The Housing Bubble

It’s desk clearing time for this blogger. “While most of the nation is already in the midst of a residential real estate slump, industry watchers say New York City is about to experience a reality check. ‘It’s getting very scary,’ said one generally optimistic high-end broker. ‘We’re just waiting for the other shoe to drop.’”

“‘The recent volatility of the mortgage markets on Wall Street have the potential to impact the housing market here in New York in several ways,’ said real estate appraiser Jonathan Miller. ‘Bonus income may be impacted as profits in the financial-services market begin to recede.’”

“With foreclosures mounting around the city and across the state, abandoned homes in some of the city’s low- to moderate-income neighborhoods are falling into disrepair. ‘All over the neighborhood, you see foreclosed homes boarded-up, and there are kids breaking in and hanging out inside,’ said City Councilman Terrence M. Hassett.”

“Hassett hopes that groups like Rhode Island Housing can work with the banks to find new owners for the properties — but that will only happen if the banks drop the prices on the homes, he said.”

“‘The banks that own these properties should lower their rates and sell these houses to first-time home buyers,’ Hassett said. ‘If they make them affordable, they will sell them. In the meantime, I want these banks held accountable.’”

“Prices of existing houses in the St. Louis area were up for the second quarter over the same period last year. Still, some in the local real estate market believe the numbers are masking the possible loss facing many sellers who bought houses in the last couple of years and now need to sell.”

“Broker Tom Malone has seen several deals in which sellers had to offer the buyers incentives ‘bring money to the closing table’ to help close the deal.”

“‘In many cases, what new homes are selling for is less than what the home is worth,’ said Dennis Norman, president of the St. Louis Association of Realtors. ‘But the builder has to consider the difference between offering a discount and having the carrying cost of a home.’”

“Canada’s strong economy and dearth of high-risk mortgage lending should help the real estate sector withstand the volatility that’s been buffeting the equity markets.”

“In the U.S., loans given to high-risk borrowers at low interest rates, known as subprime mortgages, created ‘artificial demand’ that sent house prices soaring, said economist Benjamin Tal. This was exacerbated by speculators buying investment properties and trying to flip them at a profit.”

“It wasn’t many years ago when homebuyers could expect gold-plated light fixtures for a $300,000 house. But in the last few years, the housing market has changed dramatically.”

“‘We saw a massive increase in prices last year,’ said realtor Ken Braat. ‘We saw 50-per-cent increases overnight in some places.’”

“‘Our proximity to Calgary is what drives our market. They’re one and the same now. Now you’re ending up with the reality that $300,000 is an entry-level home, Braat said.”

“In Shaunavon, (a) town of 2,000 has experienced rapid economic growth in 2007, a pace which will continue when its first Subway restaurant is built later this year. ‘Things are changing here at a very fast pace,’ said Shaunavon Mayor Sharon Dickie. ‘We will now have a Subway, which is really just one of the signs of our progress.’”

“In Shaunavon, increased demand has lots now costing $5,000, a 500-per-cent increase from three years ago. Similarly, Assiniboia now has about five real estate lots available, down from more than 50 last year.”

“As Wall Street continues to stumble under a subprime mortgage crisis, local real-estate brokers and experts said Thursday the crisis has reached Schuylkill County as well.”

“‘A homeowner wishing to sell will have more trouble than before,’ said Austin J. Jaffe, a professor at Penn State University. ‘It’s an adjustment period. It’s not the end of the world.’”

“‘Because of the subprime mess, credit is getting tighter for everyone,’ said Erica Ramus, owner of Realty Executives, Pottsville. ‘You have people who may have been approved six months ago, or 12 months ago, who have OK credit, who are being rejected. The bank is saying, ‘Show us more. We want more money down.’”

“The closing of First Magnus could have a negative and positive effect on the Tucson Housing Market. ‘This is my equity, this is my retirement,’ said James Shirkey, seeing that equity and his retirement slip away as the housing market takes another hit with the closing of First Magnus.”

“‘A year and a half ago, according to appraisals, I had about $140,000 worth of equity and now I’m getting down to $70,000 or $80,000 and it still isn’t selling, so it’s very terrifying,’ he said.”

