The Housing Bubble

It’s Friday desk clearing time for this blogger. “Until a few weeks ago, life on Wall Street was as good as it gets. But after a market upheaval that has hit like a bad case of whiplash, the fear on the Street is that the good times are coming to an abrupt halt. At the Bubble Lounge, a champagne bar in the trendy Tribeca neighborhood that caters to the Wall Street set, business has held up recently.”

“‘I haven’t seen anyone come in crying because they lost a job or are upset,’ co-owner Emmanuelle Chiche said. A prolonged Wall Street downturn, however, would be a different story. ‘That would not be fun,’ Chiche said. ‘That would be a problem.’”

“Tightened lending standards stemming from the subprime crisis likely mean fewer buyers, pushing down home prices. Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they’ve had to scramble to get loans for clients in the New York area that didn’t meet the traditional criteria.”

“One was a waitress who made decent money at a high end restaurant, but couldn’t prove it because so much of her pay was in cash tips. Another was a young lawyer, making nearly $200,000 in the city but who didn’t have the money saved for the down payment on a $800,000 Manhattan condo.”

‘”A lot of people who should have qualified for credit are getting squeezed out of the market,’ said Bouchner. ‘Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow.’”

“Peter Paul, known by some as the father of the residential mortgages market that bridges the gap between subprime and prime, is ‘hunkering down’ as he watches the market he helped create dry up.”

“The credit pullback ‘is happening quite fast and every day it’s a little bit more,’ Paul said. ‘There’s no appetite for any degree of risk.’”

“‘”People pushed the envelope a little bit, and nothing happened, so that became standard,’ Paul said. ‘Even if you don’t want to (loosen standards), you’re dragged kicking and screaming at least close to the flames.’”

“A month has passed since Washington introduced licensing exams for some aspiring new mortgage brokers, and more than half of those taking one of the key tests have flunked. Studying for the exam should be fairly easy. All of the possible questions are posted in a study guide on the department’s website, along with the answers.”

“‘We thought, ‘why don’t we just give them the questions, and that will help them learn,’ said Deborah Bortner, director of consumer services at the state Department of Financial Institutions.”

“One possible reason for the failure rates: Some test-takers believe they don’t need to study. Another reason: Test takers are required to compute annualized percentage rates and other math equations, and ‘many of them just didn’t bring a calculator,’ Bortner said.”

“What’s happening in the housing market, a financial bust of epic proportions, clearly isn’t just staying there any longer. Once mortgage defaults began to rise, however, lenders and investors began to wonder what they had wrought.”

“It isn’t as if credit suddenly isn’t available, period. Go ahead, use your MasterCard; chances are no one will stop you. But we’ve definitely entered the scary zone of the unknown: How many of your neighbors won’t be able to make their mortgage payments in the next year?”

“As mortgage funding dries up, Fannie Mae and Freddie Mac are calling on regulators to loosen restrictions on their business so they can fill the breach.”

“‘There’s going to be a shutdown in the housing market. And Fannie Mae and Freddie Mac are not going to be able to bail it out, nor should they,’ said Bill Fleckenstein, president of Fleckenstein Capital. ‘If Fannie Mae and Freddie or somebody bails out the housing market, then you tell me why we don’t start up Gambler Mae so that any lottery ticket owner, any football bettor, any guy at the track, any stock operator who loses money can get bailed out, too.’”

“Sales volumes were down in July for the second month in a row as interest rates reached double figures – their highest level since the 1990s. ‘The boom has definitely ended,’ Bank of New Zealand economist Tony Alexander said.”

“Christchurch homeowner Mark Harris has had his Lyttelton villa on the market for eight months, and only yesterday accepted an offer close to the asking price. Harris said he was surprised at the time it had taken to sell.”

“‘We probably would’ve had the place sold a number of times if we had been prepared to drop our price,’ he said. ‘But we held out, I think the person is actually getting a very good deal.’”

