The Housing Bubble

The Orange County Register reports from California. “After home shopping for seven months, Kane and Carrie Johnson found the first new home for sale that they like and can afford in Orange County. They’re not whipping out pens to sign sales contracts, however. They’re waiting to see if home prices soften further.”

“He and his wife are content to rent in Anaheim Hills and may not buy until next year. ‘With the market the way it is, we are not in a hurry,’ Carrie Johnson said.”

“Real estate agents say spring and summer months, which come to a close around Labor Day, are normally the busiest time of the year. However, this year the hot selling season never arrived.”

“In July, buyers closed on 2,391 homes, down 19.8 percent from July 2006, reported DataQuick. July marked the 22nd straight month that sales lagged a year ago. This year’s slump rivals a similar streak from June 1989 to March 1991.”

“Laura Rivera, a Tustin Ranch resident who toured Celadon on Labor Day, said she works in the mortgage industry and is just looking at homes right now. ‘I’m waiting for prices to come down more,’ she said.”

“Dick Lobin, a real estate agent in Huntington Beach, said home prices have dropped about 20 percent in some cities since the market peaked in summer 2005. He said cities such as Garden Grove, Santa Ana and Westminster are hardest hit because more home buyers have spotty credit or used creative financing to stretch into a home.”

“‘Those loan programs have either vanished entirely or been modified,’ he said.”

“Lobin said home shoppers can find some great deals. But he said prices might drop another five to ten percent. ‘It is miserable. You can’t deny it,’ Lobin said of the market. ‘But it’s not dead, on the other hand, either. It’s just that (agents) have to work for a living now. We did have quite a party, didn’t we?’”

The Herald. “The bursting of the housing bubble has translated into fewer construction jobs in California, but Monterey County appears to be bucking the trend.”

“In their annual Labor Day report, experts at the University of California-Berkeley found that…real wages for California workers fell and unemployment grew in the last 12 months. Between 2003 and 2006 California added 40,000 to 50,000 construction jobs annually, but in the last 12-month period the state has lost 12,000 of those jobs.”

“Statewide, the real estate market has created a slowdown in construction. ‘The housing bubble has had an effect,’ said Arindrajit Dube, a researcher with the university center. ‘In the last 12 months, there has been virtually no addition in construction jobs.’”

“‘Annual job growth has definitely not reached pre-recession levels in 1990s. In California, 200,000 jobs were added last year compared to 400,000 (annually) between 1997 and 2000. The 200,000 increase was unable to keep up with the state’s increasing population, with unemployment jumping to 5.2 percent in the last 12 months from 4.9 percent the previous year.”

“While earnings rose by 0.4 percent between 2006 and 2007 nationwide, the biggest increase in five years, in California real wages fell by 0.8 percent. Statewide, wages are 1 percent lower in 2007 than in 2003.”

The Recordnet. “In a rugged home-sales market, a number of spins are arising as agents and sellers try to adjust to keep the business of sales going.”

“Donna Kniess and a friend have their three-bedroom, two-bath home in Spanos Park West up for sale at $389,000 - and the for-sale-by-owner fliers specifically note to agents: ‘I am not interested in having my home listed with an agent. This allows me to offer a better price to the buyer.’”

“Thus far, the only response has been a deluge of printed information or phone calls from agents who want to list the house, Kniess said.”

“Kniess and her friend own another home in Merced and aren’t financially pressed to sell the Stockton house, she said. ‘It’s a shot,’ she said. ‘You never know.’”

“Her house, initially listed eight months ago at $425,000 and then lowered to $414,000, did garner two offers - one at $410,000 for the house and all its furnishings. Kniess said she wasn’t offended by that offer and should have accepted it. She and her friend also turned down another offer, sans furniture, at $395,000.”

“They turned down both offers at the urging of their real estate agent, who urged counteroffers to get the sales price up but instead ended up offending the would-be buyers enough that they went away, she said.”

“Longtime real estate agent Kevin Moran concentrates on foreclosure residential properties. ‘I saw the writing on the wall,’ he said.”

“Moran, who has worked in real estate a quarter-century, said he decided to specialize in foreclosure properties this past spring, when it became clear how much the market was slowing for traditional sales. ‘It’s just a bigger hit than anyone saw coming,’ he said.”