“Shirkey’s hopeful. He says he’ll just ride the ripple and hope for the best. ‘I’d like to tell everybody it bottomed; now it’s time to go out and buy a house, but I don’t know that that’s reality.’”

“As lenders tightened the screws on mortgages nationwide, Tom Jacobs called an emergency meeting Thursday morning at his Tigard mortgage company. ‘I told the guys they have to tune themselves to a psychological survival mode,’ Jacobs said. ‘The survivors will be the ones who adjust.’”

“Jacobs’ direction: Don’t waste time trying to make loans to borrowers with spotty credit. ‘We have to focus on where we can do our business,’ he said.”

“That message is being repeated across the region. ‘People who were marginal buyers in the past can’t get a loan now,’ said Rick Rosvall of Sunrise Mortgage in Oregon City.”

“‘A year ago or two years ago, we could make a loan to just about anybody,’ Greg Mirecki, managing partner of Premier Mortgage Resources in Portland.”

“That era is over even in Oregon, which is below the national rate for foreclosures and delinquencies. ‘It ain’t what it used to be. The sweetness is gone,’ Jacobs said.”

“For the longest time, Orange County residents have gleefully watched their home values escalate nearly beyond reason. It was almost too good to be true, for homeowners, anyway.”

“Unfortunately, the housing bust, or at least its current slow deflation, could be leaving a lot of wreckage in its wake. So home values are falling, and many owners who are upside-down in their homes are walking away from them.”

“The housing market, though, is working itself out. The government should not intervene with either bailouts or regulations. Lenders are becoming more careful, unqualified buyers are now less able to get loans, and home prices will no doubt start coming back to reality.”

“That’s how markets work. There is no way to avoid some pain. As one an old saying puts it, ‘capitalism without failure is like religion without sin.’”

The San Francisco Chronicle reports from California. “Sales of new homes in the Bay Area plunged 35 percent in June, the latest sign the once-strong real estate market continues to stagger. A trifecta of cooling prices, rising foreclosures and tightened credit have forced many builders to slash prices. In addition, some are putting up homes for auction.”

“‘Many of the foreclosed homes are dumped on the marketplace, and it’s skewing values,’ said Robert Rivinius, the building group’s CEO. ‘A lot of builders are already selling homes at the bottom of their price structure … and so it creates a lot of uncertainty in the marketplace.’”

“‘How does demand come back? When prices come down,’ said G.U. Krueger, chief economist with IHP Capital, said the deflated new home market is simply one more indication that the market had run amok and is now returning to some equilibrium. ‘Prices went way ahead of themselves relative to the incomes of the consumer, and price increases could only be maintained with exotic financing.’”

The Press Democrat. “Peggy and Charlie Della Maggiora have Oregon on their mind, building a retirement home on five acres by a creek near Grants Pass. But they remain tethered to their Rohnert Park home, now languishing on the glutted, glacier-slow Sonoma County housing market.”

“‘Here we are, kind of stuck,’ Peggy Della Maggiora said, with a for-sale sign planted in front of their four-bedroom home. ‘We’d love to be up there.’”

“As inventory piles up and anxious sellers whittle down their prices, buyers — now in the driver’s seat — comb the ample offerings and, in many cases, sit on their hands, anticipating even better deals to come.”

“‘It’s not a bad market, just a little slower,’ said Greg Wilde, who is relocating from Windsor to a new job in Orem, Utah and faces the unappetizing prospect of carrying mortgages on two homes.”

“He’s cut $20,000 from his initial price of $559,900, tacked on a $5,000 ’seller contribution’ and offered a $1,000 finder’s fee. ‘We’ve had plenty of lookers but no offers,’ said Wilde.”

The Santa Cruz Sentinel. “Gary Gangnes of Real Options Realty, calculated the unsold inventory index for Salinas, where the bulk of Monterey County’s foreclosure sales are taking place, as 26.7 months. Watsonville: 203 listings and an average of six sales a month.”

“At Vista del Mar, a condo complex completed last year near Auto Center Drive, developers have sold only half of the 102 units, with another 20 in escrow. They are cutting prices up to $50,000 and offering a lease-to-purchase option to generate sales.”