“The apartment-to-condo conversion market in South Florida represents a ‘perfect storm’ of wildcat investment. In some cases, entire projects went to speculators. They demanded more, so converters bought apartment complexes at record prices.”

“According to (analyst) Jack McCabe, fewer than 11,000 new condos were built and absorbed in the period from 1995 to 2005, but that currently there are nearly 20,000 condo units due to become available before the end of 2008, many of them from apartment conversions. ‘There’s currently a 31-month supply of condos and townhomes in the MLS,’ he said, ‘and (that) doesn’t count the FSBOs.’”

“‘Miami-Dade County is the poster child for the condo bubble, and a microcosm for what’ll happen in markets throughout the country. During boom-and-bust cycles when speculation runs rampant, many markets share the same variables that create artificial appreciation and future blood in the street,’ he said.

“How could they have known better? McCabe points to ancillary data: ‘You hear people say, ‘1,000 people a day are moving to Florida.’ We’re finding it’s a myth because the public school systems in South Florida are smaller than five years ago. And the moving van companies all say they have more households leaving Florida than moving in.’”

“Greetings, fellow real-estate speculators. How ya’ feeling about your gamble on the real estate market these days? Who, me? Not us, you protest.”

“Ah, but indeed it is a major motivation, and those who claim to have no participation in real-estate speculation doth protest too much. We are all real-estate speculators to some degree. What we’re quibbling about is how much of a degree.”

“The tricky part of this analysis is that we’re all real-estate speculators, whether the plan is to hold the property and the loan for one, three, 10 or 30 years. Buying a home is a bet that the returns on doing so, in financial, practical or psychological terms, will be greater than renting.”

“For the moment, what we are stuck with is a system that relies on astuteness and judgment on the part of all making speculative decisions. In the current case of the housing and mortgage industries, such reliance has proved to be, literally and figuratively, a bad bet.”

The San Francisco Chronicle reports from California. “The U.S. subprime mortgage mess escalated into a full-blown global financial crisis Thursday - making credit harder to get from Paris to San Francisco. ‘What you’re seeing is a classic credit crunch,’ said Christopher Thornberg, a Los Angeles economist. ‘Consumers have been running on fumes, using their homes to finance extravagant lifestyles.’”

“Kurt Herrenbruck, a mortgage planner in Berkeley, saw one client’s financing evaporate in the space of three days last week.”

“‘The client is well-heeled, with (a high credit score), and $500,000 in the bank, making an owner-occupied purchase with a 25 percent down payment,’ Herrenbruck said. ‘He needs a no-doc loan (meaning he cannot provide documents to prove his income) because of an employment hiccup.’”

“Herrenbruck said Wednesday he found two lenders willing to make a no-document loan. But by Thursday it was down to one. And Friday, when his client’s offer was accepted, there was none. ‘He can’t buy even though he had the strongest profile of any no-doc: superlative credit, money in the bank and a whopping down payment.’”

The Contra Costa Times. “Mortgage agents in the East Bay scrambled on Thursday to find alternative home loan programs for consumers who have been squeezed by a worsening credit crunch unleashed by the housing meltdown.”

“‘I’ve been in this business for a quarter-century and I’ve never seen it this bad,’ said Christopher George, president of San Ramon-based CMG Financial Services, a vendor of home loans. ‘This is huge.”

“‘We’re dealing with drastic change on a daily basis,’ said Scott Doruff, a certified mortgage planner (in) Fremont. ‘Lenders are pulling their programs off the shelf. If they still offer a program, they increase the cost the loan, charge more points, demand a higher interest rate.’”

“Some banks still offer jumbo loans. But they charge such a high rate that the loan effectively disappears, said Guy Schwartz, manager of CMG’s Walnut Creek office.”

“‘The bank prices it so high that they’re sending a signal: They don’t want to do the loan at all,’ Schwartz said.”