“He expected about a 30 percent drop in business. Instead, it’s down about 70 percent from its heyday in 2005. Moran estimated three out of 10 homes on the market these days are foreclosures and expects that will increase in coming months.”

“Moran said he has more than 30 foreclosure listings and is getting about five more each week. He also is making sales regularly, he said, because foreclosed properties are perceived by many buyers as the best deals.”

“‘It is a segment of the market that’s performing,’ he said. ‘I believe this will pay the bills for me and my family until this thing turns.’”

From MarketWatch. “I spent some time with an industry expert in one of the most distressed areas of northern California — the Stockton metropolitan area, which currently sports the highest foreclosure rate in the nation.”

“Clay Edwards, an area mortgage consultant, specializes in loans in an area known as Mountain House, an enormous master planned community in the grassy flatlands just across the pass from the San Francisco Bay Area and just southwest of Stockton itself.”

“It’s a huge area, scoped someday to include 48,000 homes, and is popular with folks willing to deal with a one- to two-hour Bay Area commute just to get a new family home: a home of perhaps 2,900 square feet on a 5000-square foot lot for $689,000.”

“The Stockton metro area has had more than 8,000 foreclosures so far this year, one for every 27 households in the area, according to data from RealtyTrac. Edwards says some 80% of the listed homes in the area are in some kind of financial distress.”

“Closer to Mountain House, the commuter community of Tracy, part of the official Stockton metro area, has some 1,000 listings out of 25,000 homes, with 45% of those in a ‘distress’ situation.”

“Are a lot of Mountain House residents ‘upside down,’ meaning they owe more on their mortgage than their home is worth? ‘You bet,’ says Edwards.”

“So what lender would lend in that kind of environment? Edwards recalls a recent $600,000 application with a sizzling 786 ‘FICO’ credit score, with an interest rate buy-down went through 40 banks before getting an offer. And in many more cases, you’ll get a loan, but it won’t be at the market rate.”

“Edwards continues: ‘I don’t think we’ve hit bottom yet, and it’ll probably take six to 12 months for this thing to work itself out. We had the biggest boom in 40 years, now we’re correcting, but most borrowers are doing fine. We’ll be stronger when it does come back.’”

“Asked what could derail the recovery: ‘A recession. A dip in jobs could screw everything up.’”

“Santa Ana-based title-insurer First American announced this morning that it plans to cut about 1,300 jobs this month. The job cuts are in addition to 600 jobs eliminated earlier this year.”

The Daily Herald. “Because home sales and moves stimulate purchases of appliances, electronics and furniture, the giant chains that catered to house flippers and renovators have reported recession like results.”

“Americans who were living high by taking out home-equity loans during the boom have watched their equity drop and are now faint of heart when it comes to big-ticket discretionary purchases. The nation’s biggest retailing sector — automobiles — is likewise feeling the effects.”

“John Crane, general sales manager at Ron Smith Buick Pontiac GMC Jeep in Merced, Calif., has seen a tremendous slowdown in the past six to eight months. ‘People don’t have the money to look at cars,’ he says. ‘They’re having a hard time paying house payments. Now their second mortgages and 1 percent loans are coming up.’”

The Missoulian reports from Montana. “Missoula may be somewhat insulated from the mortgage market misery consuming the rest of the nation, but it isn’t entirely immune. ‘Nationwide, the number of products we have to offer as mortgage lenders has shrunk,’ said explained Cathy Swofford, broker and owner of Missoula Mortgage. ‘It is a drastic reduction.’”

“‘We’ve seen some contractions in sales prices,’ Swofford pointed out. ‘Houses are staying on the market a little bit longer, and sometimes that helps the prices come down a little bit - and they need to.’”

“Prices are certainly no longer jumping like they once were, and people are finding they can’t flip a home for $20,000 to $30,000 in profit, said agent Bonnie Williford. Sellers can no longer inflate their prices or they risk losing their buyers, even after the price is reduced. There is just too much inventory competing for buyers’ attention, she said.”

“‘We’re doing fine, but we’re leveling,’ Williford said. ‘In this market, you really need to price it right.’”

