The Housing Bubble

It’s Friday desk clearing time for this blogger. “Staten Island foreclosures doubled in July, making the borough the New York county with the highest rate of foreclosure activity statewide, according to Realtytrac. ‘Staten Island is the only place where you see [foreclosure] across the board,’ said state Sen. Diane Savino. ‘What makes it surprising is Staten Island has the highest median income in its totality. So one would think that they would be immune to this kind of predatory lending — and they weren’t.’”

“Massachusetts Mortgage brokerage firms are closing at a torrid pace as the real estate slowdown and recent credit crunch sweep away the excesses of the most recent housing boom. Those that remain face a drop-off of up to 50 percent in jumbo financing.”

“‘The bar to entry was set so low that people were going in to make a quick buck. Those days are over,’ said Kevin M. Cuff, executive director of the Massachusetts Mortgage Bankers Association. ‘The marketplace is going to be a much more sophisticated marketplace.’”

“For one Honolulu homebuyer, loan terms abruptly revised last month demanded the borrower come up with $120,000 cash, double the $60,000 already committed as a down payment to purchase a $600,000 Downtown condominium.”

“Agent Jonathan Ford, representing the buyer, said Countrywide, the largest residential lender in Hawai’i, needed either the extra $60,000 from his client or a $40,000 price reduction from the seller.”

“‘That wasn’t going to happen,’ he said. ‘I told the lender that’s ridiculous.’”

“Are there any potential homebuyers out there in Moffat County, Colorado? If there are, the advice from real estate agent Jerry Monger is to act now, because prices probably are not going to come down.”

“‘The pricing keeps going higher,’ said (builder) Mario Ayala . ‘Every year it keeps going up. If last year a house was around $125,000, now it’s $200,000. It’s ridiculous.’”

“Barbara Button, executive assistant at the Southern Utah Home Builders Association, said more than 1,000 people move into the Washington County area per month.”

“Button said the Southern Utah market is not as terrible as it seems. When compared to 2005, the home buying market now is getting back to a healthier status.”

“‘In 2005 you couldn’t find a house to buy,’ Button said. ‘If you put a house on the market and asked about $250,000 for it you’d probably have it sold in less than two hours with four or five offers to choose from.’”

“Despite growing concerns that a bubble in the condominium sector in Bangkok could soon burst, findings from Jones Lang LaSalle show that the market for new projects remained robust, with continued growth of new supply and demand.”

“‘Many observers are calling an oversupply in the condominium market. While our findings show the market has continued to enjoy strong demand, based on anecdotal evidence, a large proportion of condominium purchases in central Bangkok are made by investors buying and intending to put units up for rent,’ says Suphin Mechuchep, Managing Director of Jones Lang LaSalle.”

“The number of condominium units in central Bangkok now totals 54,280, including 3,630 units completed over the past six months. More than 20,000 units are currently under construction, with 20 new projects comprising 5,420 units launched in the first half of 2007.”

“Even more evidence of the housing boom occurring in Regina, in Saskatchewan, and most other areas of the country was provided by construction data released by Statistics Canada. That data indicated that $479 million was invested in residential construction in Saskatchewan during the second quarter of this year.”

“Meanwhile in Edmonton, area home prices fell almost $10,000 in August, the deepest drop in the city’s history. Single-family house prices fell an average of $13,393, to $403,757. During the month, 88 per cent of single-family home sales were below list prices, by an average of $13,200, the Realtors Association of Edmonton reported Wednesday.”

“In Calgary, the red-hot resale housing market cooled dramatically with average prices for single-family homes plunging by about $20,000 in August, according to a local realtor.”

“Calgary realtor Ted Greenhough said the month-end inventory of more than 9,000 residential properties for sale is the highest-ever recorded — ‘by a longshot actually.’”

“‘As far as I’m concerned, there’s going to be a market correction. I’ve been saying that for the last four months,’ said Greenhough. ‘I feel the prices have gone up in Calgary over the last 18 months and I feel they’ve gone up too high, too quickly.’”

“‘It’s supply and demand. That’s pure and simple. The supply is exceedingly high and the demand has fallen off substantially, he said.”

