The Housing Bubble

The California realtors report on July sales. “Home sales decreased 22.7 percent in July in California compared with the same period a year ago, while the median price of an existing home increased 3.2 percent, CAR reported today. ‘The decline in sales we experienced in July continues to be driven by both tighter underwriting standards since the start of the year and the adverse psychological impact of news and information regarding increases in foreclosures and the subprime situation,’ said C.A.R. President Colleen Badagliacco.”

“‘Although the median price posted an increase statewide, there is a disparity between the lower-priced or entry-level markets where prices generally are soft at best and sales have declined sharply, and some higher priced markets that continue to experience price appreciation along with somewhat smaller decreases in sales,’ Badagliacco said.”

“‘With credit drying up in recent weeks, we expect further weakness in sales over the next few months,’ said C.A.R. Chief Economist Leslie Appleton-Young.”

“C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July 2007 was 10.7 months, compared with 7.3 months (revised) for the same period a year ago. In a separate report covering more localized statistics generated by C.A.R. and DataQuick, 29.6 percent, or 110 out of 371 cities and communities, showed an increase in their respective median home prices from a year ago.”

The Daily News. “Home sales were down 12.4 percent in the Los Angeles area in July, compared with the same period a year ago, while the median home price rose 1.9 percent, it was announced today. ”

“July home sales in the area fell 11.9 percent from the previous month, according to the Los Angeles-based CAR.”

From Reuters. “Bhaviesh and Varsha Shah bought their dream home in a new development east of Los Angeles two years ago. Today the view from their porch is a street pocked with boarded windows and dead lawns, homes now repossessed after buyers failed to make mounting mortgage payments.”

“The Shahs live on a street with 10 large homes of 3,000 square feet or more, four of them now in foreclosure. Although they are surviving the mortgage meltdown, their dream development, like many in this arid corner of Southern California known as the Inland Empire, is an early casualty.”

“Survivors of Towne Square find themselves not only with unsightly, empty properties next door, but also with home values plummeting amid the fire sales on foreclosed homes. Selling and moving to a better neighborhood is not much of an option because many owe more on their mortgage than they would get for the sale — what the industry calls ‘upside down.’”

“Joe and Mary Gordon bought an approximately 4,000 square-foot home on the street behind the Shahs for $741,000, thinking it would be their last home after moving from Orange County, just west of the Inland Empire.”

“Two homes on the Gordon’s street are going through foreclosure and one of them, comparable in size to theirs, is being offered by the bank for $550,000. ‘We have no recourse. We’ll have to live here eight to ten years before we get our equity back,’ said Joe.”

“Bob Taylor, president of the development’s homeowners association, said his family thought about moving…they didn’t think they would break even after the market turned south.”

“Despite the bad days spent in Towne Square, Bob Taylor said his family of six is here to stay and even optimistic that nice, responsible neighbors will eventually move into the foreclosed homes. ‘After what we’ve been through for the past two years — short of Charlie Manson moving in — it can’t be any worse,’ he said.”

The Modesto Bee. “Northern San Joaquin Valley home buyers these days have a staggering selection of homes in all sizes, prices and styles. Modesto newcomer Kevin Schinmann called the choices overwhelming: ‘It was like going to a restaurant with a menu that listed 14 pages of unbelievable food.’”

“A recent search of Realtor.com showed 2,273 single-family homes; 197 condos and town homes; and 131 mobile homes for sale in Modesto. More than 200 new homes are completed and waiting for buyers in about 77 subdivisions across Stanislaus County.”

“‘We ended up buying the very first house we had looked at online when we were back in Chicago,’ Schinmann said. But between the time he initially spotted that Bayview Drive house and the day he bought it, he said, ‘the price dropped $130,000.’”

“Prices for new and used homes have been dropping as inventory has soared. Median sales prices are down more than 13 percent since last summer and sales volume has plunged about 45 percent.”

“‘It used to be if someone called and wanted a home for under $300,000, it was hard to help them,’ agent Randy Feldhaus recalled. Now about 1,000 Modesto homes are priced at or below $300,000.”

“‘You’ve got to give buyers what they require to get them to even consider your houses,’ explained Joe Anfuso, who runs Florsheim Homes. So not only are prices coming down, but homes also are being built with more amenities. ‘You’re getting more house for your money,’ he said.”