“‘The buyers are out there, they’re just waiting for the prices [to drop],’ said Aldina Maciel, a real estate agent in Watsonville.”

From Sanluisobispo.com. “‘We are seeing many programs disappearing, which is making it very challenging for some borrowers to get the kind of financing that would have been available to them a month or two ago,’ said Kevin Hauber, a loan officer in San Luis Obispo. ‘The availability of jumbo loans, particularly for specialty situations like stated income, stated assets or anything to do with an unusual property, has been impacted pretty significantly in the last few weeks.’”

“The hardest-hit segment in terms of price is new homes. The median price of new homes is down more than $100,000 year over year — or 17.5 percent. The median fell to $480,000 last month from $581,500 in July 2006.”

The Fresno Bee. “Housing construction continues to struggle in parts of the central San Joaquin Valley as builders contend with stiff competition and an abundance of homes for sale.”

“‘The market is terrible,’ said Mitch Covington, president of the Building Industry Association of the San Joaquin Valley. ‘We have inventory, a little bit of traffic and can’t convince [buyers] that it is a great time to buy.’”

“Many established builders, faced with more competition from other developers that flocked to the region during the real estate boom, and with a glut of used houses on the market, have been cutting prices and offering free swimming pools and appliances to boost sales.”

“‘Maintaining profitability is a challenge for some builders given the demand for incentives and lower prices in this down market. But because of it, many builders are willing to offer very good deals,’ said Stan Smiley, senior managing director for Hanley Wood Market Intelligence.”

The Press Enterprise. “Property tax reductions for more than 11,000 homes that have seen a drop in value were announced Wednesday by San Bernardino County Assessor Bill Postmus. The reductions come as home sales have slowed and foreclosures are on the rise in the Inland region.”

“The new assessments represent a drop of more than $238 million in value in San Bernardino County and $610 million in Riverside. Officials are keeping a close eye on the value of property and said they expect to see even more value reductions. ‘We are in the process countywide of going into a major devaluing of home values,’ Postmus said in an interview.”

“Areas of Temecula, such as the Wolf Creek community, as well as French Valley, Murrieta, Hemet, San Jacinto, Indio and Eastvale were hit, Swain said. ‘A whole lot of quick expansion and tracts were going up quickly,’ said Frit Swain, an assistant assessor for valuation. The office reduced assessments on 31,333 properties.”

“‘You are going to see this as a pittance compared to what this year’s numbers are going to be,’ Postmus said.”

“June sales at Inland new-home communities were down 23.1 percent from a year ago, reflecting a statewide drop of 26.2 percent amid a slump that began in early 2007, the California Building Industry Association reported Thursday.”

“‘In some neighborhoods, the builders are putting more into the newer houses and selling them at the same price as the older ones,’ said Frank Williams, CEO of the Building Industry Association’s Baldy View Chapter. ‘You don’t want to devalue a neighborhood.’”

From USA Today. “It’s not just cash-strapped and newbie buyers who are getting rejected. The credit-tightening is also cutting off prime buyers in high-cost cities who often need to borrow more than $417,000.”

“‘We had a buyer, a doctor with an 800 (point) credit score, a down payment of more than 20%, and the (lender) backed out at the last minute,’ says Lisa Gregory, an agent in San Diego, who represents the seller. ‘We were stunned.’”

“The qualification hurdles are so bad in California, where the median single-family home costs about $595,000, that a record number of sellers are offering to lend money to their buyers in the form of second mortgages. From April to June, almost 5% of home sales in the state had seller mortgages on them. Three years ago, less than 1% of sales had seller ‘carry back’ financing, according to DataQuick.”

“Larry Underhill, an agent in Stockton, Calif., says he’s seeing homes go under contract two or three times. Each time, he says, the deal craters, because ‘Buyers can’t qualify, or buyers are understandably cautious. They see property values sliding and are saying, ‘Why am I doing this?’”

The Union Tribune. “As the nationwide credit crunch continued to shake Wall Street and the lending industry yesterday, the California Association of Mortgage Brokers urged Congress to give a financial break to the state’s home buyers.”

“Leaders of the trade group asked federal lawmakers to declare California a ‘high-cost’ state and raise the limit on the size of loans that can be purchased or guaranteed by Fannie Mae and Freddie Mac.”