“‘Stuff is sitting and there are reductions (in list price) and lots of vacancies because a lot of people last year purchased on spec (speculation). All these long-term construction dates (for new homes) have caused all that. I’m getting a lot of that as well — vacant properties. Mainly from purchasers buying on spec,’ said Teresa Centanni, with Century 21 Bamber Realty.”

“During high-level economic discussions held at Jackson Hole, Wyo., Aug. 31 to Sept. 2, leading economists presented differing views of the current situation. But agreement emerged…that at least some blame can be attached to Fed policies under its former chairman, Alan Greenspan.”

“The symposium led to a broader sense that previous Fed policy had contributed to the housing market bubble. While no participants specifically named Greenspan, the criticism was clear in a number of papers.”

“The blame for the bubble will be attached to it two main contributors: the previous Federal Reserve board and its chairman, Alan Greenspan, for its expansionary stance, and the carelessness of investors who failed to monitor the sources of the shakedown in credit markets.”

“Martin Eakes (is) co-founder and CEO of a nonprofit community lender in Durham. He was one of the most vocal advocates in the 1990s of efforts to thwart predatory lenders in this state.”

“Q. Should the government have acted sooner? A. If I sold you a toaster and said that one in five purchasers who take this toaster home will burn their homes down, you’d ban the toaster from the marketplace The dominant subprime mortgage product of the last two or three years is basically corrupt.”

“It’s incredibly frustrating to me because any serious student of the mortgage market in the past two or three years would know this would happen. It was utterly predictable, and it’s tragic that the policy actions were not taken by the Federal Reserve to prevent this kind of disaster from happening.”

The Press Enterprise reports from California. “To cut the glut of homes on the market, the chief economist for the California Association of Realtors on Thursday urged real estate agents to refuse listings from clients who don’t need to sell or won’t lower their price to reflect declining values. ‘The best thing you as a real estate professional can do in this market is to encourage sellers who are not serious about selling their homes not to list. Don’t take a listing from someone on a hope,’ Leslie Appleton-Young told a group of Inland mortgage brokers and agents.”

“Median home prices have not fallen as sharply as sales, she said, because homeowners are reluctant to cut prices and because sales are shifting toward the higher end of the market, which is less affected by the availability of low-cost loans.”

“Appleton-Young’s suggestion that the huge inventory of unsold homes could be significantly reduced by eliminating speculative and unrealistic sellers was received with some skepticism by Beverly Bayer, an appraiser from Moreno Valley.”

“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”

“Bayer said in Moreno Valley, 59 homes in the multiple listings sold last month, while there are 2,200 homes on the market.”

The Sacramento Business Journal. “Almost 8,000 bank-owned homes were for sale in the four-county area at the end of August, according to RealtyTrac, and that number could easily double by the end of the year.”

“‘The investors and the asset managers have not faced reality, and they think they are going to get a lot more for these homes than anyone is willing or able to pay now,’ said Ron Leis, broker in Carmichael. ‘They are going to have to take huge, huge losses. There is some pain that has to be felt.’”

“‘Banks don’t want to be in the business of managing property. If you can’t sell it in a short time, then presumably its value is set too high,’ said Anker Christensen, chief financial officer with River City Bank. ‘If no one is buying it, you have to reduce the price. If you don’t reduce the price, what are you doing?’”

“Some of the lenders are so far removed, they don’t know what they own, Leis said. ‘I’ve gotten to the point where I send lenders the crime reports for the neighborhood their house is in along with my brokers’ pricing opinion because they are just not going to get what they are asking,’ he said.”

The Sacramento Bee. “Sacramento-area home builders have long maintained that many of the region’s foreclosures are hitting investors who bet big and lost. The Mortgage Bankers Association now has some numbers.”

“The MBA says 21 percent of prime loans that are in default in California belong to people who bought homes without living in them. And 15 percent of subprime loans now in default belong to the speculators.”

“Since they started as a whisper last November, home auctions in the Sacramento region have become a roar. The biggest one yet, 306 houses lost by owners to the bank, is scheduled at Cal Expo at the end of this month.”

“This time, it will take the weekend to sell them all. It’s proof of how extensive the foreclosure problem has become in this part of the state. The majority, 227 houses, are in Sacramento County, according to REDC.”