“That’s a big switch from a few years ago when new home buyers had to camp out in line for the chance to buy a house — any house — from a builder. Back in 2003, for example, about 75 people lined up for the grand opening of Florsheim’s Rose Classics in Turlock.”

From CNN Money. “Being the CEO of one of the nation’s largest real estate firms didn’t stop Tom Kunz from becoming one of those homeowners who’s been hurt by the downturn in the housing market.”

“But not surprisingly, given his position as CEO of Century 21, Kunz thinks the investment he made in his former home in Tuscan Ranch, Calif., was still a good one, even if the value has tumbled about 15 percent over the last three years.”

“Kunz noted that he bought the home for $340,000 in 1998. When he moved to New Jersey from California in 2004 to become CEO of the firm, he had a $1.3 million cash offer for his home. But he turned it down and decided to rent the house instead.”

“This month a former neighbor who has an identical home in the same subdivision sold the house for $1.1 million, Kunz said.”

“‘I could sit here and say, ‘Oh I lost $200,000.’ But I’ve still made about a $700,000 profit,’ he said in the interview late last week about the problems facing the housing market.”

The San Francisco Chronicle. “Two brothers, Antonio and Pedro Sanchez, and Antonio’s wife, Isabel, bought a three-bedroom home in the East Oakland flatlands five years ago. They saved up a 3 percent down payments.”

“The house is now worth $425,000, $100,000 more than they owe on the mortgage. Now the Sanchezes want to (trade) up to a bigger house near their relatives in Woodland (Yolo County), in a better neighborhood. But the chances that they can sell their home, which has been on the market for four weeks, are slim.”

“‘Luckily, they have equity,’ said their Realtor, Mary Dresser. ‘But if they can’t sell, they don’t really have any equity, or at least they can’t gain access to their equity.’”

“Their house is in a real-estate dead zone, in terms of both location and price. Pricewise, entry-level buyers have dropped out of the market because they can’t get financing. ‘Everything below MacArthur (Boulevard) died when the subprime fiasco hit,’ Dresser said. ‘I could see (this house) plain not selling. The buyer pool has dried up.’”

“Even cutting the price wouldn’t help, Dresser said, unless it were a ‘fire-sale’ slashing of $100,000. ‘Then they’d have no house and no money,’ she said.”

“Dresser showed a printout of all the current listings within a half-mile radius. There are 18 homes for sale, and one in escrow. Since May, only two homes in the neighborhood have sold. By contrast, there have been 65 sales since May of Oakland homes priced above $1 million, she said.”

“Statistics across the Bay Area and California have borne out that dichotomy: More-expensive homes are still selling briskly, while affordable homes are in a stagnant market. That has caused the median prices to rise because the mix of homes sold has shifted to the higher end.”

“‘It’s frustrating,’ said Antonio Sanchez. Sanchez said he was robbed at gunpoint on the street last year. When the children want to play outside, the family drives to a park 20 minutes away where they feel safer.”

“The family, which refinanced one time, has an adjustable-rate mortgage on the home. It was $1,800 a month for two years, but three months ago it spiked to $2,800. They can manage that, but it’s a stretch. In nine more months, it is scheduled to rise again.”

“‘This is a postcard-perfect sweet family and a postcard-perfect sweet little house,’ Dresser said. ‘They are regular, hardworking people not able to achieve their goals.’”

The Flathead Beacon reports from Montana. “The pace of second-quarter existing home sales fell by 7.1 percent in Montana, compared to the same time in 2006, according to numbers released last week by the National Association of Realtors. ‘For sale’ signs are propping up all around Flathead Valley, but Ted Dykstra, president of the Northwest Montana Association of Realtors, attributed that to an excessive number of homes on the market, not slow sales.”

“He said many people, after watching their homes appreciate rapidly for a few years, are cashing in – while the number of homes sold has remained the same. Another issue, Dykstra said, is that the market can appear to be softening due to the sheer number of real estate agents in Northwest Montana.”

“‘We’re not seeing that. If we get into a situation where we have four or five years of inventory then we have a problem,’ Dykstra said. Right now, he estimated, the area has between 23 and 27 months of inventory.”

The Idaho Statesman. “Ada County home sales for August will likely be the fewest for that month in almost a decade, according to a local real estate broker. The sluggish housing market is weeding out people who suddenly became home builders and began building high-priced ’spec homes’ when Idaho was one of the hottest real estate markets in the country, said John Cotner, owner of Cotner Construction.”