The Sacramento Bee. “‘There’s a lot of product this week that’s been taken off the shelf,’ said Brent Wilson, mortgage strategist with Sacramento-based Comstock Mortgage.”

“One Folsom-based mortgage official says that in the long run, tougher credit standards may be better for many buyers and U.S. savings accounts.”

“‘I think it’s great for the client,” said mortgage strategist Angela Talent. ‘It’s a little bit harder to qualify, yet you’re probably going to see first-time homebuyers seeing a need for money down. The national savings rate will start to go up. They’re starting to require more documentation and increasing (the buyer’s) reserves. It’s a natural progression.’”

The Santa Maria Times. “Rarely do you see a sale on brand-new homes with prices marked down as much as $30,000. Yet that’s what’s happening this weekend and next as Centex Homes conducts what it calls its Golden Opportunity Sale at the Gardens at Briar Creek in Lompoc.”

“‘We don’t build homes so they can sit there; we build homes to sell,’ said Andrea Bradford, director of marketing for Centex Homes. ‘If we can help someone get into a home who didn’t think they ever could, that’s good. And, of course, it’s good for us, too.’”

The Camarillo Acorn. “A soft housing market forced Taft Corporation, a real estate development firm, to reconsider its plan to build a mixed-use building on the corner of Oak Street and Ventura Boulevard in Old Town.”

“Kamyar Lashgari, president of the Malibu-based real estate firm, confirmed earlier this week that a downturn in Southern California’s housing prices means the property will remain vacant a while longer- perhaps for another two years.”

“To make the development profitable, Lashgari said, the two-bedroom townhouses would have to sell for $575,000 to $650,000.’

“Without the housing portion of it, we’d be overburdened with the housing expense,’ said Lashgari, who bought the land two years ago for an undisclosed amount.”

From KGET.com. “Brian Meares thought he had signed a lease-to-own contract with Crisp & Cole. Two weeks ago, the Meares learned their house is in default, and now they’re holding off on making any more payments. ‘They’re not paying the mortgage, or not paying enough. We’re paying them, so they should be paying the mortgage,’ he said.”

“Valeri Gusman worried about the value of her home, purchased for $335,000 a year ago. ‘I just got on Zillow.com last night, and it was down to $310,000,’ Gusman said. ‘There’s so many empty houses and so many people coming and going…one house was vandalized…we don’t know who’s living there. Are they coming after my house next?’”

The Orange County Register. “July’s home-selling stats from DataQuick showtThe median selling price for the 22 business days ended July 25 is $1,000 above a record set in June. Still, sales are off nearly 19% from a year ago and July will likely be the 22nd straight month where the buying pace failed to meet the previous year’s activity levels.”

The Daily Bulletin. “The new housing market may not be strong, but what there is of it in San Bernardino County is concentrated in the High Desert (according to)a study by MarketPointe Realty Advisors.” “In fact, 66 percent of proposed single-family detached homes in the county in the second quarter of 2007 were in the Apple Valley/Victorville area.”

“A slowdown in sales of homes already built has resulted in increased inventory in the county. MarketPointe reports that 2,334 units - about a five-month supply - are currently being offered for sale and are unsold.”

“Part of that is a tightening in the credit market. Last week’s new guidelines for lenders have made it much tougher, particularly for first-time buyers, to get mortgages. ‘These guidelines will add at least a year to the current slowdown,’ said Steve Johnson, director of MetroStudy. ‘They’ll keep a lot of people from buying homes.’”

“The total number of both types of units currently in the planning process in the county is 145,830 spread among 1,214 projects. More than three-quarters, 76 percent, of those are single-family units.”

“All over the capital region, home builders are trying smaller lots and shaving extras to bring down prices. But some El Dorado Hills architects are unveiling the ultimate, a return to something not seen here in years. It’s the $150,000 house.”

“This is not as far-fetched as you might think. Prices for new small-lot houses already are dipping to $230,000 in parts of the region.”