“Ed Smith Jr., the group’s vice president of governmental affairs and industry relations, said consumers should ‘knock down the doors of their (federal) legislators to get the limit increased.’”

“Critics say raising the limit could prevent inflated housing markets from correcting.”

“‘We should be worrying about the soundness of the mortgage financing system and ways to root out some of the abusive practices we’ve had,’ said Lloyd Irland, a Maine-based economist. ‘Now we are being asked to adopt policies that will ratify these inflated housing prices.’”

Some housing bubble news from Wall Street and Washington. The Boston Globe, “Countrywide Financial Corp., the nation’s largest mortgage firm, said yesterday it has ‘tightened’ up on its lending, and another large provider said it would stop making new loans altogether, deepening the crisis in the nation’s mortgage industry.”

“First Magnus Financial Corp., based in Tucson, which purchases mortgages from loan brokers and is one of the 10 largest mortgage wholesalers in New England, yesterday said it would no longer fund new loans.”

“First Magnus, which has offices in Needham and Lawrence, said the ‘collapse’ of the investment market for mortgages has left it ‘with no viable alternative’ but to cease lending.”

“Rosemary O’Neil, president of the Massachusetts Mortgage Association, said some house hunters are likely to see the industry shake-up as benefiting them in the long run.”

“‘They may decide, ‘Let’s wait until the prices go down some more,’ she said.”

The LA Times. “Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.”

“Bill Ashmore drove his Porsche Cayenne to Countrywide’s Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.”

“‘It’s because of the fear of the bankruptcy,’ said Ashmore, president of Irvine’s Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.”

“‘It’s got my wife totally freaked out,’ he said. ‘I just don’t want to deal with it. I don’t care about losing 90 days’ interest, I don’t care if it’s FDIC-insured — I just want it out.’”

From Bloomberg. “Countrywide Financial, the nation’s No. 1 mortgage lender, was forced to tap an $11.5 billion line of credit Thursday as the global financial crisis curbed access to short-term financing.”

“‘When a company draws on its bank lines, it just basically gives off the impression that it has run out of options,’ said Christopher Wolfe, managing director at Fitch Ratings, which Thursday dropped Countrywide to BBB+, its third-lowest investment-grade rating. Credit rating agency Moody’s Investors Service downgraded Countrywide’s senior debt rating to ‘Baa3′ from ‘A3.’”

“‘Typically these bank lines are there but not really meant to be used,’ Wolfe said.”

“‘We’re in this situation where one of the biggest home lenders in the country is in significant financial difficulty and is being forced to take fairly extraordinary action to maintain its financial viability,’ said Tony Hughes, managing director of credit risk for Moody’s Economy.com ‘This means the threat of a credit crunch is very real. It means that mortgage finance generally will be hard to come by,’ he said.”

“‘Industry trends are not improving,’ he wrote. ‘Home prices are 13 percent to 14 percent overvalued (which could take several years to play out).’”

The Daily News. “Paul J. Miller, an analyst at Friedman, Billings, Ramsey & Co., said in a research report that Countrywide’s survival depends on how long the mortgage crisis lasts.”

“‘We do believe there is a scenario in which the current liquidity crises last for longer than three months and CFC is forced into bankruptcy,’ he wrote. ‘It will be ugly, but it can happen!’”

“If it persists for more than a month, he said, Countrywide might be forced to sell assets at a deep discount.”

From McClatchy Newspapers. “‘What we’re going through now is unlike anything we’ve seen before. All financial crises have their unique characteristic, this one is characterized by a seizing-up in the home-mortgage market,’ said Lyle Gramley, a former governor of the Federal Reserve System in the 1980s.”

“Gramley was referring to the spate of bankruptcies by companies that issued home loans to risky borrowers — and increasingly companies that gave loans to creditworthy homeowners.”

“Gramley’s concerned that there aren’t good measures right now of how much lenders are pulling back. ‘None of us knows for sure how much credit availability has declined, but to be sure it is substantial,’ he said.”

“The Federal Reserve lowered the interest rate it charges to banks and acknowledged for the first time today that an extraordinary policy shift is needed to contain the subprime-mortgage collapse that began roiling the world’s financial markets two months ago.”