The Idaho Statesman. “CBH Homes, one of Idaho’s largest homebuilders, is turning to online auction giant eBay to jumpstart the Treasure Valley’s sluggish housing market.”

“‘The current market demands out-of-the-box ideas,’ Ronda Conger, CBH Homes vice president, said in a statement. ‘We thought an eBay auction would be a fun and different way to attract potential buyers.’”

“The eBay plan comes at a time when home sales across the valley continue to drop. Last week, Ada County home sales in August were forecast to be the lowest in nine years. Forecasts called for 528 homes to be sold, the fewest since 527 in August 1998.”

“In July almost 8,000 homes awaited sale in the Treasure Valley market.”

The Statesman Journal from Oregon. “The Salem area and Oregon have escaped most of the fallout from the subprime mortgage crisis that’s driving up home foreclosures and rattling Wall Street. But some see signs of trouble ahead.”

“‘It’s not a perfect storm, but you have a number of low-grade weather systems coming together,’ said David Tatman, the state’s chief banking regulator.”

“Angela Martin, who works on predatory lending issues for the progressive coalition Our Oregon, warns that Oregon faces a ‘tsunami’ of foreclosures from adjustable-rate subprime loans over the next 18 months.”

“About 40,000 Oregon mortgages will reset to higher interest rates this year and next, Martin said. ‘For the average person holding a subprime loan, their average monthly payment is going to go up $406,’ he said. A typical subprime loan payment could jump 25 percent, no easy task for borrowers with weak credit.”

“Since January, 2,372 loan originators stopped operating in Oregon, or nearly one-fifth of those arranging home loans, said Berri Leslie, mortgage lending program manager for the Division of Finance and Corporate Securities.”

“Foreclosures in the Medford area rose this year after home prices weakened, said Mike Leachman, policy analyst for the Oregon Center for Public Policy.”

“Salem resident Marci White complained that she wound up with a $1,500 monthly house payment despite reporting a monthly income of $2,166. White told regulators that the lender asked her to write a letter saying she expected monthly child support payments on top of her income, even though she’d only received one payment and her child support was four months in arrears.”

“Many mortgage lenders and industry analysts scoff at the notion of a crisis in Oregon because of its healthy real estate markets, low foreclosure rates and lower use of subprime loans. ‘We’re a different animal than what’s taking place in Southern California and in Nevada and in Florida,’ said Tim Larson, a commercial loan officer for Salem-based Silver Falls Mortgage.”

“Salem’s hot real estate market makes it easier to refinance loans, Larson said.”

The Bellingham Herald from Washington. “Gragg Miller of Coldwell Banker Miller-Arnason said this summer has followed a similar trend he’s seen earlier this year, with steady sales in a somewhat uneven market. ‘Prices couldn’t continue to go up like they had been.’”

“Realtor Peter Roberts described the market as ‘mixed, but with a stable core.’ ‘There are about four times as many homes out there now compared to the market peak of August 2005, so while the sales are just a little slower, the supply is way up,’ Roberts said.”

“‘The main risk to the local market is that reductions in credit availability will have an adverse effect on demand. It remains to be seen how large this effect will be,’ said Julie Hansen, an economics professor at Western Washington University.”

The Daily News from Washington. “The Longview area’s 13.6 percent year-over-year increase in home values ranks sixth in the country, according to Office of Federal Housing Enterprise Oversight data released last week.”

“‘I’m kind of surprised at the that ranking,’ said Matt Broughton, Realtor/owner of Realty World in Longview. ‘I’ve been seeing a flat market, we’re seeing a lot of pricing reductions. There’s a lot inventory. It’s not like it was last summer.’”

“Longview’s ranking likely also is bolstered by current owners refinancing their homes for extra cash, since part of the OFHEO measures refinancing.”

“‘The market spiked last year and lots of people were still getting the equity out of the home this year,’ Broughton said.”

The News Tribune from Washington. “If you had to guess where the highest and lowest foreclosures in the South Sound occurred in July, where would they be? Top of the list: Spanaway, with 33 auction notices.”

“In Spanaway, real estate agent Pamela VanderLinda said the lower prices on homes there drew buyers in the last couple years who can’t afford increased mortgage payments now that adjustable interest rates are on their way up.”