“Those high-priced homes are not finding many buyers as consumers are concentrating on homes in the $200,000 to $250,000 range. The result, he said, is that people who were not real builders are being forced out of the business. ‘A lot of bad apples are being shaken out,’ he said.”

“In some cases, Cotner said, builders who sold spec homes to investors now find themselves competing for buyers against those same investors.”

The News Tribune from Washington. “Saving money for a down payment might soon be the newest trend revisited in financing the purchase of a home. At Community One Financial in Puyallup, senior loan officer Jayme Coffey said that in the last three weeks she and her colleagues scrambled to find new funding sources for 25 loans that had been preapproved for no-money-down mortgages – sometimes called”

“80-20 or piggyback loans – that some banks would no longer finance. ‘The 80-20 is effectively dead,’ she said.”

“Adam Stein, president of the Washington Association of Mortgage Brokers, called the recent mortgage lending environment ‘a credit democracy.’”

“Not so today. ‘There are people right now who aren’t getting home loans. That’s the sad reality,’ Stein said. ‘Right now the market is in an overcorrection.’”

“Among those left out are self-employed buyers with difficult-to-verify income and buyers with imperfect credit history, Stein said. He predicts the zero-down mortgage products left will continue to retreat in the next six months, just as the 80-20 has.”

“‘I looked for it today and couldn’t find it. I called a couple places where I used to do business,’ Stein said last week. ‘It was offered a month or two weeks ago.’”

“Chris Dunayski, who owns High Point Mortgage in Puyallup, said mortgages in the near future will look much like what buyers used in the 1980s and 1990s. Twenty to 30 years ago, a 20 percent down payment was considered the norm.” “Twenty percent of July’s $281,400 median home price would be $56,280.”

“‘I would think at some point 100 percent will be gone and people buying homes will be responsible with their money and save and invest,’ he said.”

The Seattle Times from Washington. “In the last several weeks, the national mortgage crisis has spread beyond the subprime market to jumbo loans. Nearly half of the single-family houses for sale in King County, plus 21 percent of the condos, have sales prices high enough to require jumbo loans, and that’s if buyers reduce their loan amount by putting 20 percent down.”

“‘Funding sources have dried up for all loan products except for conforming loan product,’ explains Erik Hand, president of Bellevue-based Response Mortgage. ‘Anything outside of those product types and your options are limited because there’s no investor appetite for those loans anymore.’”

“Home purchases are almost always contingent on financing and ‘we’re probably in something of a flattening [housing] market right now while we work through this,’ says Mike Skahen, owner of Lake & Co. Real Estate in North Seattle. ‘It makes me a little bit nervous because no one knows where it’s going right now.’”

“Last week, his office was handling a $1 million house purchase when the lender went bankrupt. ‘The buyer is looking for an alternative lender now, and hopefully she can find one,’ Skahen says.”

“From his high-rise office in HomeStreet Bank’s downtown Seattle headquarters, residential-lending director Rich Bennion views the widespread mortgage crisis as ‘the inevitable correction for some of the excesses of the past several years.’”

“Bennion suspects some consumers will shy away from buying altogether. ‘They’ll decide that instead of buying now, they’ll wait a year. Or instead of buying now, they’ll stay put and remodel the kitchen,’ he says. ‘It has a dampening effect on the housing market, no question.’”

The Tigard Times from Oregon. “‘Is the housing market getting worse?’ Maybe it has everywhere else but not in Oregon, and definitely not in Portland or its surrounding communities, including Tigard, Tualatin and Beaverton, according to local agents.”

“Broker Eva Sanders says many sellers still think they live in a 2005 housing market when buyers were basically standing in line for houses. ‘2005 was an incredible sellers’ market,’ said Sanders. ‘People thought, ‘I can get anything for my house and I don’t have to do anything to it.’ That has all changed.’”

“‘Now buyers have more inventory to choose from. Buyers now have the ability to comparison shop,’ Her rule: ‘If you compete you can sell, if you’re not willing to compete, you won’t sell.’”

“‘It depends on where you are and what you have,’ said Sanders. If, for example, it’s a townhouse up at Progress Ridge in Beaverton, Sanders says, ‘There are way more townhouses than we can absorb for a long time. It’s probably not going to sell.’”

