selling their inventory rather than acquiring land, she said.”

“‘I think they recognize demand is not there at the moment, and it’s a wise decision,’ Caruso said.”

“Richard Lee, vice president of First American Title, said he doesn’t believe there would be any bidders right now for the larger parcels given the high inventory of homes on the market. No one could afford to sit on that land given the current demand for housing, he said.”

“North Las Vegas Mayor Mike Montandon said there’s no reason to auction land at this time unless the BLM changed their practice and accepted bids for less than the appraised value. He said his city doesn’t nominate land unless buyers show interest.”

“No consideration has been given to Focus Property Group and its development of Inspirada, which opened model homes this year for its 13,500-unit project, said Henderson Community Development Director Bristol Ellington. But he acknowledges it will benefit Inspirada if any nearby development is delayed for now.”

“‘I know companies would like to see themselves established and ride out this economic slump before there is other competition, but at some point it helps to have healthy competition,’ Ellington said.”

The Lahontan Valley News from Nevada. “Now is a good time to buy a home, according to second quarter figures released by Bob Getto, a local Realtor and trustee for the Northern Nevada region of Multiple Listings Service.”

“‘The Fallon market seems to be bucking with the national trends,’ Getto said. ‘The sales prices are still fighting to stay level. It’s been the worst in a long time.’”

“The MLS data, encompassing April, May and June of this year, shows the median sales price for a residential, stick-built home located on 1.99 acres or less is $208,167. The all-time high for median sales occurred during the second quarter of 2006, when the average home cost $237,633. That’s compared to the first quarter of 2004, when the median price was $128,166.”

“Getto said some of the reasons for the drop in price and units sold is the lack of quality in the job market and that the California real estate market is also poor.”

“‘The California market seems to be sluggish, and people aren’t relocating to Fallon,’ Getto added. ‘We don’t have the California buyers looking to come here.’”

“After 57 units sold during the first quarter, that figure dropped to 49 in the second quarter, continuing a decline dating back to the second quarter in 2005 when 99 units were sold.”

“Getto doesn’t envision any change for the rest of the year. ‘The rest of the summer is going to be sluggish,’ he said. ‘We need the Californian and Western economies to increase.’”

“Getto said the hottest homes to buy have been in the $200,000 range with 1,200 to 1,400 square feet located in town. ‘Those tend to be selling the best, but nothing is really moving well,’ Getto added.”

“For sellers, pricing your home correctly is the big goal. ‘Pricing is the key right now, and it has to be priced competitively,’ Getto said.”

Some housing bubble news from Wall Street and Washington. MarketWatch, “General Electric Co. announced it is exiting the U.S. subprime-mortgage business. GE sold about 75% of its subprime portfolio during the second quarter, or $3.7 billion, resulting in a loss of $182 million for its WMC Mortgage business, the company said.”

“‘The business exit is in process,’ Chief Financial Officer Keith Sherin said. ‘We restructured the business to prepare for that exit (and) I think it was a smart move to remove the head wind and also reduce future risks.’”

From Bloomberg. “‘The mortgage industry has greatly changed since the purchase of WMC,’ Laurent Bossard, CEO of the division, said in an e-mail to employees yesterday. ‘The current subprime market environment has made a significant negative impact on the business.’”

“WMC and a unit of Washington Mutual Inc. were among four subprime lenders whose loans were behind many of the Moody’s Investors Service ratings downgrades on mortgage securities this week, the firm said yesterday.”

From Reuters. “Rating companies began a new wave of rating cuts Thursday as they reassessed the fallout from deteriorating subprime loans, drawing increased scrutiny from investors who are questioning why the agencies failed to act earlier.”

“Both S&P and Moody’s now project cumulative losses for subprime loans originated in 2006 to reach as high as 14 percent, more than double projections at the start of the year. ‘That’s a huge change in their projections and has huge implications for the market,’ said Inna Koren, an analyst at Barclays Capital.”

“Fitch Ratings also on Thursday said it may cut ratings on 19 collateralized debt obligations, and has revised its CDO rating methodology, identifying 170 U.S. subprime transactions as requiring further analysis.”

“S&P spokesman Adam Tempkin said on Thursday that the rating agency miscalculated by nearly $5 billion the amount of debt that may be affected in its review for potential ratings cuts.”

“S&P corrected the volume of residential mortgage-backed securities it placed under review for downgrade to $7.35 billion from its $12.1 billion estimate on Tuesday. ‘It was an error and we corrected it,’ Tempkin said. ‘It was human error. It is what it is.’”