“‘A lot of payments are going up from $150 to $300 a month and income hasn’t justified any increase,’ said VanderLinda, who specializes in foreclosure sales. ‘Plus, they go out and buy toys and have extra debt.’”

The Seattle Times from Washington. “Two decades after moving to Hawaii from the Northwest, Dan McEvoy considered buying a downtown condominium for his occasional visits to Seattle. But when he learned he’d have to spend more than a half-million dollars, the Seattle native and small-business owner figured staying with friends and family would do just fine.”

“Then McEvoy heard about a new type of condominium going up downtown that would allow him to buy a hotel room, stay there when he wants, and possibly make money when others use it.”

“Whether the Seattle market will support the high hotel rates and rising condo prices necessary to fulfill buyers’ expectations remains to be seen.”

“McEvoy expects to spend about $600,000 when ‘1′ begins sales of condo-hotel rooms in the next few weeks. He also hopes the revenue-sharing agreement with the hotel will cover his monthly mortgage payments.”

“McEvoy figures it roughly like this: He’ll make a down payment of $240,000, and get a 30-year loan with a 6.88 percent interest rate for the rest, with a monthly mortgage payment of $2,366, not including property tax, insurance and homeowner fees.”

“He estimates that to cover the mortgage payment, hotel management would need to fill his room 22 days or more a month at a daily rate above $300, and return at least 40 percent of the revenues to him.”

“Unlike many condominium projects, where developers discourage real-estate investors and favor owners who will live in their condominiums, said Paul Brenneke, president of developer Avalon Holdings, ‘condo-hotels openly welcome them.’”

“Still, Seattle is ‘rate-sensitive’ compared with more expensive tourist destinations, said Dante Alexander, CEO of the National Association of Condo Hotel Owners, meaning revenues for each hotel room tend to be less — a potential problem for buyers hoping to cover their mortgage payments.”

“‘It’s not the kind of market where, for whatever reason, people like to pay more than $300 a night,’ Alexander said.”

“Alexander said he downplays the money-making possibilities of owning a condo-hotel room. Expectations became unrealistic after the real-estate boom of the early 2000s in Florida, where ‘you could go to the beach, buy a unit for $300,000, and sell it three years later at a considerable profit, plus make money off renting it out.’”

“‘If you follow what’s going on nationally, we’re not sure price appreciation will occur,’ Alexander said.”

Some housing bubble news from Wall Street and Washington. Associated Press, “Construction activity plunged in July by the biggest amount in six months. The Commerce Department reported housing activity fell by 1.4 percent, more than double the 0.6 percent decline in June, and has now declined for a record 17 straight months as home building suffers through its worst slump in 16 years.”

From Bloomberg. “Homebuilders are scaling back to try to trim the glut of unsold residential properties even as companies are still adding offices and factories. We’re going to see another leg down, mostly because of the pain the big builders are taking, said Ken Mayland, president of ClearView Economics LLC. ‘The full effects of the market volatility really haven’t found their way into housing yet. The August declines may be even bigger.’”

“Federal Reserve officials got an earful from critics at a weekend retreat arguing they should use regulation and interest rates to prevent asset-price bubbles.”

“Otmar Issing, former chief economist at the European Central Bank, and Stanley Fischer, head of the Bank of Israel, were among guests at the Fed’s summer symposium in Jackson Hole, Wyoming, to challenge the hands-off approach.”

“‘The position that ‘this isn’t an issue for central banks’ has lost some support,’ Issing said in an interview at the gathering. ‘The tide is turning.’”

“‘Central banks, probably on more occasions than they would like to admit, should respond to asset-price bubbles,’ said Fischer, who taught economics at the Massachusetts Institute of Technology Fed Chairman Ben S. Bernanke worked on doctorate (a) there in the 1970s.”

“James Hamilton, an economist and former Fed research adviser, warned that if the central bank doesn’t tackle the loose lending standards that contributed to the housing bubble, politicians will, potentially doing more damage. U.S. legislators blame the central bank for insufficient action to stop predatory lending practices.”

“‘It would be wise for the Federal Reserve to be clear on exactly what changes in regulatory authority could help prevent a replay of these developments and pre-position itself as the advocate to get these implemented now,’ said Hamilton, a professor at the University of California at San Diego.”