“Credit the housing slowdown for giving an architect time to think. ‘Based on what we know to be true on sales of homes now, $150,000 is very achievable,’ says Kerrin West (a) partner in charge of Iowa-based BSB Design’s Sacramento division.”

“West believes ‘the market for this is huge.’ ‘We’ve got so many folks priced out of the market,’ she says. ‘Also, on the flip side, people are making too much money to qualify for low-income housing.’”

From CNN Money. “The number of homes for sale around the nation jumped over the past year, according to figures from ZipRealty. In Los Angeles, inventory has soared since Zip started tracking it two years ago.”

“The number of homes on the market has risen from about 30,000 to more than 106,000. One must consider the population of the area it covers, however, which is nearly 13 million people.”

“In a press release Wednesday, NAR’s senior economist, Lawrence Yun, said, ‘Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year with broader improvement to include the new-home market by the middle of 2008.’”

“Before that happens, motivated sellers may have to slash prices to move properties. Already, in Sacramento, 48 percent of sellers have discounted from their original listing price. Some 47 percent of Orange County, California sellers have dropped their price and more than 45 percent of sellers in both Boston and Phoenix have done the same.”

Some housing bubble news from Wall Street and Washington. “Countrywide Financial Corp., the largest U.S. mortgage lender, said Thursday that ‘unprecedented’ poor conditions in the secondary-mortgage market are causing it to retain a greater proportion of mortgage loans than it sells.”

“In a filing with the SEC, Countrywide said that while it plans to retain more loans until investor demand improves, it warned that a prolonged period of poor conditions ‘could have an adverse impact on our future earnings and financial condition.’”

The Associated Press. “Countrywide said in an SEC filing late Thursday it has adequate funding liquidity, but added “‘the situation is rapidly evolving and the impact on the company is unknown.’”

“Shares of Washington Mutual Inc. also dropped after the bank said in a filing with the Securities and Exchange Commission late Thursday that disruptions in the mortgage market could affect its liquidity.”

“Washington Mutual said it its filing that deposits decreased by $12.57 billion for the six months ending June 30. The company is now expending billions in financing costs, a business that used to generate cash for the bank, according to the filing.”

“Net cash the company uses in financing activities zoomed to $32.24 billion for the six month period. At the same time, its lenders are apparently demanding repayments.”

From MarketWatch. ” The company in its quarterly financial report said its liquidity ‘may be affected by an inability to access the capital markets or by unforeseen demands on cash’ such as a general market disruption.”

“Washington Mutual said ‘there has been significant volatility in the subprime secondary mortgage market which has spread into markets for all other nonconforming residential mortgages.’”

“American International Group on Thursday told investors the housing market would have to spiral to Depression-era levels before the insurer would be harmed by its exposure to the residential mortgage market.”

“The world’s largest insurer has exposure to subprime loans as a lender, investor in mortgage-backed securities and supplier of mortgage insurance. But AIG characterized its exposure as minimal and said it would take declines of 30 percent to 40 percent in home values to dent the market for mortgages with stronger ratings, where most of its holdings lie.”

“‘We believe that it would take declines in housing values to reach Depression proportions, along with default frequencies never experienced, before our AAA and AA investments would be impaired,’ said Chief Risk Officer Bob Lewis, in a conference call.”

From Bloomberg. “‘We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,’ Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors July 24.”

“‘Any company that has products related to home sales is in trouble,’ said James Stratton, CEO of investment firm Stratton Management Co. ‘Instead of a soft landing, it’s a hard landing,’ said Stratton, whose company has $3 billion in assets.”

The Kansas City Star. “Troubled subprime mortgage lender NovaStar Financial reported a second-quarter pretax loss from continuing operations of $124.08 million as waves of bad news continued to pound the storm-tossed credit market.”

“NovaStar cited several factors for its continuing hemorrhage, including an $83.6 million increase in its provision for credit losses as home loan delinquencies and defaults continued to rise.”