“‘That doesn’t sound as if they were in charge of the credit judgments of the Western world, does it?’ asked James Grant, editor of the highly regarded Grant’s Interest Rate Observer, on S&P’s $5 billion error.”

“(Moody’s and Standard & Poor’s) should scrap every appraisal on the subprime portion of the $503 billion of CDOs sold globally in 2006, according to Mehernosh Engineer, a credit strategist at BNP Paribas SA. Because people were able to borrow money without credit checks in last year’s freewheeling mortgage market, the rating companies have no right to use inductive reasoning to predict the likely defaults on subprime CDOs.”

“‘Their models are basically unable to predict any ‘normal’ behavior due to this overriding fraud factor,’ Engineer wrote this week. ‘The right thing for the rating agencies to do for the 2006 vintage would be to withdraw all ratings.’”

The Des Moines Register. “A subprime home finance company will pay $2.3 million to Iowa homeowners to settle charges that its employees inflated appraisals and encouraged buyers to lie on loan applications.”

“Ameriquest Mortgage Co. will make the restitution as part of a nationwide $325 million settlement over its lending practices. Iowa Attorney General Tom Miller announced the settlement on Thursday, estimating that 3,800 Iowans will be eligible to receive from $119 to $1,761 each.”

From ABC7.com. “Former Ameriquest customer Constantino Martinez says he was taken advantage of. The interest on his mortgage was nearly double the going rate and property taxes were never added to his monthly payment like he was told, sending him to near foreclosure.”

“‘I feel so bad. I feel so bad, I don’t even want to remember those guys,’ Martinez said.”

“State Attorney General Jerry Brown began mailing out claim forms Thursday to about 80,000 customers of Ameriquest and its affiliates in California. $51 million is California’s share, meaning the average restitution is around $800.”

The New York Sun. “It’s clear that the national housing horror show is far from over. If anything, it’s getting gorier.”

“‘Plainly, the lackadaisical lending standards by the mortgage crowd just a few years ago are now showing up at Wall Street’s doorstep,’ wrote Raymond James Financial’s chief investment strategist, Jeffrey Saut.”

“A veteran multiregional residential real estate developer in Lake Forest, Ill., Robert Sheridan, also paints a bleak picture. ‘The housing market is getting darker and darker,’ he said. The full effects of the subprime crisis, as they relate to tighter lending standards, have yet to be felt, he adds.”

“A year from now, he figures, single-family home prices should fall 5% to 10% nationally versus current levels. He sees an even bigger drop, 10% to 20%, in condo prices, with high-end condos — those priced at $750,000 or more, vulnerable to 20% to 40% declines.”

“Mr. Sheridan believes a housing recovery is at least two years off. The bottom line on housing: Call the exterminator. The financial termites are out in full force and lots more are on the way.”

“U.S. class-action lawyers who have sued subprime mortgage lenders are now scrutinizing Wall Street banks that sold packages of risky loans to investors and credit analysts that served up top ratings on the securities.”

“Plaintiffs’ lawyers say they want to know more about the relationship between the credit rating services and investment banks that assembled complex debt structures known as collateralized debt obligations, or CDOs, tied to risky mortgages.”

“‘There’s no question that there is a careful examination going on right now of what role the rating agencies played here, what they knew and when they knew it, as well as the investment banks,’ said Gerald Silk, a partner at (a) plaintiffs’ law firm.”

“Silk’s New York-based firm represents investors who are suing bankrupt subprime lender New Century Financial Corp and Accredited Home Lenders Holding Co. The lawsuits contend that shareholders were duped about the companies’ finances.”

“While the rating services argue that they are merely offering opinion, they are involved in a lot more, said Joseph Mason, an associate professor of finance at Drexel University in Philadelphia.”

“He said they work directly with underwriters to determine the size of each tranche, or group of debt, and are active in the entire structuring of CDOs to achieve a rating target.”

“‘The rating companies view is we offer an editorial opinion,’ Mason said. ‘That’s clearly not the case. Rating companies are involved in financial engineering.’”

The Associated Press. “Lawsuits blossomed after Enron Corp.’s collapse, many targeting the energy giant’s bankers. Wall Street firms could again become the bull’s-eye for investors seeking recourse from the subprime mortgage debacle.”

“Investors ‘are going to be looking for deep pockets where they can maximize their recoveries,’ said Rick Antonoff, a New York-based lawyer with Pillsbury Winthrop Shaw Pittman, which has a group of lawyers assigned to subprime mortgage litigation.”