“Today’s decision shows policy makers understand ‘the various different tools the central bank has at its disposal,’ said Neal Soss, chief economist at Credit Suisse in New York, who worked as an assistant to former Fed Chairman Paul Volcker. ‘This is a masterful move because it doesn’t actually feed some of the concerns about moral hazard’ of bailing out investors, he said.”

The International Business Times. “On the same December day Merrill Lynch & Co. Inc. paid $1.3 billion for a subprime lender, the world’s largest brokerage got a rude introduction to risky mortgages.”

“Merrill Lynch’s newly minted First Franklin Financial Corp suffered a loss of nearly $300,000 on a soured home loan to a lab assistant from a gritty, blue-collar town north of Boston.”

“Lab assistant Marielite Hardy received $670,000 in loans from First Franklin in March 2006 to buy a multi-family home in Revere, Massachusetts. Her loan application, submitted by mortgage broker National Lending Corp., listed her monthly income as $12,000.”

“This month, First Franklin accused the Houston-based broker of inflating Hardy’s income by about $9,000, according to a lawsuit filed in U.S. District Court in Boston.”

“After funding the Hardy loans, First Franklin sold the first loan on the property to a U.S. unit of London-based bank HSBC in the secondary mortgage market. First Franklin said Hardy did not make a single payment. HSBC demanded First Franklin buy back the loan, according to court records. First Franklin did and then sold it in a distressed sale, taking a $295,908 loss.”

“Several months after First Franklin funded Hardy’s loan, the lender received her wage verification from her employers. The documents showed that her wage income fell far short of justifying the money she received.”

“‘These lenders want to loan money to people without guidelines,’ said Hao Nguyen, National Lending’s operations manager. ‘And then they get burned.’”

“A few bad loans at First Franklin are not a disaster for Merrill Lynch, a financial powerhouse with $1 trillion in assets, But the subprime mortgage industry’s crisis has sidelined Merrill’s strategy for buying the lender in the first place.”

“‘It wasn’t the best move,’ said John Meara, president of Argent Capital, which owned 309,000 Merrill shares at the end of June. ‘It’s not going to make or break the company, and I’m sure the company didn’t factor in what’s happened to the subprime industry. It’s hard to predict Armageddon.’”

From Inman News. “Ratings agencies Moody’s Investors Service and Fitch Ratings have downgraded or are preparing to downgrade billions in securities backed by subprime second-lien mortgages.”

“Bear Stearns Cos. moved to cut jobs at two home-lending units because of the housing slump. The fallout from the subprime-mortgage crisis threatens to cut Bear Stearns’s profit by as much as 13 percent this year.”

“Some investors consider Bear Stearns a possible takeover target now that its market value has dropped to $16.6 billion from $22 billion at the end of its fiscal year in November.”

From Reuters. “Falling stock prices, a slowdown in the housing market and tighter credit could hurt auto sales, although there has been no big impact yet, a senior General Motor Corp executive said on Thursday.”

“‘It is never good when the stock market goes down. It takes wealth out of the economy…people feel poorer and decide to defer major purchases,’ Bob Lutz, GM’s vice chairman and head of product development, told reporters.”

“Like many lenders, GMAC’s ResCap unit has struggled as falling home prices, and rising interest rates have made it tougher for many homeowners to keep up with mortgage payments.”

“GMAC CEO Eric Feldstein said in July that ‘widespread weakness’ in housing would persist this year.”

“Lutz, however, described the downturn as a ‘momentary correction.’ ‘We have a very serious credit crunch in the U.S., but that was triggered by a bubble-like prosperity due to sub-prime mortgages and a building boom that was unjustified,’ he said.”

The Gainesville Times reports from Georgia. “A Gainesville real estate executive said mortgage originators who work ‘out of the back seat of their car’ will be a thing of the past as mortgage companies struggle with fallout from the collapse of the subprime mortgage business. Frank Norton Jr….who monitors business and economic development trends, said money for mortgages for people who are not creditworthy has dried up. ‘HomeBanc was relying on a warehouse full of money,’ Norton said. ‘It’s now empty, and they have to close.’”