The Lake Oswego Review from Oregon. “Local Realtors said the recent credit crunch is part of the market’s return to normalcy. ‘Everybody knows that it was time to adjust,’ said broker Mary Jo Avery. ‘If it kept going in the direction that it was going, people wouldn’t be able to afford homes. People with no down payment are not going to be able to buy anything for awhile. You have to have some cash to buy a house now.’”

“July saw a 21 percent drop in the number of pending sales in Lake Oswego and West Linn, compared with the same month last year. The number of home sales, including condos, in Lake Oswego and West Linn in July 2004 was 194, compared with 138 this year. The number of listings in our areas went from 555 in July 2004 to 1,008 this year, nearly double the inventory.”

“‘Most of the loan programs that were available before the credit crunch are still available,’ said Brian Bushlach, a senior adviser with Alpine Mortgage Planning. ‘But the underwriting requirements and credit score requirements have been raised. It’s almost like the old-fashioned mortgage — you have to have a job and good credit.’”

“Avery said the days of ‘aggressive pricing’ — in which the seller could set the price at a high level and most often get it — are gone.”

“If prices stagnate for a few years, or even go down, it’s all part of the correction process, Avery said. ‘It’s more a process of adjusting to prices where they need to be,’ she said.”

“While other areas of the country could see severe drop in home values, Avery said she doesn’t predict the same for this region. ‘I don’t think that will really affect us here in this slice of heaven,’ she said.”

The Oregonian. “Lime Financial Services rode the housing boom to considerable heights, growing from 30 employees in 2003 to 450 last summer. The Lake Oswego-based mortgage lender was frequently cited as one of Oregon’s fastest-growing companies.”

“Today, Lime boasts a far more modest claim to fame — it is not dead. Lime agreed in April to be bought by deep-pocketed investment bank Credit Suisse. The deal makes it one of Oregon’s last subprime mortgage lenders still operating despite an unprecedented meltdown of the U.S. mortgage industry.”

“‘I’ve been in this business for 30 years, and I’ve seen a lot of cycles,’ said Rick Baldwin, whose own subprime lender, Meritage Mortgage, closed up shop in November. ‘But none this bad. This makes every other downturn pale in comparison.’”

“By late 2006, the industry’s looser standards had reaped a predictable harvest of unqualified homebuyers and unpaid mortgages.”

“‘I call it the race to idiocy,’ said Ken Perry, whose Broker Knowledge Group offers classes for mortgage professionals. ‘The more you loosened the guidelines, the more people got into homes, the more money everyone made. But it was unsustainable.’”

“A painful truth of the industry implosion is that it was in large part self-inflicted. In their zeal for a piece of the red-hot housing action, lenders created loan products far beyond the pale of traditional banking.”

“More than a dozen mortgage professionals interviewed for this story agreed that some of the most fundamental gauges of financial prudence were relegated to the round file.”

“Traditionally, lenders didn’t extend a home loan to someone if the mortgage payment would exceed 28 percent of their monthly income or would push their total debt payments to more than 36 percent of their income.”

“In the new era, some lenders accepted debt-to-income ratios as high as 65 percent. Likewise, the traditional down payment went by the wayside. Instead of requiring borrowers to put up 3 percent to 10 percent of a home’s price tag, some lenders cheerfully made loans equal to 100 percent, or even 125 percent, of a home’s value.”

“‘It got out of hand,’ Baldwin said. ‘Everybody knew in the back of their mind what was happening. But it was just too good. It was just too good.’”

“The day of reckoning finally came. In 2006, homeowners began to default on mortgages in larger numbers. The institutional investors who bought the mortgages from Wall Street exercised their rights to demand that mortgage wholesalers such as Lake Oswego’s Sunset Direct Lending buy back nonperforming mortgages.”

“‘We were facing $20 million in buyback demands,’ said Frank Frazzitta, Sunset Direct co-founder. ‘That was more than we had in capital.’ Sunset Direct, which had 125 workers at its peak, closed in March.”

“Since January, 2,372 mortgage professionals have withdrawn their state registrations, a 20 percent decline, according to Dave Tatman, administrator of the Oregon Department of Finance and Corporate Securities.”

“Mortgage industry veterans, meanwhile, argue that they were the victims. ‘There were a lot of people who lied to get into homes,’ Frazzitta said. ‘We’ve seen every kind of fraud that you can imagine.’”