“The firm, doing its third auction in Sacramento this year, will sell 48 San Joaquin Valley homes in Modesto on Oct. 1 and 160 Bay Area homes Oct. 6 in San Mateo.”

“Incidentally, the firm is expanding to do more home foreclosure auctions across the United States. It’s one real estate sector where business is very good.”

The Ventura County Star. “After 22 months of sagging demand for housing, August and September could be brutal as the real estate market hits rock bottom, an economist projected Thursday.”

“‘We’re in the bottom of the third inning, maybe the top of the fourth,’ said Mark Schniepp, director of California Economic Forecast in Goleta.”

“Schniepp was cautiously optimistic about where the real estate market is heading in Ventura County. But he was clear that the county is in the middle of a ‘terrible residential recession.’”

“The housing market will remain in the doldrums for some time, Schniepp said, adding that prices could continue to fall by 5 percent to 10 percent over the next 12 to 14 months.”

“The subprime crisis has been overblown and accounts for only a small percentage of mortgage loans, said William D. Dallas, chairman of Dallas Capital Management. But it’s hit the nation hard and has plunged the country into what some, including Dallas and Schniepp, believe is a real estate recession.”

“Dallas added that much of the bad news surrounding the real estate industry has been blown up by the media, such as the number of foreclosures. In the second quarter, foreclosures spiked in Ventura County to 303 from 43 over the same period a year ago.”

“The speakers’ optimism was a welcome surprise to the packed crowd. Larry Works, a commercial loan officer in Ventura, appreciated that the speakers didn’t offer a ‘doom and gloom scenario.’”

“‘Basically, the thought was, be cautious, be ready to adapt,’ he said. ‘Overall, I think everything’s going to tighten. You’re going to see some great bargains (in housing), so the people who have liquid assets are going to be the Rockefellers of the 2010s.’”

The Santa Cruz Sentinel. “When sales are down, you have to get creative. That’s what Santa Cruz agent Dan Doerksen is doing.”

“Doerksen has organized a four-hour bus tour Saturday to show homes selling for less than $600,000. The tour, which departs from Aptos at noon, will include homes and condos in Aptos, Capitola, Soquel and Santa Cruz. So far, 15 of the 30 spaces have been taken.”

“He figured a chauffeured tour on an air-conditioned charter bus, with information on the properties, prizes and refreshments, would mean less stress. ‘So, which sounds better: do it yourself or allow us to serve you?’ he asked.”

“Countywide, home sales have been lagging, with 143 homes sold in July, an 11-year low for that month. When sales are down, the buyer has an advantage.”

“‘Due to the subprime market fallout, many people are nervous about buying, which has caused sellers to offer incentives to sell their homes,’ Doerksen said. ‘We feel that right now is one of those rare moments in Santa Cruz County where prices have leveled off.’”

“Given that median prices have risen steadily from $240,000 in 1996 to $744,000 in 2006, he sees the current market as ‘the perfect time to buy.’ Loans are available if you have good credit, a good down payment and you can document your income, he added.”

“Doerksen isn’t the only agent getting creative. Last month, Realtors Cassie Maas in Los Gatos put together a driving tour of homes for sale in the Santa Cruz Mountains, creating a map and offering a barbecue.”

“She had two homes for sale, and people visited the one with the barbecue, even though it was in a rather remote area. Five groups of buyers came, as many as had toured the home in the past year.”

The Mercury News. “The number of homes for sale rose more steeply last month in Santa Clara County than in any other of 13 counties included in a monthly report from a local realty brokerage.”

“The inventory of for-sale homes rose 9 percent in the county from July 31 to Aug. 31, to 6,412 houses and condos, according to a monthly report prepared by Redwood City-based Movoto. The second-highest increase was 5.3 percent in San Diego County, followed by a 4.1 percent uptick in San Francisco.”

“In Santa Clara County, inventory is rising in part because more buyers are hesitating, said Warren Winsness, president of the Santa Clara County Association of Realtors. ‘A lot of buyers are sitting on the fence,’ he said. ‘They’re concerned they can’t get loans because of what they hear in the media. As a result, the number of sales is really down.’”