“The company also took a hit on its mortgage securities as the value of its mortgage assets declined, requiring nearly $90 million in mark-to-market adjustments in the first half of the year.”

The San Francisco Chronicle. “Nothing illustrates the swift collapse of the home-loan market better than Luminent Mortgage Capital of San Francisco, which is teetering on collapse the week after it assured investors it was fine. Luminent is a real estate investment trust that buys, sells and owns mortgages.”

“So how did Luminent get into trouble? In late 2005, the company made a strategic shift that turned out to be the wrong move at the wrong time. Before that, Luminent avoided credit risk…by investing almost exclusively in mortgages insured by Fannie Mae, Freddie Mac or Ginnie Mae.”

“Things started to unravel in early July, when investors became increasingly worried that problems in the subprime market would spread to Alt-A loans. Things got even worse in late July, when Countrywide Financial said its prime home-equity loans were defaulting at sharply higher rates.”

“Suddenly, prices for mortgages without agency backing started to fall. Buyers headed for the exits, causing values to fall even more, creating a downward spiral.”

“‘I’ve talked to guys that run nonagency mortgage desks. They say they’re throwing the baby, the bathwater, the sinks and the stoves out the window,’ says Andrew Wessel, an analyst with J.P. Morgan.”

From Reuters. “Fears of risky investments in an environment of troubled credit markets cut U.S. speculative-grade debt issuance in July, credit agency Standard & Poor’s said in a report published late on Thursday.”

“The number of U.S. speculative-grade issuances fell to four in July, compared with an average of 38 new speculative-grade issuances per month in the first half of 2007, the agency said.”

“‘Market volatility shut down the issuance pipeline in July 2007 in the U.S. speculative-grade market,’ S&P said. ‘Issuers faced rising risk aversion and a market hesitant to absorb low-grade issuance.’”

“U.S. regulators are scrutinizing the books of Wall Street’s largest investment banks amid questions they are hiding losses from subprime mortgages, people familiar with the inquiry said.”

“Analysts and investors have raised questions whether there are unreported losses from subprime-mortgages and collateralized-debt obligations, or CDOs.”

“Fannie Mae sees ‘no bottom‘ to shrinking US home prices and continued problems with borrowers paying their mortgages until the second half of 2008, the mortgage giant’s CEO Daniel Mudd said today.”

“In the meantime, Mudd said Fannie has asked its regulator, the Office of Federal Housing Enterprise Oversight, to allow it to expand its ability to buy mortgages from US lenders in order to help provide liquidity in the mortgage market.”

“We’d like to be able to buy those mortgages,’ he said in an interview with cable business channel CNBC.”

From Bloomberg. “Federal Reserve Chairman Ben S. Bernanke was wrong. So were U.S. Treasury Secretary Henry Paulson and Merrill Lynch & Co. Chief Executive Officer Stanley O’Neal.”

“The subprime mortgage industry’s problems were contained, they all said. It turns out that the turmoil was contagious.”

“Other types of mortgages are suffering. So are firms and banks that package the debt for investors. The ripples were felt in Europe and Asia, where central banks offered cash to banks amid a credit crunch. And some corporations, from countertop makers to railroads, are blaming the mortgage meltdown and housing slump for earnings that fell short of analysts’ estimates.”

“‘Housing created a lot of ancillary economic activity and jobs, and now we are in the reverse process,’ says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago and a former Fed economist.”

“‘The subprime mess is now spreading to banks,’ says Nariman Behravesh, chief economist at Global Insight Inc. ‘A lot of international banks, especially those in Europe, did invest a lot in the collateralized debt markets, especially the subprime situation here in the U.S., so they’re suffering.’”

“Paulson said June 20 that subprime fallout ‘will not affect the economy overall.’ This week on CNBC, he provided a less definitive assessment, saying that markets have been ‘unsettled largely because of disruption in the subprime space.’”

