The Housing Bubble

The Great Falls Tribune reports from Montana. “The local real state market is following the state’s appreciation trend, said Realtor Jan Popa. Last year, the average selling price of a single family home was $148,620. This year, so far, the average price is $165,585. It’s not quite a hot sellers’ market, however.”

“‘Our market is turning some what, but it’s not a crisis,’ she said. ‘There are about 100 more homes in the market now than at this time last year. But we are insulated from the national bubble burst. We were left out of the boom, but that means we are getting left out of the bust too.’”

“Realtor Julie Topel-Evans says not long ago Great Falls homeowners were seeing appreciation levels of 12 to 18 percent a year. ‘That’s done,’ she said. ‘We are back at 3 to 4 percent,.’”

“Other areas of Montana, most notably Bozeman and Kalispell, are beginning to see their markets stall, said John Kunz, owner of The Falls Real Estate agency. ‘Those are the areas that saw huge increases just a couple of years ago,’ he said.”

“The Flathead area, for instance, has two to three times the number of homes on the market compared to last year, said Greg Strable, owner of Mountain Front Appraisal Services.”

“‘They are actually starting to see property values decline,’ he said.”

The News Tribune from Washington. “Known for having some of the biggest houses and miles of shoreline, the Gig Harbor area holds another, less desirable distinction: Pierce County’s largest supply of for-sale homes.”

“Gig Harbor’s inventory of such houses and condominiums stood at 9.7 months in July, according to (the) Northwest MMLS director Dick Beeson. The number measures how long it would take to sell every home that’s listed, putting Gig Harbor deep into a buyer’s market. And hundreds more homes are planned.”

“Homes listed for more than $1 million in the first half of 2007 were projected to sell in 25.6 months, according to Beeson. The area examined includes Fox Island and the Key Peninsula.”

“Developer Dave Devin is more than half finished converting 62 apartments to condos at Harbor Glen. ‘I thought once I got this thing done, the public would be coming to my door. I still haven’t generated much traffic,’ he said.”

“After listing the first ones in April, he’s sold two, with offers on two more. Prices on the three-bedroom units have been cut from $289,950 to $259,950. Two bedrooms were reduced from $259,950 to $229,950.”

“Ed Aro, agent and consultant to home builders, said newly built homes still sell in Gig Harbor. But they have to be meticulously designed and on the right piece of property, he said. ‘You can’t throw up a house and have it sell, which is what was happening the past four years,’ he said.”

“‘There are buyers. They keep coming back. There’s no urgency,’ said agent Paul Redal, who’s selling new houses in the Artondale area for $795,000 to $1.3 million. ‘Buyers are waiting to see how far prices will go down.’”

“Home owners are trying to time the real estate market, said agent Mary Souza. ‘The feeling is, ‘the market has tapped out, the market has peaked. We should put our house on the market now before we see a loss of value,’ she said.”

“Kyle Lawson, who wants to sell his 3,248-square-foot house and buy something smaller, said he’s a bit discouraged. His house, which sits on nearly 8 acres near Kopachuck Park, was listed seven months ago for more than $850,000.”

“He and his wife bought the house four years ago for $360,000 and did a $150,000 remodel. They got a new agent in July and dropped the price to $749,700, where Lawson said he thought it should be in the first place.”

“Lawson is optimistic the house will sell before summer ends. ‘It’s a matter of whether we drop the price so it’s a fantastic deal, or do we hold out knowing the market will pick up?’ said Lawson. ‘On the other hand, I’m not worried about buying in Gig Harbor. It’s a buyer’s market.’”

The Bellingham Herald from Washington. “The local real estate market continues to be a mixed bag of news these days. Realtytrac Inc. released its midyear look at foreclosures filings, with Whatcom County having 169 through the end of June. That’s up from 84 filings for the same period in 2006.”

“That’s a big jump in one year, and looking at it month-by-month, many (67) came in the last two months.”

“A mid-year analysis of the local housing market by Coldwell Banker Miller-Arnason…shows that sales of high-end homes, ones priced at more than $700,000, are ahead of last year’s pace, and last year was a record-breaker in that bracket, said Gragg Miller, administrator of the firm.”

“‘The strength of the high-end homes is obviously what’s keeping the average home price up,’ said Miller.”

“The price bracket that saw the biggest sales volume drop compared to last year were homes in the $500,000 to $699,000 range (down 27 percent) and $160,000 to $199,000 range (down 22 percent).”