“Optimists hope the worst is past. Others aren’t so sure, noting the wave of adjustable home mortgages scheduled to tick upward over the next two years. That could mean new defaults, delinquencies and foreclosures.”

“‘You can’t bounce back from this until the adjustable-rate mortgages wash out,’ Perry said. ‘If people can’t refinance, they can’t keep their houses.’”

Some housing bubble news from Wall Street and Washington. MarketWatch, “Inventories of unsold single-family homes increased 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years, the National Association of Realtors reported Monday. Sales were down 9% compared with a year earlier. The results were the slowest since November 2002.”

“Inventories of single-family unsold homes represented a 9.2-month supply at the July sales pace, the highest since October 1991. For all homes, the inventory rose 5.1% to a record 4.59 million, representing a 9.6-month supply. Condo inventories surged 20% to 742,000, an 11.9-month supply at the July sales pace.”

“Inventories typically fall in July, said Lawrence Yun, senior economist for the real estate trade group. The inventory figures are not seasonally adjusted. ‘The inventory is very high,’ Yun said, adding that rising foreclosures might be increasing levels of inventories by 5% to 7%.”

“‘These data reflect conditions prior to the financial market volatility of August,’ wrote John Ryding, chief U.S. economist for Bear Stearns.”

“Yun said the market is holding on despite temporary mortgage disruptions. ‘Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,’ he said. ‘Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.’”

From Bloomberg. “The median price of an existing home dropped 0.6 percent in July from a year ago to $228,900, the Realtors group said.”

“‘We continue to wrestle with the interrelated challenges of softer demand and excess housing supply in most markets,’ Toll Brothers Inc. CEO Robert Toll said on a conference call Aug. 22. ‘Traffic is pretty stinky out there.’”

The Associated Press. “Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.”

“Borrowers’ withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples’ minds, according to a survey of 258 members conducted by the National Association of Business Economics.”

“The tumult in the financial markets has led businesses to revisit their interpretation of the housing boom earlier this decade and the easy credit that fueled it, NABE said. The proportion of surveyed members who call it a ’serious national bubble’ more than doubled from two years ago to 29 percent, the group said.”

The New York Times. “On its way to becoming the nation’s largest mortgage lender, the Countrywide Financial Corporation encouraged its sales force to court customers over the telephone with a seductive pitch that seldom varied. ‘I want to be sure you are getting the best loan possible,’ the sales representatives would say.”

“But providing ‘the best loan possible’ to customers wasn’t always the bank’s main goal, say some former employees.”

“One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide.”

“Other documents from the subprime unit also show that Countrywide was willing to underwrite loans that left little disposable income for borrowers’ food, clothing and other living expenses.”

“A different manual states that loans could be written for borrowers even if, in a family of four, they had just $1,000 in disposable income after paying their mortgage bill. A loan to a single borrower could be made even if the person had just $550 left each month to live on, the manual said.”

“‘In terms of being unresponsive to what was happening, to sticking it out the longest, and continuing to justify the garbage they were selling, Countrywide was the worst lender,’ said Ira Rheingold, executive director of the National Association of Consumer Advocates. ‘And anytime states tried to pass responsible lending laws, Countrywide was fighting it tooth and nail.’”

The Coloradoan. “Norlarco Credit Union stopped making construction loans on homes in Florida a year ago, but now faces numerous lawsuits alleging it made construction loans to members who couldn’t afford the payments and defrauded another credit union into sharing the risk.”

“At least six lawsuits in Florida and one in Colorado naming Norlarco as a defendant paint a picture of a credit union that ignored credit-worthiness when approving loans, many in Lehigh Acres on the western edge of the Everglades near Fort Myers, Fla.”

“Construction loans resulted in mounting delinquencies, which led federal regulators to seize control of Norlarco in July within weeks of the lawsuits hitting Florida courts.”

“With more than $212 million in deposits and $334 million in assets as of June, Norlarco is the largest credit union in Larimer County and eighth-largest in Colorado.”

“Norlarco CEO Bob Hamer told the Coloradoan on Thursday he stopped the Florida loan program about a year ago when he replaced former CEO Chuck Mabry, who retired. Mabry defended the loans as ‘a good risk, well-secured and very profitable for us.’ He said he ‘had absolutely no idea’ what went wrong.”

“In the lawsuits filed in Florida federal court, Norlarco is accused of making deals with builders and buyers that promised big returns on their investments but went bust when the Florida housing market tanked.”