“Movoto founder and broker Henry Shao said listings in San Jose are driving the county’s overall inventory trajectory. Listings in San Jose are about double their level from three years ago, he said.”

“Movoto’s report also features an estimate of what percentage of homes for sale in each county are ‘distressed,’ as measured by whether terms such as ‘bank owned,’ ’short sale’ or ‘in foreclosure’ are included in the comments entered by listing agents in the MLS.”

“In Santa Clara County, those properties made up 11 percent of listings, up from 9 percent at the end of July. San Mateo and Santa Cruz counties had rates of about 10 percent, also up from 9 percent. Contra Costa and San Benito counties had the worst incidence of distressed properties, with 22.1 percent and 20.3 percent falling into the category, respectively.”

Some housing bubble news from Wall Street and Washington. Associated Press, “Shares of Hovnanian Enterprises Inc. fell Friday after the luxury homebuilder reported it fourth conscutive quarterly loss and said it would slash prices on homes across the country beginning late next week to try to sell off excess inventory. Hovnanian reported it lost $80.5 million in the quarter ended July 31, citing continuing problems of credit availability and high inventory.”

“‘Credit tightening in the mortgage market has reduced the number of qualified home buyers, existing home inventory levels remain persistently high in many of our markets and buyer psychology has been negatively impacted by a steady stream of news related to falling housing prices, foreclosure rates, and mortgage availability,’ CEO Ara K. Hovnanian said in a statement.”

“Hovnanian also blamed the tightening of lending standards in the mortgage market beyond those made to subprime lenders. ‘This is leading to a further reduction in the universe of qualified buyers for our homes,’ he said.”

“‘Right now the game is who can cut the prices the most,’ said analyst Alex Barron. ‘They have a lot of debt that they need to service and in order to service that debt they need to have some cash coming in the door.’”

The Street.com. “Revenue fell 27% to $1.1 billion, matching analyst estimates. New contracts dropped 24%, excluding those from joint ventures. The losses stemmed from $109 million of land impairment charges.”

“‘Our sales pace fell further in many of our communities, and we reacted by offering further price concessions and incentives. This created additional downward pressure on profit margins and led to additional land-related charges in the quarter,’ Hovnanian said.”

The Toll Brothers 10-Q. “Beginning in the fourth quarter of fiscal 2005 and continuing throughout fiscal 2006 and into the fourth quarter of fiscal 2007, we have experienced a slowdown in new contracts signed.”

“We believe this slowdown is attributable to a decline in consumer confidence, an overall softening of demand for new homes, an oversupply of homes available for sale, the inability of some of our home buyers to sell their current home and the direct and indirect impact of the turmoil in the sub-prime mortgage loan market.”

“We attribute the reduction in demand to concerns on the part of prospective home buyers about the direction of home prices, due in part to many home builders’ advertising price reductions and increased sales incentives, and concerns by the prospective home buyers about being able to sell their existing homes.”

“In the three-month period ended July 31, 2007, we recognized impairment charges of approximately $139.6 million on communities in which we were currently selling and on land owned, primarily located in California, Florida, Nevada, and Virginia.”

“At July 31, 2007, the fair value of the inventory in the 28 current communities and owned land subject to write-downs in the three-month period ended July 31, 2007, net of the $139.6 million of write-downs, was approximately $344.1 million.”

From Reuters. “Home builder Beazer Homes USA Inc said on Friday it received default notices related to senior notes from U.S. Bank, the trustee for the notes”

“Independent credit rating firm Egan-Jones Ratings Co. said there was ‘blood in the water.’ ‘The delay in the 10Q filing is a concern,’ Egan-Jones said in a research note. ‘Beazer needs to provide answers on its credit strength soon.’”

“Beazer said on August 15 its delay in filing its third-quarter Form 10-Q was due to internal probes into the company’s mortgage origination business.”

From Bloomberg. “IndyMac Bancorp Inc., the second- biggest U.S. mortgage company, expects to eliminate about 1,000 jobs over the next ’several months,’ the Pasadena, California-based company said today in a statement. IndyMac also said it may report a third- quarter loss of as much as $36.8 million.”