“Miller said much of the increased activity in high-end home sales is taking place in the Chuckanut area, and agents are still reporting many of the interested buyers are from out of the area.”

“‘It’s hard to say whether it’s the same number of out-of-towners as we were seeing last year, but it is still the majority of the buyers these days,’ Miller said.”

The Bend Bulletin from Oregon. “A few years ago, Krishan Tinney was stuck in traffic, again, on her grinding commute from Los Angeles to Ventura County. So she called a friend in Bend to kill some time.”

“‘What are you doing?’ Tinney asked. ‘Oh, I just got off work,’ her friend said. ‘Thought I’d walk down to the river and float for a while.’ It was 4 o’clock on a Thursday afternoon.”

“A few months later, Tinney and her husband, an engineer, ditched Southern California, moved to Bend and bought a house, something that was way beyond their means in SoCal’s heady housing market. Since then, he has recruited friends to join him. Her parents have moved here, too.”

“The Tinneys sold their first house a few months ago and moved into a bigger, brand-new one in south Bend’s Renaissance Ridge subdivision. ‘We could never have done this in Ventura County,’ Tinney said.”

“Since 1988, the year the city pulled out of its last major real estate slump, the average price of a Bend home has shot up an average of 11.3 percent per year, according to Central Oregon MLS numbers.”

“Of course, the numbers are rough. Some of Bend’s average price gains have come more from increases in the construction of super-expensive homes than from the price appreciation of individual houses.”

“Still, it’s clear that the local housing economy hasn’t experienced anything like a drawdown in nearly a generation. Until, possibly, this year.”

“The inventory of unsold homes in the Bend market has swelled to record numbers this year, while sales levels for the first six month of the year have fallen back to levels not seen since 2003.”

“But working off all of those unsold houses might bring some pain, University of Oregon economist Tim Duy said. The only question is how much and for how long. ‘I’ve got to think that the world is not falling apart here,’ Duy said. ‘But prices are going to have to come down to get rid of whatever excess inventory has built up.’”

“There’s no doubt that home prices have broken beyond the city’s established trend line, said Duy, who (produces) a quarterly Central Oregon economic index for The Bulletin. The question now is, where does it go from here?”

“Justin Peterson, a 30-year-old Bend mortgage broker, grew up in Redmond. Up until this year, he hadn’t experienced a local real estate downturn in his lifetime. Now, he’s living through one.”

“Peterson and his wife bought three investment houses during the boom years of 2005 and 2006. He’s trying to sell one now to generate cash, so far without much luck. Two are rented.”

“The experience so far hasn’t soured him on real estate investing, Peterson said, but lessons have been learned. Going forward, he said he’ll be more conservative, maybe buying a property every few years rather than buying them in a lump, reducing the chances of buying at the peak of a cycle. He’ll stay more liquid, too — cash is king in a downturn, and it can take a lot of cash to hang onto houses to wait one out.”

“But for now, like a lot of other recent investors, he’s a seller. ‘We definitely haven’t lost faith in real estate, for sure,’ Peterson said. ‘We’ll just get past this correction and make our adjustments and move on.’”

USA Today reports on Colorado. “While everyone agrees these more prudent lending standards should ensure future borrowers can afford to keep their homes over the life of the loan, many homeowners who got those loans in the past few years are now having grave problems refinancing as their interest rate rises. In the Denver area, Patrick Jones bought his home three years ago and has paid his mortgage on time every month.”

“This month, his adjustable-rate loan reset for the first time, to $1,800, up $450. Loan terms in the current market mean that he can’t get relief if he were to refinance. ‘Now, I’m just barely making it,’ he says. ‘I used to have a steak once or twice a week; now, I’m going to have hot dogs and beans. We used to go to the movies, but we’re giving that up.’”

From CBS 4 Denver in Colorado. “Homebuyers tried to zero in on a good deal at the Denver Convention Center Saturday when REBC held the first home auction in the Denver area. More than 100 homes were on the auction block, including a property Jon Carle had his eye on.”

“‘I hope to get it for under $300,000,’ Carle said. ‘I honestly think it will go for well more than that. If it does, then I just walk away from it, but if it’s coming under $300,000, that’s why I’m here.’”

“The downtown town home was valued at $468,000. The starting bid was $259,000. The home sold for $340,000.”

“‘Sometimes you can get deals and I’m not saying that you can’t, but then sometimes there are some that people get all excited and wrapped up into it and the bidding just keeps going and going,’ realtor Jody Malone.”