The Brisbane Times. “Although financial markets have begun to stabilize after several turbulent weeks, experts say the subprime mortgage loan crisis will take time to resolve, and could drag down other sectors of the economy.”

“Gridlock in credit markets is putting more pressure on housing as lenders tighten standards in the face of rising delinquencies, say economists.”

“With a pullback in lending, ‘We now look for an even deeper housing recession,’ said Lehman Brothers economists Michelle Meyer and Ethan Harris in a briefing note to clients.”

“Goldman Sachs’ economist Jan Hatzius agreed, saying the bubble in housing has yet to be unwound. ‘Our working assumption has been that US home prices are about 15 percent overvalued,’ Hatzius said.”

“But because of changes in credit availability and mortgage rates, Hatzius said he sees ‘a more dire picture’ in which ‘cumulative nominal price declines of 15 to 30 percent are possible.’”

“Because so many bad loans were packaged into securities that were sold around the world, said Robert Brusca at FAO Economics, ‘This has created tremendous financial turmoil … it’s an Easter egg hunt trying to figure out who holds the bad ones.’”

“The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.”

“The reversal is particularly striking because many government officials and housing-industry executives had said that a nationwide decline would never happen, even though prices had fallen in some coastal areas as recently as the early 1990s.”

“A 2004 report jointly written by the top economists at five organizations, the industry groups for real estate agents, home builders and community bankers, as well as Fannie Mae and Freddie Mac, the large government-sponsored backers of home mortgages — was typical. It said that ‘there is little possibility of a widespread national decline since there is no national housing market.’”

“Alan Greenspan, the former Fed chairman, said the housing market was not susceptible to bubbles, in part because every local market is different.”

“In 2005, Ben S. Bernanke, then an adviser to President Bush and now the Fed chairman, said ’strong fundamentals’ were the main force behind the rise in prices. ‘We’ve never had a decline in housing prices on a nationwide basis,’ he added.”

“As interest rates fell and lending standards became looser, prices started rising rapidly in the late 1990s. The result was a ‘euphoric popular delusion’ that real estate was a can’t-miss investment, said Edward W. Gjertsen II, president of the Financial Planners Association of Illinois. ‘That’s just human nature.’”

“Dean Baker, an economist in Washington who has been arguing for the last five years that houses were overvalued, said the idea that house prices could go only up had fed the bubble.”

“It was very misleading,’ said Mr. Baker. There are a lot of people, he said, who bought ‘homes at hugely inflated prices who are going to take a hit. You also have a lot of people who borrowed against those inflated prices.’”

“Perhaps the most prominent housing booster was David Lereah, the chief economist at the National Association of Realtors until April. In 2005, he published a book titled, ‘Are You Missing the Real Estate Boom?’ In 2006, it was updated and rereleased as ‘Why the Real Estate Boom Will Not Bust.’ This year, Mr. Lereah published a new book, ‘All Real Estate Is Local.’”

“In an interview, Mr. Lereah acknowledged he had gotten it wrong, saying he did not fully realize how loose lending standards had become and how quickly they would tighten up again this summer.”

“But he argued that many of his critics have also been proved wrong, because they were bearish as early as 2002.”

“‘The bears were bears way too early, and the bulls were bulls too late,’ he said. ‘You need to know when you are straying from fundamentals. It’s hard, when you are in the middle of the storm, to know.’”

The Orlando Sentinel reports from Florida. “The champagne-popping days are over for Natalie and David Luongo, who banked enough money flipping a South Florida condo three years ago to stage a $100,000 wedding. Should they walk away from the $117,000 deposit they plunked down on another investment condo in the ritzy Miami-Dade enclave of Bal Harbour? Or should they close on the one-bedroom unit, which is similar to others now on the market for less than the $585,000 they agreed to pay?”

“‘It’s painful and scary,’ Natalie Luongo said. ‘We saw the frenzy, and we bought in. Now we’re paying the consequences.’”

“Just how many other speculators face the same dilemma in the nation’s most glutted condo market will become clear during the next two years. That is when 25,000 new condo units, most of them rising in or near Miami’s downtown, will flood an area already saturated with 23,000 condos listed for sale. An additional 40,000 units have been approved, but analysts doubt the majority will break ground.”