“‘We’ve had a major correction in that housing sector,’ Paulson said. ‘It will take a while for the impact of that to ripple through the economy as mortgages reset.’”

“‘Most of the market has shut down,’ says Doug Duncan, the Mortgage Bankers Association’s chief economist. ‘This is not a normal event.’”

“Peter Hebert, a broker with Allied Home Mortgage Capital Corp. in Ellicott City, Maryland, says it’s getting tougher to find mortgages for his clients.”

“For one self-employed borrower in Pennsylvania, with a 626 credit score, just above what’s considered subprime, Hebert says he contacted three lenders. Last year, the borrower would have qualified for a 7.99 percent loan, Hebert says. This week, he received one offer for a 10.5 percent loan with a three-year prepayment penalty.”

“‘It would have been cheaper to use a credit card to pay for his house,’ Hebert says.”

“U.S. housing prices will fall this year, the first annual decline since the Great Depression of the 1930s, according to the National Association of Realtors.”

“The inventory of unsold U.S. homes in May was the largest since the realtors group started counting them in 1999. Defaults and foreclosures may increase because about $1 trillion of payments on adjustable-rate mortgages are scheduled to rise this year, hitting a peak in October, according to Credit Suisse.”

A report from Arizona State University. “The local resale housing market continues its uninspiring trend. With 4,330 recorded sales in July 2007, the activity was well below last year’s 5,545 transactions. While the current level of activity brings much needed stability, the 2007 year-to-date total of 33,510 homes is well below the 41,835 for 2006 year to date and 68,235 sales for 2005 year to date.”

“Increasing inventories of new homes and foreclosures are providing a competitive and attractive alternative to the resale home in many areas of the market.”

“‘New home builders have been aggressively pursuing buyers through incentives, thus, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the current expectations of it being a good year,’ said Jay Butler, director of Realty Studies in ASU’s Morrison School of Management and Agribusiness.”

The East Valley Tribune. “The market’s continued erosion stems in part from the rising number of homeowners who are defaulting on monthly mortgage payments. ‘Overall, it’s getting more difficult to get financing,’ Butler said. ‘Lenders are scared.’”

“Some Valley buyers thought they qualified for a loan, only to have those deals fall through because of stricter standards, Butler said. Other buyers are remaining on the sidelines to see if prices will continue falling, he said.”

“More foreclosure properties have also hit the market, adding to the more than 50,000 homes already for sale in the Valley. Earlier in the year, industry observers predicted that the Valley would see home sales in the high 60,000’s or low 70,000’s this year, he said.”

“Now, ‘most forecasts are out the window,’ he said.”

The Arizona Republic. “The median price for housing resales in Ahwatukee Foothills dropped to $343,000 in July, a 14 percent decline from a year earlier. Jay Butler said the housing market continued an ‘uninspiring trend’ in July.”

“He said medians continue to bounce around from month to month, but in general are falling. Median prices elsewhere in the Southeast Valley: Chandler, up 2.6 percent to $308,375; Gilbert, down 6 percent to $314,500; Mesa, down 3 percent to $242,000.”

From AZ Family in Arizona. “For an area that continues to see more and more houses going up, experts say many of their values are less and less every day. ‘It’s an unsure market. Nobody can tell what’s going to happen,’ said Realtor Ben Garrett.”

“While the average sale cost has actually gone up about $14,000, the average value has dropped from $179 to $171 per square foot.”

“‘And that’s giving a false sense of security that this market’s continuing to rise when it’s really not,’ he said. ‘The cost per square foot is getting less and people are getting less for their houses when they’re selling them than they were the year before.’”

“Garrett said during this same week in 2005, more than 2,100 homes sold throughout the Valley. In 2006, 1,200 sold. This year, only 713 have sold. And in addition to the sluggish market, there has been a flood of foreclosures, about 27,000 Valleywide so far this year.”