The Arizona Republic. “Home buyers have long flocked to metropolitan Phoenix’s farthest flung suburbs to get the most house for their buck. But where affordability and steady appreciation once enticed many to the Valley’s edges, foreclosures are now forcing them out.”

“Neighborhoods from Queen Creek and Pinal County in the southeast to Laveen, Goodyear and Buckeye in the southwest to Surprise and Anthem in the northwest have at least three times as many homeowners struggling to hold on than communities closer in, according to an Arizona Republic analysis.”

“‘The fringes are where affordable houses were and where investors went,’ said Jay Butler, director of realty studies at Arizona State University. ‘A lot of people stretched to buy at peak prices and can’t hold on.’”

“The number of Valley residents who lost their homes to foreclosure has nearly tripled since last year, from 1,073 in all of 2006 to 2,954 through June of this year. Some suburbs like El Mirage, northwest Peoria, Buckeye, Queen Creek and parts of Gilbert were hit especially hard, with the number of people in danger of losing their homes quadrupling in the past year.”

“Maxine Gordon bought a new home in Surprise in early 2005, at the height of the housing boom. She had very little to put down in cash, so she was advised to get two loans, one of which would cover her down payment. That loan came with a rapidly rising interest rate and now has a payment she can’t afford.”

“‘I am stuck,’ the retirement-home nurse said. ‘I can’t afford it, and I can’t refinance and I can’t sell.’ Her lender filed to foreclose on her home in June.”

“Gordon, like many other struggling home buyers in new edge developments who are trying to sell to avoid foreclosure, is competing with home builders offering huge incentives of $50,000 or more to sell homes. Builders are motivated, too, because more than 20,000 new homes are unsold across the Valley.”

“Add to those houses the multiple homes that speculators snatched up during the boom and now want to unload.”

“And then there’s the glut of homes on the market. A record 50,000-plus homes are for sale across metropolitan Phoenix, compared with 12,000 two years ago. The median price of a new home has fallen to $275,000 from about $315,000 a year ago, according to the Information Market.”

“Low home prices enticed Anthony LaRocca to buy a home near Florence in Pinal County last year. But the 30-mile commute to doctors’ offices at the nearest hospital in Casa Grande has soured the retiree on the area.”

“‘We have been trying to sell our home for four months. Not one person has come by,’ LaRocca said. ‘Of course, foreclosures are jumping here. No one can afford the commute, and no one is making money off their homes.’”

From Las Vegas Now in Nevada. “The largest single home foreclosure auction in Las Vegas history took place on Sunday. Prospective buyers across the valley got a chance to cast their bids for nearly 100 homes and condominiums. Real estate buyer Bill Guerra called the auction a buyer’s bargain market.”

“‘There seemed like some deals, which is good for our market. We need to see the bidding go high so our market doesn’t stay soft like it is,’ said Guerra.”

“Some of the homes in the auction were newer homes. ‘I would say this is a new home someone bought, whether they could not afford it or they decided not to move, whatever the case may be,’ said Joe Iuliucci, a Prudential real estate agent.”

“‘We do have a lot of vacant homes on the market in the MLS today. The numbers are astronomical,’ said Iuliucci.”

“Joe Iuliucci works with banks to sell foreclosed properties. He says the competition to sell could be a silver lining for the right person.”

“The bidding usually starts at $1. The bank’s goal is to make enough to cover the loan. ‘In some cases, they don’t, unfortunately. They have to settle for less than they are into it for. That is a common thing,’ said Iuliucci.”

The Reno Gazette Journal from Nevada. “It’s taken time, but Ken Wiseman believes Northern Nevada’s sluggish housing market has finally hit home with sellers. And that’s good, he said, as more sellers realize they need to trim their asking prices if they want their homes sold.”

“‘In the second quarter, it finally registered that they need to be on board,’ said Wiseman, broker/owner of Reno Rancho Realty LLC.”

“The median price for all types of single-family homes in greater Reno-Sparks was $295,000 in the April-June quarter, below the 2006 peak.”

“‘We’ve seen an increase in sales,’ Wiseman said. ‘There’s so much inventory, it comes down to supply and demand. If we look at history, every five to seven years we go through this.’”

“UNR economist Tom Cargill said the housing slump might be hitting bottom. ‘I think we’ve seen the worst,’ he said. ‘People have adjusted their prices down 10 (percent), 20 percent. If anyone’s waiting to get another 10 percent cheaper next year, I don’t think that’s going to work out.’”