“Rich White, chairman of United Community Bank in Hall County, said it is hard to see the direction of the current upheaval in the banking industry. ‘We don’t know where rates are going,’ White said. ‘We don’t know what this is going to do to the mortgage industry.’”

The Charlotte Observer from North Carolina. “The nation’s mortgage crisis and housing slowdown are hitting Charlotte, driving new home permits to the lowest level in at least 10 years.”

“Pat Riley, president of Allen Tate, said challenges facing the company this summer include potential buyers who can’t sell their homes in other markets. But he said ‘We are still in the real estate mecca.’”

“At Beazer’s Ardrey Woods, also in south Charlotte, agents declined to discuss sales Thursday, as landscapers spruced up gardens and a family toured the model homes. A sign out front encouraged buyers: ‘Save Thousands Now!’”

“At Cunnane’s Ardrey, Sandy Gay was choosing colors for her new home on Thursday. She and husband Mike expect to move from Florida in March. ‘We don’t expect to have any problem selling our house,’ she said.”

The Palm Beach Post from Florida. “Out of 20 single-family housing markets in Florida, 18 posted declining existing-home sales in the April-to-June period, according to a Florida Association of Realtors report released Wednesday.”

“Palm Beach County and the Treasure Coast were among those markets. Miami saw the biggest decline, followed by the Treasure Coast, which tied Orlando for No. 2 with a 40 percent year-over-year sales slump.”

“‘There’s plenty of inventory, and sellers will bend over backwards for you,’ said Douglas Rill, president of Century 21 America’s Choice.”

“‘Plenty of inventory’ could actually be an understatement. There are nearly 25,000 homes for sale in Palm Beach County, according to Illustrated Properties Real Estate. At this time last year, there were 22,000 homes on the market, according to Illustrated’s Web site. That’s a 12 percent increase.”

The Sun Sentinel from Florida. “The Grove, a proposed development in the county’s extreme northeast corner, could encompass the city of Okeechobee. Twice.”

“Barron Collier plans to raze the grove and replace it with nearly 14,000 homes. Although the housing market has slumped in recent years, Ryan Noah, assistant project manager with Barron Collier, said the developer wants to get The Grove approved and started soon in preparation for a market rebound.”

“‘We don’t want to waste time building when we could be selling,’ Noah said. ‘Building in Florida is not going to go away. (Evans Properties) is out quite a bit of money if they don’t develop the property.’”

The Tampa Tribune from Florida. “The highest priced homes in select Tampa Bay area neighborhoods, exclusive properties and waterfront communities, are still selling, but the bulk of homes on the market are sitting longer.”

“Increased competition from national home builders willing to take a loss just to clear their books may be part of the reason, a Florida real estate expert said Wednesday.”

“Those deals could lower prices in the rest of the neighborhood, said Michael J. Timmerman, Florida managing director of Hanley Wood Market Intelligence.”

“‘They’re reducing homes to less than it costs to build them,’ Timmerman told dozens of real estate professionals. ‘That sets a dangerous precedent when you’re trying to get appraisals’ on other nearby homes.’”

“Sales prices have fallen in recent months, but sellers need to lower their asking prices even more, Timmerman said. At the current sales pace, he said, it could take 25 to 30 months to sell all of the homes on the market in the Bay area.”

“‘People still don’t want to give up the amount of money they thought they had made in their homes,’ Timmerman said. ‘In order to stimulate sales, prices need to come down.’”

The Bradenton Herald from Florida. “Everybody knows about the decline of the subprime market, but now the mortgage industry problems seem to be more far-reaching with mortgage brokers going out of business every day.”

“‘Sellers cannot overprice their homes or hold out in hopes of unrealistic offers as the market continues to be very price sensitive,’ said Shane Masterman, co-founder of Concierge Lending in Sarasota. ‘Buyers who are on the fence waiting for prices to drop another couple percent need to get off the fence and buy now while multiple mortgage options still exist. The number of mortgage options is reducing every day.’”

The Herald Tribune from Florida. “The Sarasota-Bradenton-Venice market sits in the top third of the 100 communities with the nation’s highest foreclosure rates.”