“(Consultants) warned that up to 70 percent of the condos rising in Miami were being snapped up by people who didn’t plan to hold on to them, much less live in them. That was evident from the hordes who camped overnight, fought over lottery numbers, even paid homeless men $20 and a pack of cigarettes to hold their places in long lines, all for the chance to put 20 percent deposits on condos that existed only in brochures.”

“The frenzy for some projects was so fevered that some developers raised their prices hourly.”

“‘It was a nightmare. Lines around the corner. People screaming into phones. I would look at them, and think, ‘You don’t know what you’re doing,’ said Mark Zilbert, president of Zilbert Realty Group.”

“Gregg and Mary Mullins, retirees living near Fort Myers, finally rented out the two-story $885,500 penthouse they closed on last year in Blue, a concave tower overlooking Biscayne Bay. But the $2,800-a-month rent they’re collecting is less than half their monthly mortgage payment, maintenance fees and property taxes.”

“The couple never planned to live in the condo, but jumped at buying it at pre-construction prices in 2004 after friends shared a familiar story. ‘They said they made lots of money, so they told us to try it and maybe we could make lots of money, too,’ Mary Mullins said. ‘But that didn’t happen. We don’t know what happened.’”

“A sheepish Tom Leon says he knows. The retired businessman from Illinois said he knew he had made a mistake about six months after he put down $200,000 on two $500,000 condos at the end of 2004.”

“‘Every 2 inches, I’d see another [construction] crane, and I knew: There is no market that can absorb these many units,’ said Leon. ‘It doesn’t take a rocket scientist to say, ‘Gee, who’s going to live in all these buildings?’”

“After a more than five-year frenzy, the condo-building boom in downtown Orlando has ground to a halt. A new Orlando Sentinel survey of the downtown core finds that more than two-thirds of the 40 new high- and mid-rise condo projects announced in recent years are in limbo.”

“Not a single project has broken ground since an identical Sentinel survey six months ago found only 15 of the 40 projects had begun construction or been completed. Scott Stahley, a senior VP at Lincoln Property Co., calls the current condo environment ’scary.’ ‘It cannot be done,’ said Stahley.”

“The projects that have yet to get out of the ground may be the lucky ones. Many developers say the condo market has fallen so precipitously that the true danger now lies with the handful of still-incomplete towers that have already passed the point of no return.”

“A number of developers are in a situation some say is the worst-case scenario: halfway built. Five downtown condo towers are in the midst of construction right now, including the 100-unit Star Tower and the 146-unit 101 Eola. The other three are giants.”

“Developers make no secret that they will be anxiously watching to see how the newest projects perform. ‘I think everybody is in the search mode: How many investors are there?’ said Michael Beale, of Raleigh, N.C.-based Highwoods Properties, which has a 125-unit downtown condo project on hold and another in early planning stages.”

“‘We were all hoping it was like 80 percent owner-occupied and 20 percent investors,’ he said. ‘But no one knows.’”

The Palm Beach Post. “After 14 months, Pam Crosby finally blinked. The former morning news anchor put her Lake Worth home on the market on June 9, 2006. ‘I had been told for the past two years I could get all this money for it, and then I went to have it appraised, and it appraised high - $260,000 to $280,000,’ she said. ‘Then the bottom fell out.’”

“Despite being listed with a widely respected Realtor, the two-bedroom, one-bath house was shown only five times in 14 months, she said. There were no offers.”

“The supply of single-family homes and condominium units for sale in Palm Beach County’s MLS reached 32 months’ worth in June in the $200,000-$299,999 price range, according to Illustrated Properties Real Estate.”

“In the $300,000-$499,999 range, which has included the county’s median price since the boom times, sales declined 73 percent from June 2006 to June of this year. And it would take 37 months to burn off the supply.”

“In Palm Beach County, 1,142 homeowners lost their bid for the American dream - or their investment flip - compared with 370 foreclosures in the same month a year ago, the Palm Beach County clerk’s office said. It was worse in St. Lucie County, where 429 homeowners got foreclosure notices last month - nearly five times as many as in July 2006, when 90 were filed, according to the clerk’s office.”

“After getting nary a nibble on her home for more than a year, Crosby lowered her asking price from the original $260,000 to $156,000. She decided to sell the 800-square-foot house herself, a challenging task for an out-of-town owner. If Crosby can’t sell the house, she said, she’ll rent it.”

“‘My sellers are sticking to their guns in pricing,’ said Douglas Rill, president of Century 21 America’s Choice. How are sales? ‘Slow,’ he said.”