“IndyMac plans to keep ‘prudently rebuilding our mortgage franchise which has been damaged as a result of the illiquidity in the secondary markets.’ The company eliminated all subprime loans except those it can sell to U.S. government-sponsored enterprises, it said today. IndyMac also ’substantially cut all other non-conforming products’ and curbed lending to homebuilders, according to the filing.”

“The tighter restrictions was necessary because of ‘panicked and illiquid markets,’ IndyMac said.”

From Barrons. “National City is hosting a conference with investors in New York today. In the first presentation it was indicated that the company would be taking a $200 million pretax charge related to its mortgage activities. The losses may continue into the fourth quarter, suggesting that earnings estimates for the fourth quarter are suspect.”

“The reason for the 2007 write-off in the mortgage division is that the bank has been unable to sell the subprime mortgages that it has put up for sale some months ago. Consequently, these loans had to be placed back on the bank’s balance sheet and written down.”

“The breakdown of the loans being reacquired is as follows: $1.6 billion of jumbo first mortgages; $1.2 billion of Alt ‘A’ firsts; $900 million of seconds; and 600 million of loans in the pipeline.”

The Telegraph. “Hundreds of estate agencies across southern Spain have gone out of business in a trend that experts say signals the end of a buoyant housing market that has fuelled the country’s economy over the past decade.”

“Many British owners of Spanish homes are now facing major losses with some experts claiming the property market is overvalued by as much as 30 per cent. During the last decade Spanish house prices have risen by more than 200 per cent.”

“At the height of the construction boom in 2005 there were 7,000 estate agents on the Costa Blanca but 300 have closed this year, according to Enrique Llopis, honorary president of Alicante’s College of Real Estate Agents. ‘It is a symptom of the property bubble bursting,’ he said. ‘Demand is 10 per cent lower than it was a year ago and people are having to sell their property for less than they hoped.’”

“Eisuke Sakakibara, Japan’s former top currency official, dismissed claims that the economy is still in deflation, saying recent declines in the consumer price index were because of companies lowering prices amid ’stiff’ competition.”

“Low global interest rates were the main cause of the recent financial-market turmoil, said Sakakibara, who is now a professor at Waseda University in Tokyo.”

“‘Central banks including the Bank of Japan should be blamed for the credit crunch,’ he said. ‘The monetary policy makers and investors enjoyed too much of excessive liquidity.’ Low rates are also leading to a house price bubble in Japan, he said.”

“Recent credit market turmoil has increased downside risks for the economy, but the U.S. Federal Reserve would refrain from taking action to bail out investors who made bad decisions, top policy-makers said on Thursday.”

“Financial markets have been clamoring for the Fed to cut its benchmark lending rate at its next rate-setting meeting on September 18. But Fed policy-makers were clear to state that the central bank was not in the business to bail out investors who took risks.”

“Speaking in New Mexico, Dallas Federal Reserve Bank President Richard Fisher put it bluntly: ‘The job of the Federal Reserve is not to bail out risk-takers: You’re a big boy, you take risks, you bear the consequences.’”

The Courant. “Bruce Rose wasn’t taking meetings Thursday - at least not with the likes of Patricia Bullon, Al Ynigues or Christine Wright.”

“The three never got closer to the president of Carrington Capital Management than the sidewalk outside the hedge fund’s offices, where about 12 police officers monitored 50 or so people protesting the way the company is handling mortgages.”

“‘The CEO, Bruce Rose, has told us that if anybody asks, he is not coming out, nor are any of his employees,’ Greenwich police Sgt. James Marr told the protesters.”

“So there they stood in the hot sun for nearly two hours, shouting ‘Predatory Lenders, Criminal Offenders!’”

“The scene in Greenwich was an unmistakable sign of the collision between two powerful and unwieldy economic forces - the mortgage lending crisis and the rise of the hedge fund industry.”

The Connecticut Post. “Cindy Jenereaux, VP of ING Real Estate, said she called the police because she wanted to protect her company’s property from the busload of protesters who gathered Thursday on West Putnam Avenue.”

“The protesters said they came to ING’s property for the same purpose, protecting property, because one of ING’s tenants, Carrington Capital Management, is kicking families out of homes across the country, including in Bridgeport.”