“Housing…will continue to top the economy talk for the rest of 2007, if not longer, observers said.”

“‘We’ll see this pattern for what could be the next year,’ said Brian Kaiser, research analyst at the Center for Regional Studies at the University of Nevada, Reno. ‘Everyone’s been shell-shocked. It was such a precipitous fall from the peak….It’s definitely a psychological mountain to surmount.’”

Some housing bubble news from Wall Street and Washington. Bloomberg,”Frankfurt Trust stopped withdrawals from a fund after clients removed 20 percent of their money since the end of July amid concern about the U.S. subprime loan debacle. The FT ABS-Plus fund, which includes residential mortgage- backed securities and collateralized debt obligations, halted redemptions on Aug. 3, the Frankfurt-based company said today.”

“‘The situation for the asset-backed securities and CDOs market has gotten much worse in the last few days because of the U.S. real estate crisis,’ making it difficult to secure fair prices, the company said.”

From Reuters. “Moody’s Investors Service on Monday cut its bank financial strength rating on German lender IKB. IKB has become Europe’s highest-profile casualty so far of a crisis in the U.S. subprime mortgage market. To stop IKB from unraveling, German banks have joined together to cover the lender’s potential losses from the subprime crisis.”

From National Mortgage News. “I’ll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don’t have a deep-pocketed parent or hedge fund as a sugar daddy you’re likely to be out of business by year-end, probably sooner.”

“In the 20-plus years that I’ve been covering residential finance I haven’t seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s.”

“One subprime executive who closed his shop a few months ago told me, ‘This is a liquidity crunch the likes I have never seen.” Meanwhile, the mudslide is rolling downhill from Wall Street to mortgage bankers, to loan brokers, and then the consumer.”

“Default rates for non-subprime mortgages will jump in the next year as delinquencies that roiled subprime debt become more commonplace among homeowners with better credit, said Friedman Billings Ramsey Group Inc.”

“Late payments of at least 90 days, foreclosures and holdings of seized property among so-called Alt-A mortgages in bonds will probably rise to 3.92 percent in May 2008, from 2.69 percent in May 2007 and 0.89 percent a year earlier, Michael Youngblood, the top mortgage-bond analyst at Friedman Billings wrote.”

“‘Liberal underwriting was not limited to subprime loans,’ said Youngblood. The number of new loans being packaged into bonds rose to a record in 2004 through 2006, increasing the likelihood that defaults will also escalate, Youngblood said.”

The New York Times. “The very innovation that made mortgages so easily available, an assembly line process known on Wall Street as securitization, is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.”

“‘Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,’ Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. ‘The thing that caused the problem is making it harder to solve the problem.’”

“More than 60 percent of home mortgages made in the United States in 2006 went into securitization trusts. Some $450 billion worth of subprime mortgages, those made to borrowers with weak credit, went into securitizations last year.”

“Fifteen years ago, the last time the housing market ran into stiff trouble, government-sponsored enterprises like Fannie Mae did most of the work pooling and selling mortgage securities. These enterprises readily agree to loan modifications.”

“But not so in the private issues pooled and sold by Wall Street, which has fueled the extraordinary growth in the market.”

“American Home Mortgage Investment Corp. filed for bankruptcy protection, becoming the second- biggest residential lender in the U.S. to close down this year.”

“American Home specialized in mortgages for people who fall just short of top credit scores. ‘Their sources of funding have all dried up,’ said Mark Power, a lawyer advising some of the more than 100,000 creditors. ‘This case is going to be very similar to New Century.’”

“The top five unsecured creditors include units of Deutsche Bank AG, Wilmington Trust Corp., JPMorgan Chase & Co., Countrywide Financial Corp. and Bank of America Corp.”

“American Home, in a statement, warned it was unlikely the value of its assets will be enough to repay creditors or leave any equity value for common shareholders.”

“The company ‘experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets,’ CEO Strauss said in a prepared statement.”

“The cost to insure the debt of Countrywide Financial Corp., the largest U.S. mortgage lender, and U.S. brokers with exposure to mortgages, including Bear Stearns Cos., surged on Monday.”

“The cost to insure the debt of D.R. Horton, Inc., Lennar Corp. and Toll Brothers Inc. all rose by around 30 basis points to 410 basis points, 261 basis points and 265 basis points respectively, CMA data showed.”