From Reuters. “In rare public criticism of Alan Greenspan, a former government official who authored a famous rule of central bank policy said on Saturday that ultra-low Federal Reserve interest rates had stoked the U.S. housing boom and subsequent bust.”

“‘A higher federal funds path would have avoided much of the housing boom,’ said John Taylor, former U.S. undersecretary for international affairs. ‘The analysis also suggests that the reversal of the boom and thereby the resulting market turmoil would not have been as sharp.’”

“Taylor argued…the unusually prolonged period of low Fed rates were misinterpreted by financial markets as a lasting change in the Fed’s policy responses to inflation — further evidence that the U.S. central bank is to blame for the housing debacle.”

“‘A key lesson here is that large deviations from business-as-usual policy rules are difficult for market participants to deal with and can lead to surprising changes in other responses in the economy,’ Taylor said.”

“Federal Reserve policy makers underestimated the role that housing plays in triggering recessions and merit an ‘F’ grade for their failure, said Ed Leamer, director of an economic forecasting group at UCLA.”

“‘Something’s wrong here,’ Leamer wrote in a paper presented to a conference in Jackson Hole. Leamer said in an interview today at Jackson Hole that some former ‘hot markets,’ such as pockets of California, may see declines of 30 percent to 40 percent.”

“In his paper, Leamer said ‘highly stimulative’ monetary policy helped stoke a ‘hot’ housing market. ‘This is an event which I think to a large extent was preventable.’”

“‘The best time to fight the housing cycle with tight monetary policy is when the wave is starting to rise, not when it is cresting,’ Leamer wrote. ‘The worst time to stimulate the economy with loose monetary policy is when the wave is starting to rise. That is going to make the crest all the higher, and the crash all the more catastrophic.’”

“He added that there’s ‘very little possibility that a rate cut would make much of a difference’ at this point. ‘Once the wave has peaked and is crashing, there is not much that can be done to quiet the waters.’”

“Would cheaper money relieve the anxiety in financial markets about shoddy mortgages and declining home prices?”

“‘The reason there isn’t a market for these credits is that people don’t know what price they should be trading at,’ said Leamer. ‘That’s not going to be affected by a small change in the federal funds rate.’”

“Other experts attributed the real estate frenzy to other factors, in particular to an explosion of exotic mortgages that allowed people with low incomes and weak credit to buy houses with no money down and deceptively low initial payments.”

“‘It’s too easy to blame the Fed,’ said Robert Shiller of Yale. Shiller blamed mass psychology for the bubble, an almost ubiquitous conviction that housing prices would simply keep climbing at double-digit rates.”

“Freddie Mac, one of the largest providers of financing for U.S. home mortgages, on Tuesday said it broke from its plan to sell one if its standard mortgage securities each quarter amid a glut of securities in the market.”

“Supply in the $7.2 trillion mortgage bond market over the past two months has ballooned as investors have cooled to purchases of even ‘AAA’ rated securities.”

“‘We and the dealers that we work with are seeing a market with considerable supply with all fixed-income programs’ said Michael Cosgrove, a Freddie Mac spokesman. ‘At this time it doesn’t make sense to provide more supply to the market.’”

The LA Times. “A year ago, Countrywide Financial Corp. CEO Angelo R. Mozilo was boasting that the looming shakeout in home prices and hike in mortgage interest rates would usher in a period of remarkable prosperity for his company.”

“Today, the picture looks much different. The tone of executives’ comments has gone from complacent to almost apocalyptic. The company’s traditional frames of reference for the performance of its loan portfolio, he added, may no longer be ‘a fair comparison in light of what is happening to real estate values.’”

“As for loans that the company has packaged and sold to investors in the bond market and on which it retains some liability for defaults, executives said in July that it was too early to say what those losses will be. David Sambol, the company’s president, told analysts in July that it was ‘providing for future losses [in its mortgage portfolio] at a level that is greater than anything that we have ever seen.’”

“Countrywide also concedes that its vaunted proprietary system for estimating loss probabilities and delinquency rates was bamboozled by real-world conditions in 2006 and 2007.”

“‘There really had not been for our models…very much in the way of historical empiricals’ to help Countrywide compile accurate predictions, Sambol said.”