“Foreclosure notices rose an average 183 percent in Chandler and Sun Lakes in the first six months of this year compared to the same period a year earlier. Areas of Chandler in ZIP codes 85225 and 85249 were hardest hit.”

“Notices also jumped 240 percent in Gilbert and Ahwatukee Foothills, 116 percent in Mesa and 97 percent in Tempe, according to The Information Market.”

“Homeowners are struggling throughout the Phoenix area. The Arizona Regional MLS said about 19,000 homes were on the market in June in the Southeast Valley, but only 1,973 sold.”

“Mike Foley, a Realtor since 1978 who works in Chandler, said the fringe areas were hit harder because there are more newer homes purchased in the last few years.”

“Barry Kramer, owner of Keller Williams Realty Ahwatukee Foothills, agrees. He said people having the most trouble are those who bought in the last year o two, or investors.”

“‘The majority were investors and those who bought late in the cycle and they overbought,’ he said. ‘They got into the game late, and they didn’t do their homework. They got a little greedy.’”

“Chandler Realtor Mike Foley wants buyers and sellers to know that eventually the market will recover. He has been through four cycles like this. He remembers in the late 1980s when ‘homes in Ahwatukee sat unfinished for two or three years. Their 2-by-4s turned black.’”

“Wade Denman, a Mesa Realtor, started seeing so many homeowners in trouble he expanded his business to include a division to deal just with foreclosures. ‘We’re helping people get out of these situations by getting them to investors,’ he said.”

The Yuma Sun from Arizona. “Far too often these days, people’s ‘exotic’ financing is turning their dream of home ownership into the nightmare of homelessness.”

“It’s a trend seen across Yuma County and across the nation as the real estate bubble has burst into a flood of foreclosures.”

“The increasing foreclosure rate can be seen in the public notices of The Sun in the number of listings for foreclosed homes being auctioned. From January through July, there were 292 such listings, about 100 more than during the same period in 2006.”

“In July alone, there were 57 listings, more than double the number in July 2006 when there were an estimated 25.”

“‘You have people who are trying to support their families and suddenly find themselves homeless,’ said Vicki Bardo, president of the Yuma Association of Realtors. ‘There’s a huge frustration level. It’s a terrible situation we’re in right now.’”

“It’s a result of the number of people in the last few years who turned to nontraditional loans to buy a house, said Derek Egeberg, a mortgage adviser with First Magnus Home Loans.”

“In 2002, he said, 72 percent of home loans nationwide ‘were the plain vanilla variety,’ with the buyer qualifying for a regular loan by demonstrating he or she could afford the mortgage payments.”

“In 2006, 40 percent of all loans were ‘a hodge podge of nonconforming loans,’ he said. ‘There was a big effort to get people into houses where they didn’t belong,’ he said.”

“Another problem coming up, Bardo said, is that the huge inflation of home values has come to a halt. With the tighter mortgage market, people may not be able to get refinanced, they can’t afford the higher payments and they can’t sell the house at a break-even price. So they walk away.”

“‘Once you get behind, the mortgage company won’t take a partial payment. When you wait until the foreclosure is filed, the lender just wants you out. It is their money,’ advised Bardo.”

“The latest phase of a plan to bring thousands of homes, shops and offices to Gilbert is taking shape with two new housing subdivisions in the works. Longtime farmer Jeff Cooley plans to put 900 homes near the southeast corner of Williams Field and Recker roads, as part of the massive Cooley Station development.”

“Cooley’s family set plans in motion nearly a decade ago to transform 950 acres of farmland into some 4,000 homes and more than 2,000 apartments and condominiums.”

“‘This is kind of now our last hurrah,’ he said. Construction could begin as early as next summer with sales starting the following fall.”

“Still, how long Eldon Point and the larger Cooley Station development take to build will depend on the state of the real estate market, Cooley said. ‘We hope, maybe, within the latter part of 2008 things will start picking up again and stabilizing,’ he said. ‘The problem now is where’s the bottom?’”

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