“Swap spreads on KB Homes and Meritage Homes Corp. also were around 40 basis points wider at 545 basis points and 725 basis points, respectively.”

The Wall Street Journal. “Recently, the nation’s largest home builder, D.R. Horton Inc., reported the first quarterly loss in its 15-year history as a public company.”

“Yet, only two years ago, Donald Tomnitz, Horton’s CEO, declared confidently: ‘We can earn our way through any economic cycle, except one like the Great Depression.’ The Great Depression hasn’t hit, but Horton’s earnings have declined more severely than most anyone imagined.”

“One big assumption had to do with their cash flow: The common wisdom among some analysts was that builders would turn into ‘cash machines’ in the event of a housing downturn, because they would pare construction and land buying.”

“In reality, most builders haven’t been able to stockpile as much cash as expected. That is partly because they have had to keep building large housing developments, even though demand dropped off sharply.”

“‘The linchpin to our bullish thesis has been the emergence of land constraints,’ Citigroup analyst Stephen Kim wrote in a bullish March 2006 research report. ‘This will allow the builders to outperform expectations in any given demand scenario.’”

“But as it turns out, some builders still ended up owning too much land. Horton says it has a 5.4-year supply of land. That’s up from a 3.5-to-four-year supply of land when the downturn hit.”

From Business Week. “In November, 2005, Elizabeth and Armando Motto agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. Rather than send them to a bank, the builder, Beazer Homes USA Inc. offered to provide a mortgage itself in an arrangement of the sort that helped fuel the long housing boom across the country.”

“Beazer, according to the couple, inflated the pair’s earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving. They now regret it. The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md.”

“They have nearly $1 million in mortgage debt on the two dwellings. With $145,000 in family income, Elizabeth says, they are ‘on the brink of foreclosure’ on both houses. ‘We are so broke.’”

The Associated Press. “Lawmakers left Washington for August vacations without passing reforms meant to prevent mortgage-lending abuses like the ones that led to the housing market woes now distressing Wall Street and Main Street.”

“‘We’ve been told by some that, if we do this, we’ll ruin the market,’ said Rep. Barney Frank. ‘I think that, if we do this right, we could help the market.’”

“Rep. Brad Miller…said investors will shy away from buying mortgage securities backed by loans to people with shaky credit until there are ‘reasonable regulations in place to prevent the kinds of loans that consumers can’t possibly repay.’”

“He added: ‘It’s hard to argue that regulation is going to have a devastating effect on the market because the market has already devastated itself.’”

The Dallas Morning News. “There’s a breathless tone to the national fretting about the housing industry’s downturn. It goes something like this: It’ll spread like a virus and leave the U.S. economy on life support.” “Make no mistake, this is a serious time with a lot of people in a lot of pain. But it’s also time to recognize another looming threat: overzealous policymakers making matters worse.”

“”Freddie Mac CEO Richard Syron said he was wary of calls for Freddie Mac and fellow mortgage finance company Fannie Mae to buy loans and securities no longer favored by private investors, the New York Times said. With credit pools drying up ‘there are some loans that are in difficulty,’ the Times quoted Syron as saying in a telephone interview.”

“‘There are other loans that probably should never have been made and providing more liquidity will make that situation worse in the long term,’ Syron told the Times.”

The Daily News. “While testifying before Congress last month Fed Chairman Ben Bernanke…stuck to the opinion that the badness was not spreading to the broader mortgage sector or consumer spending.”

“‘So what can we look for in the Fed’s statement?’ said analyst Greg McBride at Bankrate.com. ‘Expect further backpedaling as it pertains to the housing market. What in January the Fed termed as stabilization, in March became an adjustment, then an ongoing adjustment. Might the term correction that Bernanke uttered before Congress two weeks ago appear in the statement?’”

The St Petersburg Times. “Claudia Vinson Johnson’s savings were decimated as risky mortgage-backed securities in her account were devalued and her investments were sold to meet margin calls. The broker who put her into the high-risk investments: Steven Shrago, her neighbor across the street.”

“‘One day you wake up thinking you have a little bit of financial security and by mid afternoon, you have none,’ she said.”

“Johnson is one of dozens of clients of Brookstreet Securities Corp. who suffered huge losses in June on risky debt securities that were sold to them as safe investments. Brookstreet, which was based in Irvine, Calif., collapsed.”