“Mortgage lender NovaStar Financial Inc. said Tuesday it was all but eliminating sales of new loans and will lay off more than 30 percent of its work force as it deals with continued deterioration in the mortgage market.”

“‘In better times for the industry, operating a sizable mortgage banking business to feed loans into the portfolio made strategic sense. But the secondary market has deteriorated substantially, so we are modifying our business model and further reducing costs for this difficult environment,’ said CEO Scott Hartman, in a news release.”

“NovaStar canceled a rights offering designed to raise $101.2 million for the subprime mortgage lender and said its auditor expressed doubt about the company’s survival.”

“Deloitte & Touche LLP told NovaStar it wouldn’t be associated with the rights offering unless the company made additional disclosures, according to a NovaStar statement today. The changes would include ‘an explanatory paragraph about the uncertainty of NovaStar’s ability to continue as a ‘going concern,’ NovaStar said.”

“The U.S. subprime crisis could herald tighter mortgage policies in Europe and retail lenders could be especially reluctant to grant 100 percent loans on property purchases, analysts said.”

“Arturo de Frias, chief banking analyst at Dresdner Kleinwort in London, forecast a ‘widening of spreads but that is good for the sector. There will be more differentiation between what is more and less risky.’”

“‘If there is less availability of credit in general, there will be less availability of mortgages,’ said Alan Webborn at SG Securities in London. ‘It is likely the terms will be tougher and a little more restrictive.’”

“In Italy, lenders could become stricter with new categories of borrowers, such as employees on temporary contracts, and reduce loan-to-value ratios for borrowers in general to 80 percent from near total coverage.”

The Independent. “Bullish Finance Minister Brian Cowen has said that the current turmoil in the property market is ‘neither unwelcome nor surprising’ despite plummeting house prices around the country.”

“In comments which will renew questions over his stewardship of the nation’s finances, Mr Cowen has rejected claims that his policy of ‘cooling down’ the property market has badly backfired.”

“The difficulties in the Irish property market were highlighted last week at a new housing development in Delgany, Co Wicklow, where people who bought houses for €700,000 have been shocked to learn that new houses of similar design on the same estate are now being sold for €595,000 — a drop of €105,000.”

“‘For most people, the value of their house is a constant factor. It is a home to live in, not an investment to be tracked like price changes on the stock market,’ he declared.”

“Mr Cowen claimed there is now much better value both in the new and secondhand market than a year ago. ‘A climate of price moderation is a far more comfortable place for buyers than a market driven by hype. Even home owners trading up or down who may take longer to sell will be in a better position as buyers than in an overheated market,’ he asserted.”

“‘The recent turnaround from unsustainable house price escalation in 2005/2006 should be neither surprising nor unwelcome. It is in everyone’s interest that the housing market should evolve to an orderly and sustainable growth pattern, in terms of prices, lending and output,’ he added.”

National Mortgage News. “National Mortgage News is publishing its exclusive ranking of the nation’s top subprime lenders in 2Q — and the news isn’t pretty. Mortgage bankers originated a paltry $53.4 billion in subprime loans during the second quarter, the industry’s worst showing in five years.”

“Here’s just one of many startling facts in the story: subprime accounted for just 6.3% of all home mortgages originated in the quarter, compared to 20.4% for all of 2006.”

“First Horizon mortgage chief Jerry Baker recently sent out an e-mail to his employees. He wrote, ‘This situation quickly evolved to a complete investor pullback from purchasing any form of loan or credit product or pool of products extended by banks and other financial institutions for virtually any purpose…Over the last several weeks the result has been that there have been almost no buyers for credit or debt products at any price.’”

“Friedman Billings Ramsey on the mortgage insurance industry: the outlook ‘over the next six to 12 months continues to be challenging. The most significant near-term issues facing the space, in our opinion, are (1) the chance of more-onerous capital standards from the rating agencies, (2) the potential for earlier-than-expected loss development eclipsing near-term revenue and (3) worsening home price depreciation impacting loss severity.’”