“‘Everyone knows Florida was hot during the boom, and so was Las Vegas,’ said Nancy Detert, a former mortgage broker. ‘And the hotter the market, the more likelihood for foreclosures.’”

“The main culprits were bankers who offered complicated loans and 100 percent financing to people who could not afford it, Detert said. ‘The loan products banks were offering was almost like putting cheese in a rat trap,’ she said. ‘The loans caused people to bite. But when the market turned, it snapped their necks off.’”

“‘These loan programs are fine for getting people into home ownership,’ Detert said. ‘But when they’re used to help people buy two or three houses, that’s not good. No one is going to feel sympathy for the bank or the borrower in that situation.’”

“‘It’s just a crazy market,’ Detert said. ‘Banks should have known better.’”

“‘What few buyers you have are now drying up because there’s no mortgage money out there,’ said George Huhn, a Venice real estate agent and foreclosure specialist. ‘I’m hearing stories all day long about people who meet with mortgage brokers and are told there will be no problem. But when they get to the closing they get turned down. It’s really getting ugly out there.’”

USA Today reports on Florida. “The problems in the mortgage industry, which began late last year and have rapidly deteriorated since June, are having a domino effect in the real estate market.”

“Homeowners are also having more trouble refinancing their escalating adjustable-rate loans, and that is increasing the number of foreclosures and the supply of homes on the market. As a result, sellers are having to wait longer and cut their prices more deeply.”

“When Christine and Michael Canavan moved from Fort Lauderdale to Melbourne, Fla., two years ago, they bought a $250,000 home with a subprime-borrowers ARM that allowed them to pay only the interest on the loan each month.”

“After two years of making their payments on time, their credit score had improved to prime level, but the value of their home sank suddenly this summer.”

“‘I had to go to (the mortgage broker) three times because our appraisal kept depreciating,’ said Christine.”

“‘At first he said, ‘Great news, your home appraisal would be $275,000.’ Within a week, the home had gone down to $240,000. When I went in to do the paperwork, I was in tears. It had dropped to $230,000 in two weeks,’ she said.”

The Orlando Sentinel from Florida. “The building frenzy that has created too many downtown condominiums has also spawned something few people think about: too many downtown penthouses.”

“All told, there are more than three dozen of these exclusive units in various stages of construction floating over Orlando like an Isleworth in the sky.”

“The Florida condo market in general is headed for some rough times. WCI Communities, for example, said just last week that 17 percent of its condominium buyers who signed contracts on units nationwide walked away from the closing table this year.”

“Here in Central Florida, there is evidence to show that the condo inventory is also outnumbering buyers or that buyers have simply changed their minds.”

“Condo sales in the Orlando area declined 64 percent in July from the same month last year, according to a Realtor report released this week.”

“At The Vue at Lake Eola, three of six penthouses are under contract. The units will be move-in ready at the end of the year. They come standard with Subzero refrigerators, a wet bar, rare blue and green granite countertops and remote-controlled Kohler Infinity bathtubs (in case you can’t be bothered to enter the bathroom to run your bath).”

“The Vue penthouses cost $2.2 million to $3 million, not to mention the 29 cents charged per square foot as condo-association fees. For a 2,700-square-foot place, that’s an additional $783 each month.”

“At The Sanctuary, which at about 20 months is one of the oldest towers, there are two of 12 penthouses for sale. They are listed at $2.8 million and $1.8 million. The Sanctuary has a total of 173 units and 11 are empty.”

“It’s doubtful the newer buildings will be so lucky. So far, 55 West at the Esplanade has received contracts on three of eight penthouses (all upward of $4 million) scheduled to be completed next summer.”

“An ad on Craigslist offers another penthouse for rent at the ‘very low’ price of $3,800 a month with an option to buy.”

“Listing agent Jane Scrima of Stirling Sotheby’s International Realty said the level of intrigue is increasing, with two showings just this week. ‘People are looking at them; they’re just not committing on paper,’ she said.”

“There’s no getting around the softness in the market. It may take years to cycle out of the overstacked inventory. But are there enough high rollers, especially as home and condo sales in Central Florida plummet, to fill the ritzy digs? After all, that remote-controlled bathtub doesn’t come cheap.”

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