“To say the least, it’s put a chill in a once neighborly relationship. Shrago, who didn’t respond to attempts to contact him, keeps his blinds closed.”

From ABC News. “Home foreclosures are up 59 percent from last year while loan defaults continue to mount, and that has mortgage lenders zipping up their once generous coffers.”

“‘This was a classic case of irrational exuberance,’ said Alan Murray, the executive editor of the Wall Street Journal. ‘Lenders were giving away way too much money on easy terms. People borrow too much. They bought houses they shouldn’t be buying and now they are paying the price for that.’”

The Miami Herald reports from Florida. “Horacio and Patsy Parra cashed out two retirement accounts last year to buy an Orlando condominium they couldn’t afford. The developer, Cay Clubs Resorts & Marinas, agreed to lease back the $307,000 unit for 15 percent of the sales price, enough cash to cover the mortgage for nearly two years. But the Parras now expect to lose their unit to foreclosure, they say, because Cay Clubs owes them about $40,000 in unpaid rent.”

“The nationwide real-estate downturn has brought a cash squeeze that forced Cay Clubs to lay off dozens of workers, slow redevelopment plans, and ask roughly 140 buyers like the Parras to wait for their rent checks.”

“The ‘money is just not available to make the necessary payments and continue to maintain Cay Clubs’ long-term viability during this down market,’ CEO Dave Clark in May wrote to condo buyers awaiting lease-back checks.”

“The troubles that the Clearwater company faces symbolize wider concerns about South Florida’s battered condominium market. Real-estate analysts say too many developers depended on investors who stretched their bankbooks buying condominiums during the housing boom on the assumption that others would buy or rent them only a year or two later.”

“Faced instead with anemic demand for real estate, those investors are left scrambling to pay the bills, said Jack Winston, a condominium analyst with Goodkin Consulting in Miami. ‘It’s the same people: ‘Hey, let’s invest in some real estate! We’ll flip it. Then, all of a sudden, they find they have to reach into their pocket every month to cover the mortgage. And it’s a shock.’”

“Ricky Stokes, a top seller for Cay Clubs, touted the lease-back arrangement in a May 2006 online presentation as providing ‘virtually two years of free appreciation’ because, for most buyers, it would cover ownership costs for 20 months. Stokes did not respond to interview requests.”

“Even with their large real-estate holdings in Colorado, Patsy Parra says she and her husband do not have the extra income to handle another mortgage payment.”

“They took out four loans to buy two Cay Clubs units: the one in Orlando and another in a planned Las Vegas hotel. They counted on 20 months of lease-back payments to cover the $4,500 in monthly costs for both. After that, the Parras needed appreciation gains to make the investment work.”

“‘I’d have to refinance to get the next five or six months of payments,’ Parra said. ‘They were supposed to be very valuable.’”

“Other buyers depended on the lease-back cash to pay their mortgages, too. ‘I have clients that are filing bankruptcy because they can’t afford their payments,’ said Gene Denton, president of a Colorado firm that sold Cay Club units through Internet presentations.”

“NAWREI wrote to Clark on June 7 that Cay Clubs owed members nearly $240,000 in back rent, leaving members ‘facing personal financial hardship including bankruptcy.’”

“Patsy Parra said Friday that she has no cash to pay the mortgage in July or August, a scenario she said she never anticipated. ‘When we first bought these condos, I thought everything was fine,’ she said. ‘I never in my wildest dreams thought something like this would go wrong.’”

The Orlando Sentinel. “The housing boom may seem a distant memory, but experts say the real-estate speculation and ‘creative’ financing it generated are now driving many investors and homeowners into bankruptcy, especially in Central Florida.”

“Personal bankruptcies in the Orlando area were up 80 percent during the first half of 2007, the biggest rate increase in the federal court system’s Middle District of Florida,. Orlando’s jump in bankruptcies also far outstripped the national rate, which was up 43 percent compared with the first six months of 2006.”

“Orlando bankruptcy lawyer Richard Heller is seeing a lot of people these days who thought they had placed a sure bet during the recent housing boom.”

“‘Some would buy land for, say, $750,000, then use all their 401(k) and other money to keep the mortgage paid,’ Heller said. ‘At the end, the best they could get for it was $550,000 — and they’d still owe $750,000. They didn’t understand the risk they were taking.’”

“Many of those with mortgage problems are trying to fend off bankruptcy by renegotiating their loan terms, downsizing their lifestyles, taking second jobs or and making other changes to save money, lawyers say.”