“The California Association of Mortgage Brokers recently held its annual convention. The exhibit hall had 110 booths. About 15 of them were empty because of no-shows…”

The Herald Tribune reports from Florida. “It’s a post-boom world out there, and many owners of residential property are experiencing real estate bubble trouble. Some are faced with payments that are about to ‘adjust.’ Others found themselves underwater even before they closed on a house, when the builder or developer started selling similar housing units for less in order to get rid of them.”

“When Jim Willig of Sarasota’s Sire Properties talks about buying opportunities in real estate, he is not talking about paying list price on something in the MLS. Instead, Willig is looking to negotiate a deal between a seller who is underwater on his payments, and the bank that is on the hook for the loan, or a short sale.”

“Willig gave this hypothetical example, which he says is realistic in today’s market. ‘A guy bought at the peak and he encumbered the house for $400,000. The property today is worth $300,000. We can go in and buy it from the bank at a number that is probably closer to $200,000. So there is a great buying opportunity.’”

“Office condos were the hottest commercial commodity going during the recent residential real estate boom. But now that the bust is upon us, veteran commercial real estate agent Carl Wise says there is little to no demand for office condos.”

“Q: When did the office condo market take off? A: It took off at about the same time as the residential real estate market.”

“Q: Why did they buy office warehouse space instead of renting? A: That was always the debate: Was it better to leave money in your business or use it to buy real estate that might increase in value?”

“Q: Why and when did the office condo market collapse? A: It went to pot shortly after the boom ended. When home building slowed, the office condo market just stopped. It will be interesting to see what happens now with prices.”

The Daily Herald. “Harry Heyward, who has been appraising homes in Tampa, Fla., for almost 20 years, says he’s doing about five appraisals per week — down from 10 to 15 at the height of the boom. ‘I keep thinking it’s going to get better, and it never does.’”

“Roughly $370 billion in adjustable-rate mortgages will reset this year, according to First American CoreLogic, and millions of Americans will have to pay significantly more per month just to stay in the same home.”

“Freaked-out lenders are ratcheting up requirements for minimum-credit scores and down payments. Kim Dicce, a Realtor in Tampa, where housing inventory is piling up, notes that lenders now seem to be requiring buyers in her area to put 15 to 20 percent down and have a credit score above 700.”

“‘Now we only have one third of the eligible buyers that we had before, and five times as many houses,’ she said.”

The Tampa Tribune. “The lure of quick money - and lots of it - in the home building business was too tempting for Michael Dizzine to pass up. The St. Cloud native set aside his dream of becoming a firefighter to join Florida’s home construction industry, which promised strong wages for blue-collar work. But after its peak in summer 2005, the housing market began to fizzle.”

“Dizzine’s employer began cutting his hours, a little at first, but eventually laying off him along with all of his co-workers. ‘It was so easy to go into construction out of high school and make $400, $500 a week. Now I’m regretting it,’ said Dizzine, who has been out of work since July.”

“The state has lost more than 14,000 construction jobs in the past year, and some economists are projecting that the housing slump could linger another year or two.”

“In Tampa, bankruptcy lawyer Patrick Smith says he’s seeing a spike in clients who are construction workers seeking bankruptcy protection. ‘I’ve probably handled five to 10 cases in the last six months of construction workers surrendering their homes, packing up and moving out of state,’ Smith said.”

The News Press. “Lee County’s overheated real estate market is being blamed for the collapse of a second credit union. Federal regulators have taken over Fort Collins, Colo.-based Norlarco Credit Union largely because of problems with construction loans on properties in Lehigh Acres and Cape Coral.”

“At issue are the vast numbers of construction loans on First Home Builders houses being built in Cape Coral and Lehigh Acres. Many of those houses are worth less than the contracts to build them and some buyers are refusing to close.”

“Prices have dropped sharply since the market reached its peak in December 2005 with a median price of $322,300 for the sale of an existing single-family home. In July, the last month available, the price was $246,100, a drop of 23.6 percent.”

“As a result, many of the people who made deals to build houses are unwilling or unable to get mortgages on them after they’re built.”

“First Home is owned by national builder Hovnanian Enterprises. The company bought the assets of First Home in 2005.”

“Hovnanian officials have repeatedly blamed the Fort Myers/Cape Coral market for the company’s financial woes in recent months, and J. Larry Sorsby, chief financial officer, has said Lee County is ‘by far the worst housing market that we’re in and I wouldn’t be surprised if it’s the worst housing market in the country.’”