“Homeowners are suing lenders. Shareholders are suing collapsed mortgage companies. Investors in complex mortgage securities are starting to sue big Wall Street banks. Those investment banks are turning around and suing the mortgage companies.”

“Florida lawyer Dale Ledbetter, the plaintiffs’ lawyer, said he is working on several similar cases, adding that the subprime mortgage boom could not have happened without Wall Street’s help. ‘What people are not focusing on is the top of the pyramid,’ Ledbetter said. ‘They were doing almost no due diligence on those loans.’”

“One indication of how the lawsuits play out could be in last month’s settlement of a class-action lawsuit filed in a Tacoma, Wash., federal court against subprime lender NovaStar Financial Inc.”

“Just before the trial began, Kansas City, Mo.,-based NovaStar negotiated a $5.1 million settlement, which involved 1,600 plaintiffs who claimed the company overcharged them through fees paid to mortgage brokers. The company faces a similar lawsuit in California.”

“Ari Brown, a Seattle-based lawyer for the plaintiffs, said cash rebates to mortgage brokers, known as yield-spread premiums, were either disclosed to borrowers on the day loan documents were signed, or not at all. Such practices, which were prevalent at numerous subprime lenders, made it difficult for borrowers to dispute a loan’s terms, he alleges.”

“‘Everybody got on this gravy train,’ Brown said. ‘There was so much money to be made in subprime lending.’”

“The legal fallout will extend beyond the private sector. New York’s Andrew Cuomo and several other state attorneys general are investigating the subprime industry’s practices.”

“Marc Dann, the attorney general of Ohio, a state hit hard by foreclosures, is taking an especially aggressive approach and pursuing civil and criminal cases. Dann said he is considering a broader case against Wall Street banks, lawyers and bond-rating agencies.”

“‘We’re looking at how do we bring a case that really gets to the heart of this problem,’ Dann said. ‘This irrational market for these loans was created on Wall Street.’”

WBOC 16 reports from Maryland. “A housing slump in Ocean City is keeping many condominiums empty. There are currently 1,683 units on the market, while construction companies are building at least 500 new units. The buying slow-down is also impacting single-family homes, with 166 on sale in West Ocean City and 120 in Ocean City.”

“Realtor Bud Church has been working in the business for more than 30 years. He said housing trends are typically unstable, but usually a depression comes with some warning. ‘The market stopped quicker than I’ve ever seen it stop. There have been slow downs before but it was a gradual curve but this time we went over the edge,’ Church said.”

“According to Church, there was a housing boom three or four years ago. ‘People called speculators would come into town, buy a unit, and sell it within a month or two,’ he said. ‘They would make a profit of $25,000-$30,000, but that quick turn around is just not here anymore.’”

The Capital from Maryland. “Anne Arundel County home prices edged up slightly last month, after falling along with the number of homes sold during the first half of the year. In many cases, as their homes sit unsold for months, sellers are lowering their prices in an attempt to entice buyers who are holding out for a better deal.”

“January was the only month this year in which sales were up. This isn’t surprising, considering the oversupply of inventory, market watchers said.”

“Frank Nothaft, chief economist at Freddie Mac, said the slower housing market has ‘certainly had a drag effect’ on the economy,. ‘We’ve taken a hard hit here in the Baltimore-Washington-Annapolis area,’ Mr. Nothaft said.”

“Mr. Nothaft said he expects home values in the higher-priced neighborhoods to decline this year. ‘The name of the game is it’s a buyer’s market,’ he said. ‘If you’re a seller, you’re probably going to be more willing to negotiate on terms of the contract.’”

“Dr. Joe Cater, president of Market-Economics in Annapolis, said a good chunk of homes for sale are coming from the upper tier of the market - $500,000 or more. But he said he expects sellers will bring prices down. ‘We’re starting to see signs that we’ve reached the bottom,’ Dr. Cater said. ‘What’s going on is some price adjustments.’”

“Bill Lambros, an agent in Annapolis, said sellers should hold their ground and not reduce prices any further. He said a waterfront home in Edgewater that was listed for $950,000 and now sits on the market for $775,000. Even with the lower price, the home hasn’t sold.”

“‘I think sellers are shooting themselves in the foot,’ Mr. Lambros said.”

The Daily Progress from Virginia. “In the Charlottesville area’s crowded housing market, sellers this summer are looking for a way to stand out. Want a free high-definition television with your new condo? The Woodlands of Charlottesville has a 42-inch set waiting for each new buyer.”

“Want reduced closing costs on a house? Realtors across the area are telling sellers to pony up the cash.” “‘Interest rates are low, there’s high inventory and sellers are more negotiable than they were a few years ago,’ said Realtor Ray Caddell.”