“‘We’re not talking just about people who are hardly making ends meet,” said Raymond Rotella, a partner in (a) Orlando law firm. ‘We’re talking about some people with a sizable net worth and income-earning potential who are facing a serious dilemma.’”

“Chapter 13 filings have surged the past two years and now comprise about 40 percent of all bankruptcies in the court’s Middle District of Florida, double their historic rate.”

“‘People are trying desperately to avoid filing,’ said Andrew Baron, a veteran consumer-bankruptcy lawyer in Orlando. ‘But for a lot of them, it’s going to be the only sensible way out. Too many have been tapping their home equity to pay other bills in the past. Now that avenue is blocked off.’”

From TC Palm. “The number of mortgage foreclosures filed in St. Lucie this summer has skyrocketed. Court officials say it’s a nationwide trend and there are themes running through many of the cases, such as home buyers taking on adjustable-rate mortgages that now carry higher interest rates and the rise in insurance and property taxes for some residents.”

“Others bought the homes as investment properties, but are now having trouble keeping up with payments.”

“Of the 550 civil cases filed in circuit court in July, nearly 80 percent were mortgage foreclosures, records show. There were four times as many foreclosures filed in July as there were during the same time period last year and it is likely more than 3,000 will have been filed by year’s end.”

“Clerk of Court Ed Fry and his office has been swamped with calls from the public. Fry hired an additional clerk earlier this year to deal with the growing demand and employees have begun working on Saturdays.”

“‘It’s a little disheartening actually to see that kind of volume,’ Fry said. ‘You hate to see this many foreclosures being filed in the county.’”

“The sinkhole in Jill Dienemann’s backyard, eroding away from the canal retaining wall put up by the builder of the empty house next door, isn’t technically the city’s problem.”

“But the owner, Todd Stolfi, is unreachable. His address on the property deed is a Post Office box and a listed phone number has been disconnected. So Dienemann, frustrated and fearing further erosion, demanded help from the city, and the city has promised to deliver.”

“‘Who else is going to fix it?’ City Manager Don Cooper said.”

“To make it easier to fix problems with the hundreds of empty homes in Port St. Lucie, Councilwoman Michelle Berger and City Attorney Roger Orr are looking into the legality of designating the homes as public nuisances.”

“‘There are a lot of empty houses and we have to get a handle on these issues,’ Berger said. ‘It’s not just high grass. It starts out with high grass and then the whole neighborhood begins to fall apart.’”

“The nuisance designation, if legal, would allow the city to make repairs to empty homes without the threat of losing cash because the home is in foreclosure. Foreclosures have quadrupled in St. Lucie County in the past year, and a foreclosure exempts an owner from repaying cash spent to fix it.”

“With a public nuisance designation, the city could put a lien on the home until any repair money was paid back.”

“Dienemann wants the city to find a way to get all the vacant homes, many of which were built by speculators who have turned into absentee-owners, under control. ‘All these people who live next door to these empty houses are being held hostage,’ Dienemann said. ‘This town has to be accountable.’”

“For 33 years I have been employed in the construction industry. Lake County, like the national economy, has an excess inventory of new and existing homes. In my neighborhood in Mount Plymouth, a subdivision called the Fairways has 23 homes for sale and four for rent. In the surrounding streets in Mount Plymouth, another 34 homes are for sale, and that covers only about a third of the community.”

“With all of these homes for sale in this tiny part of Lake County, can building new homes be justified? I think not. The events leading up to this excess in housing inventory include a developer-friendly County Commission that approved too many developments without sufficient infrastructure.”

“For Lake County to prosper, it must attract high-paying jobs in sustainable industries. Residential construction is not sustainable. The labor force, for example, is transient. The New York Times reported in April that one in five construction workers in California was an illegal immigrant. Does anyone think it is any different here?”

“Everyone’s home is losing value because there is an excess in the supply.”

“Forbes.com has just ranked Miami and Orlando as the two riskiest housing markets in the country. Obviously this isn’t a good thing. Talk of a Florida recession grows.”

“But common wisdom says not to worry. The real-estate Ponzi scheme that got us into this fix will be replaced by the next get-rich-quick gimmick.”

“There are disturbing reports of school enrollment declines and of moving companies moving more people out than in.”

“We are in a unique situation with the cost of property insurance often exceeding the cost of property taxes. Talk of leaving Florida has become a pastime, with the quality of life as big a complaint as the cost of life.”

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