The New York Times. “Even when Leon Maldonado was getting his real estate license three years ago, he saw that the red-hot housing market in San Diego was beginning to cool. But he decided to forge ahead.”

“Now, as the housing market slows to a crawl, those new agents and a good number of more established ones are looking for other employment.”

“‘When I tell people I got out, everyone understands,’ said Mr. Maldonado, who now collects a steady paycheck, from a health care staffing company. ‘It’s the best decision I ever made.’”

“‘It’s a perfect storm for real estate agents,’ said Glenn Kelman, chief executive of an online brokerage in Seattle. ‘Not only have unprecedented numbers flocked to the profession, but at the same time you have the mortgage meltdown, the housing bubble bursting, and online competitors attacking the commission structure.’”

The Dallas Morning News reports from Texas. “For thousands of Texas homeowners, the check isn’t in the mail. Almost 6.5 percent of the state’s mortgage holders are late with their monthly payment, the latest survey finds. That’s higher than the national loan delinquency rate of 5.12 percent, the Mortgage Bankers Association reported.”

“With a rooftop deck and sweeping views of downtown, the three-story townhome is barely 2 years old. This luxury residence east of downtown is in move-in condition and priced to sell.”

“‘It’s now priced $279,000,’ said real estate agent Alicia Duffy, showing off her 2-month-old listing. ‘We started out at $295,000.’”

“The 1,947-square-foot townhouse was previously owned by an out-of-state investor who hoped to make a killing in the Dallas housing market. That didn’t happen. Now it’s one of more than 14,000 foreclosed properties for sale in North Texas.”

“By some estimates, foreclosed homes now make up more than a quarter of the residential properties for sale in North Texas.”

“Ms. Duffy said the investor that owned the East Dallas townhouse ‘never even saw the property’ and was part of a group that bought up homes in the neighborhood hoping to flip them and make money. She said about 50 percent of her residential sales business now comes from the resale of foreclosed real estate.”

“Connie Zetterlund, (an) agent who specializes in foreclosures, predicts lenders will have to significantly cut prices to move properties. Standing in the front yard of one of her listings in DeSoto, she pointed to ‘for sale’ signs peppered along the block.”

“‘That’s a foreclosure, and that one and there’s another one around the corner,’ said Ms. Zetterlund. ‘This is a good neighborhood, but a lot of owners were hit by adjustable-rate loan payments that got too high.’”

“Her listing has been on the market since June, and the price has been cut about $7,600 to $285,900. ‘I’ve probably got 50 other foreclosure listings and another 20 on the way,’ Ms. Zetterlund said. ‘The number of these on the market is going up, up, up.’”

The Gazette from Colorado. “The Pikes Peak region’s housing market received more bad news Tuesday: The number of homeowners falling behind in their mortgage payments continues to climb.”

“El Paso County foreclosures rose about 20 percent in August when compared with the same month last year, according to the El Paso County Public Trustee’s Office. Also, for the first eight months of the year, foreclosures were up about one-third over the same period in 2006.”

“When lenders take back a home to satisfy an unpaid debt, they sometimes sell it at a discount, which can drag down values of nearby properties, real estate experts and economists say. Also, rising numbers of foreclosed homes coming back on the market add to an already flush inventory of resales and new homes for sale.”

“If two homes among 10 properties in a particular area go into foreclosure and are later sold, appraisers who help determine values on other homes that are going on the market will consider the lower prices the foreclosed homes probably sold for, said Benjamin Day, a broker associate in Colorado Springs.”

“The housing market isn’t just about numbers, it’s also about perception, Day said. Many homebuyers who read about rising foreclosures worry that the housing market is unhealthy and that it’s better for them to sit tight, he said.”

“‘You sit on the fence,’ Day said. ‘It encourages sitting-onthe-fence behavior. You’re more apt to find fault (with the housing market). There isn’t something emotionally compelling to push buyers into buying something.’”

“There’s also a strange split among homebuyers, Day said. Local residents might get turned off by rising numbers of foreclosures, but out-of-towners moving to the Springs see the huge supply and reasonable prices and think they’ve hit the jackpot, he said.”