“Dave Phillips, CEO of the Charlottesville Area Association of Realtors, said there are 3,400 properties for sale in the area. The inventory represents a 12- to 13-month supply, Phillips said.”

“The last few years have been a booming seller’s market in the Charlottesville area, as low interest rates, a strong economy and a string of awards naming the city one of America’s best places to live all contributed to a buying frenzy.”

“Builders, meanwhile, were planning or constructing hundreds of homes. Combined with the general housing market slowdown, the market suddenly seemed to have more houses than it could handle.”

“While free trips or a new TV might seem like good incentives, Caddell says cash is the best option. Caddell said that today’s buyers know that the supposed freebies are often being factored into the price some other way.”

“‘TVs are a gimmick,’ Caddell said. ‘If you’re buying a $350,000 house, how much does an $850 TV matter?’”

“Lori Chapman, the president of the Realtors’ association, said another attractive option is offering buyers a home warranty. ‘Anything to make it easier for buyers to get in,’ Chapman said.”

The Times Dispatch from Viginia. “Foreclosures nationwide, and in Virginia — rose dramatically last month from a year ago, according to RealtyTrac.” Virginia (households had) one foreclosure for every 1,678 households. A year ago, few people here faced foreclosure: One foreclosure was filed for every 12,549 households.”

“‘We noticed that spike in Virginia,’ said Daren Blomquist, spokesman for RealtyTrac. ‘Investors are saying it was like a switch was turned off,’ he said. ‘The course reversed very quickly. We are seeing a dramatic shift in quite a few areas.’”

“Steve Baugher, executive director of the Virginia Association of Mortgage Brokers, said he is monitoring the sharp rise in foreclosures. ‘It is a little concerning,’ Baugher said. ‘It will take a year to see how this market shakes out.’”

“Baugher said the subprime mortgage market, such as interest-only loans and some adjustable rate loans, may have contributed to the problem. But it isn’t solely to blame. ‘A lot of people got into houses on a shoe string,’ he said. ‘They overextended.’”

The Washington Business Journal. “There’s nothing hot about the housing market in D.C. this summer. Sales of single-family homes fell in all local jurisdictions in June, and median prices tumbled everywhere except Montgomery County, according to data compiled by Metropolitan Regional Information Systems.”

“Economists and other market observers don’t expect a rebound in residential sales until 2008 at the earliest.”

WMDT 47 from Delaware. “More discouraging news about the housing bubble burst, it’s hitting the Eastern Shore hard. The state of Delaware suffered a record number of foreclosures in the last year. Experts don’t think things will get better in the near future.”

“You finally bought your dream home, but now you can’t afford it. A variable or deferred interest rate lured you in. Now, you’re paying more than you bargained for. In Delaware, it’s happening in record numbers.”

“Realtor Bruce Wright says, ‘Many times you can find a larger home and be able to get in them with an adjustable rate. You can get a much larger home for less money.’”

The Philadelphia Inquirer from Pennsylvania. “Mortgage foreclosures grew 87 percent nationwide in June, and by 8.2 percent in the Philadelphia area, according to a report.”

“But a wide disparity in the number of defaults in South Jersey compared with defaults in Southeastern Pennsylvania left regional economists questioning the data’s validity.”

“The Pennsylvania counties, including Philadelphia, had a 30 percent decline, while the total for Camden, Burlington and Gloucester Counties more than doubled, according to RealtyTrac.”

“‘There is no question that there will be a pickup in the number of foreclosures going forward, especially when the rates [for] subprime loans taken out in 2006 begin adjusting,’ said Frank Nothaft, chief economist of Freddie Mac.”

“Many subprime borrowers are trying to refinance out of their loans, but tighter lending standards put into place by federal regulators in the last six months are working against them.”

“‘Six months ago, most of my [refinancings] were the standard kind, with homeowners trying to cash in equity or a lower fixed rate,’ said Brett Warren, president of Buyer’s Home Mortgage Inc., of Abington.”

“‘Today, most people seeking to refinance are subprime borrowers, and we can’t place their loans because of those tightened standards,’ Warren said.”

“‘Abusive lending with teaser rates and exorbitant fees, which can give borrowers negative equity from the get-go, are clearly at play,’ said Lawrence Yun, senior economist for the National Association of Realtors. ‘Delinquencies and foreclosures are further anticipated to rise as more loans are scheduled to reset.’”

“‘Foreclosures are a lagging variable,’ he said. ‘Even if the real estate market begins booming tomorrow, the foreclosure rate will continue to rise.’”

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