“Norlarco and Hovnanian are defendants in a civil lawsuit filed July 30 in federal court by Timothy and Kerri O’Leary. The Cape Coral couple signed a contract in June 2005 to put down a $500 deposit to build a $296,075 house.”

“The O’Learys allege fraud and misrepresentation by Norlarco and Hovnanian because they were allowed to participate in the purchase despite their ‘patent lack of financial qualifications.’ The suit includes documentation showing the couple was not able to get financing to actually purchase the house.”

“Dominic Naro is tired of looking out his window and seeing grass high enough to cover a small child. His neighbor’s lawn is one of 1,441 vacant properties in Cape Coral that have been cited for overgrown grass since June 11. Fort Myers has had 2,300 lawn complaints.”

“They’re not only an eyesore, but they also cost thousands of dollars in mowing expenses and can bring down neighboring property values.”

“‘They are certainly more prevalent this year than any other year,’ said Joan LaGuardia, the communications manager for the county’s Department of Community Development.”

“Overgrown lawns are an effect of the sluggish housing market. LaGuardia said the problem could be a result of more abandoned properties in the county. Home sales in Lee County are down 24 percent from last year.”

“The county doesn’t know how many of its homes are abandoned, she said, but approximately 15,000 single-family houses are for sale in the county, while more than 1,000 residences are going through foreclosure proceedings.”

The Palm Beach Post. “Developer George de Guardiola is backing off his plans to sell 82 condo-style units at his first big Port St. Lucie project, East Lake Village. Instead, he’s hiring a property manager to rent them as apartments.”

“The 82 units will open in October. De Guardiola hasn’t set rental prices for them yet. Ultimately, 890 homes are planned.”

“The Jupiter-based developer may take a similar approach at his other big Port St. Lucie project, City Center. There, de Guardiola is mulling a plan to convert some of the several hundred condos in the first construction phase to rentals.”

“‘Eventually they’ll go back to condominiums when the market is there,’ de Guardiola said last week. ‘It’s just market response.’”

The St Petersburg Times. “Candice Anderson and her husband got a chance to buy houses in Hernando Oaks at prices even they could afford. The Andersons joined with two friends to purchase five houses from home-building giant Lennar Corp.”

“The couple ended up paying $110,000 and $115,000 for two houses, each of them selling for more than $60,000 less than the market value, according to the Hernando County Property Appraiser’s Office.”

“‘These are the first two houses we’ve bought,’ said Anderson, of Lutz, who is renting the houses.”

“But such deals have been a curse to local builders, as Hernando Oaks tries to return to its original marketing plan - building custom-made, upscale homes. Local builders worry that Lennar’s sale of more than two dozen houses below market value has devalued Hernando Oaks, where some builders are trying to sell homes for more than $400,000.”

“‘Lennar was brought in with much fanfare and hasn’t done a whole lot, other than building a lot of spec homes and dumping them on the market,’ said Chris Glover, chief operating officer of Palmwood Builders. ‘It hurts the whole community.’”

“Lennar has sold 56 homes in Hernando Oaks since January 2006, according to the property appraiser’s records. Almost all of the 35 sales in 2007 have been below market value, according to the appraiser’s office. Four, including the houses the Andersons bought, were $50,000 or more below market price.”

“That irked not only other builders but also some residents, who had signed contracts designed to limit speculation - forbidding them either to rent their houses or to resell them within a year.”

“Though Andee Clancy has no problems with her neighbors - mostly renters in investment homes - she worries they will devalue her neighborhood. ‘My understanding was that we could not rent the place out. But as you can see, this whole neighborhood is rentals,’ she said.”

“Mark Metheny, president of Lennar’s Tampa division, said the company reserves the right to sell some homes to investors who do not face rental and resale restrictions. Others buyers know this, he said, because it is written into their sales contracts.”

“Lennar has also sold houses in Sterling Hill and other nearby subdivisions for below-market prices, as have other home builders, Metheny wrote in an e-mailed response to questions.”

“‘Price reductions result in reduced profits, or sometimes losses, for Lennar, and we make reductions only when required by market conditions,’ he wrote.”

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