The Rocky Mountain News from Colorado. “A year ago, state and local officials encouraged the Federal Reserve to implement moves to deal with the growing foreclosure crisis in Colorado.”

“On Tuesday, the Federal Reserve did just that, issuing a special ‘guidance’ urging loan service companies nationwide to work with borrowers who are in danger of defaulting on their mortgages.”

“Bob Davis, a Denver-area Realtor for almost 40 years, said the Federal Reserve’s plan is a good one, but warned it may be too late to help much in Colorado. ‘The water is already under the bridge,’ said Davis. ‘This should have happened years ago.’”

The Denver Post from Colorado. “When Anita Criticos bought her house in Aurora’s Del Mar neighborhood 10 years ago, most people living there owned their homes. Today, Del Mar is a collection of well-cared-for homes scattered among vacant houses with peeling paint and overgrown yards. Most homes are rentals, and For Sale signs are prevalent.”

“Del Mar has emerged as the metro-area neighborhood hit hardest by skyrocketing foreclosures and plummeting home values, according to an analysis by Your Castle Real Estate. In the past year, 71 percent of the 91 homes sold in Del Mar were either foreclosures or ’short sales.’”

“Criticos paid about $65,000 for her small two-bedroom house 10 years ago and watched it soar in value to about $150,000 by 2003. But by the time Criticos tried to sell her home last year, the value had dropped to about $113,000. She ended up pulling it off the market.”

“Of the 51 homes sold in Jefferson Park during the past year, 20 percent were either foreclosures or short sales, but the average value of the homes increased 24 percent to $247,000.”

“‘I can imagine that houses that were changing hands were probably not owner occupied,’ said David Zucker, a developer who’s building condos in the area. ‘My guess is that there were guys buying a second or third rental home and cutting pretty close and began to have some financial difficulty. They were getting squeezed by an adjustable-rate mortgage and one of their three holdings were tanking.’”

“Broker Brad Evans said the foreclosures are more likely a result of fix-and-flip buyers who didn’t know what they were doing. ‘The get-rich-quick scheme doesn’t always work,’ he said.”

The Aspen Daily News from Colorado. “According to an Aug. 30 Colorado Division of Housing foreclosure report, 19,460 foreclosures were filed as of the end of the second quarter of 2007. According to the report, ‘the most significant foreclosure activity is on the Front Range. The counties with the most foreclosure filings per household were Adams, Weld, Arapahoe, Denver, and Pueblo.’”

“‘There is definitely a crisis going on right now,’ says Drew Sakson, Aspen branch manager for Residential Pacific Mortgage. ‘Across the country we’re seeing banks go out of business on a daily basis. But it really hasn’t hit the valley yet. It’s just the tip of the iceberg nationally, and by the summer of 2008 we’ll definitely start to see some of the effects here.’”

“‘What’s insulating the valley is increasing prices,’ Sakson says. ‘As the prices go up, people who own homes are able to refinance because they have enough equity in the house. And many of the people upvalley have multiple properties and lots of financial strength. This means that if they get into trouble, they can set the price on their house low and sell.’”

“‘We did a lot of subprime lending from Rifle to Basalt starting back in 1996,’ Sakson says. ‘But we stopped three years ago. Because when you’re setting someone up with a $400,000 or $500,000 house and giving them a high-interest loan at 9 percent, you’re setting them up for failure.’”

“Foreclosures have steadily climbed every year since the Colorado Division of Housing started keeping statistics in 2003. In ‘03, there were 13,573 foreclosures, 16,801 in 2004, 21,782 in 2005, and 28,435 in 2006. The yearly increase in foreclosures for each year ranged between 24 and 30 percent.”

“According to the Colorado Division of Housing foreclosure report, 38,000 foreclosures are expected by the end of 2007, a 34 percent increase over 2006.”

“‘Ultimately, I don’t see this affecting the upper valley very much,’ Sakson says. ‘I’m a bit worried about Basalt on down, because there’s a lot of housing that’s going to come on the market in the next 12 to 14 months. We’ll definitely see a burp as supply increases and people aren’t as easily able to sell off their house when trouble hits.’”

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