“‘One client - a famous guy, but I can’t tell you who he is - thinks, ‘Well, it will sell now or it will sell next year,’ Rill said. ‘But he really can’t hold out because he has a $1 million mortgage. He moved to North Carolina, so he’s going to lose his homestead.’”

‘”When that sticker shock comes up and his taxes are $75,000 instead of $7,500, then I think in November or December when the tax bill comes, price is going to matter. When it’s costing him $15,000 a month, it’s going to matter,’ he said.”

The St Petersburg Times. “Bleak headlines say the home building industry has sunk into its worst trough in a decade. With sympathies to laid-off construction workers and model home sales staff, three cheers for the trough. It’s good news for Tampa Bay area homeowners.”

“In our region the big picture depicts a glut the size of Goliath. In July, of 41,000 homes for sale in Pinellas, Pasco and Hillsborough counties, about 2,400 sold. With so many homes competing for so few buyers, a house sells for about 10 to 20 percent less than it would have 18 months ago.”

“Aside from sellers yanking their home listings to await better days, the market needs builders to give it a rest.”

The Ledger. “Foreclosures filed for single-family homes in Polk in 2007 totaled 1,696 through July, nearly doubling 2006’s total of 998, according to data collected by Largo-based Foreclosures Daily. And there’s still another five months to tally.”

“Tracy Beebe, a manager in Polk County’s Circuit Court’s civil division, spoke with several real-estate lawyers who estimate thousands of foreclosures are waiting to be filed around the state.”

“Chris Osmon, who owns AAA Housebuyers LLC, hasn’t found any deals. ‘It’s a down market right now,’ said the Lakeland investor. ‘No one is bidding because the homes are at 100 percent of their value or greater and the banks don’t want to take a loss. It makes no sense as an investor to bid on those properties.’”

“At the auction last week, properties were sold within a matter of minutes, sometimes seconds. But only the lenders foreclosing on the property were bidding.”

“Polk’s median home sales price has increased 96 percent from $89,000 in 2002 to $175,300 in June. Across Florida, median property values increased 76 percent during that time from $137,800 to $243,200.”

“The rise in prices helped fuel a craze among buyers hoping to get into a new home, investors wanting to make quick cash and lenders looking to make money off new mortgages. ‘The less you understand and know, the more money they make,’ Jeff Lazerson, CEO of a mortgage broker in Laguna Niguel, Calif., said of mortgage lenders.”

“That is what has helped fuel the current foreclosure situation around the country. ‘Many of the lenders were loose or had no standards for underwriting,’ he said. ‘You could be dead and get a loan.’”

The Herald Tribune. “Sarasota Realtors coined a new slogan in January: Time2Buy. One of these days they may be right, experts say. Those willing and able to buy can take their pick, make low-ball offers without fear of derision and wait for a seller to take the bait.”

“But though it is easy to make a buy now, not all the experts agree that it is the right thing to do.”

“‘Prices definitely have declined, especially in areas like yours,’ said Susan Wachter,a professor of real estate at the Wharton School in Philadelphia. ‘You are in the epicenter of the subprime-induced bubble.’”

“In July 2005, a Sarasota buyer would have found just 1,626 active single-family listings, a mere 10 weeks’ worth of inventory. Realtors were closing on 156 deals per week. This summer, that would-be buyer has 8,135 homes to consider. At the current sales rate of 90 houses a week, that inventory will last 90 weeks.”

“‘We are in a holding pattern, because we haven’t seen the bottom yet,’ said George Huhn, founder of Gulf2Golf Properties in Venice. ‘There may be another 20 percent, 30 percent on the downside on this thing.’”

“‘Everybody wants to know when will we get out of trouble,’ said Sarasota banker Jody Hudgins. ‘In January of ‘06, people were saying, ‘Sometime in the spring and summer of 2007.’ Well, that has come and gone, and what are we saying now?’”

“As chief economist at Wachovia Bank, Mark Vitner of Charlotte, N.C., has a unique vantage point on the construction-related economy in the Southeast. He claims to know the executives of every major builder in the region.” “In Vitner’s view, the nation is roughly halfway through a two-year-long correction in existing home prices, which started in third quarter 2006.”

“‘We are in the early stages of a buyer’s market, because there are more sellers than buyers. But sellers really haven’t come off their prices enough to make it attractive to the buyers,’ he said.”

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