The Housing Bubble

The Recordnet reports from California. “When Louise Wohl bought her one-bedroom, one-bath Lodi condo in August 2005 for $180,000, she was delighted with her first home purchase. Then in July, she got a letter from the lender saying her adjustable-rate loan was jumping after the initial two-year set rate to the going rate of about 8.25 percent.”

“This, she said, was news to her, and bad news at that, because she can’t afford the $200 jump in the monthly payment.”

“She contacted her lender to try to work out a deal that would allow her to stay in her home. ‘I talked to three different people, and none of them could help me,’ she said. ‘One was very interested and helpful but said there was nothing he could do because the value of the home was less than the amount owed. He said, sorry, institutionally he couldn’t do it.’”

“Another said, well, just try to hang in there. ‘I was like, OK, I guess I could make the payments if I don’t buy gas and eat.’”

“She isn’t sure what will happen now. ‘I wish I had never bought,’ she said. ‘I would have been better off renting.’”

From Inman News. “Kossandra Knight said she would like to keep her home that she bought six years ago in the Santa Cruz, Calif., area. But that is just wishful thinking. Knight has worked to sell off several investment properties at a loss and is working with a real estate agent to complete a short sale on her primary residence. Job troubles and high monthly payments have put her into a foreclosure process.”

“‘What are your choices?’ she said. ‘The first thing you try to do when you start to go south is to use your credit cards to pay for things.’”

“Knight, who has filed for Chapter 13 bankruptcy, said she ended up with a negative-amortization loan on her home and the payments quickly got out of control. She was drawn in by a ‘teaser’ rate, she said, and a job loss wiped out her reserve.”

“‘This was my very first purchase — my very first house…When you have to do a refi to save your butt, there’s no butt to save — my equity of $175,000 is gone now because of the market,’ she said.”

“Wendy Shapiro, a resident in Roseville, Calif., said she purchased multiple investment properties after selling her home in San Francisco and moving out to the Sacramento area.”

“But her real estate investments have become a money pit. ‘Unfortunately, I put all my eggs in one basket. Now my daughter is going to college and I don’t know if I’ll be able to keep her there,’ Shapiro said.”

“Shapiro said she had planned to gradually sell off the properties for a profit, but now she is faced with a decision on which properties to ‘walk away from,’ she said.”

“Rental prices have dropped substantially in areas where she owns property, Shapiro said, as many investment properties are competing for rental income.”

“‘Rents have dropped everywhere because people who couldn’t sell houses are now trying to rent them. I can’t even sell one house,’ she said.”

“‘It’s just hell. Will I be able to sleep at night knowing I just walked away from $400,000 to $500,000 … and all my time?’ she said.”

The Daily News. “Through the end of June, Lancaster and Palmdale recorded 749 foreclosures, compared with 274 in all of 2006, according to the Greater Antelope Valley Economic Alliance.”

“A total of 2,353 notices of default were issued to Antelope Valley homeowners through June, compared to 2,394 in all of 2006, GAVEA statistics show.”

“‘People got in over their heads and got in adjustable mortgage rates that are low for maybe three to five years and then they go up. It’s like negative amortization adding interest onto the end of the loan,’ GAVEA president Mel Layne said.”

“‘Most people thought, ‘Get into it, house prices are going up fast, if I get in trouble I’ll be able to sell,’ Layne said. ‘Well, not so. They got into trouble and there were no buyers.’”

“Layne said the Antelope Valley experienced a similar housing slump in the early 1990s. ‘This is a normal real estate cycle where house prices go too high, mortgage companies make too lenient loans, and there’s a correction,’ Layne said. ‘It’s not an uncommon thing.’”

The Los Angeles Business Journal. “The expanding mortgage crisis and credit crunch slammed the Los Angeles housing market in August, with home sales plunging 50 percent from the same month last year and 25 percent from July.”

“Similar carnage took place in the condo market with year-over-year sales plummeting 40 percent to 1,168 units. Sales were off 27 percent from July’s 1,601 units.”

“‘These numbers are the first to show the beginning of the impact of the credit crunch that materialized in the last couple months,’ said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.”

“‘Everything was great until about a month ago. Then, on one day – Thursday, Aug. 9 – everything changed as lenders shot up rates on jumbo loans to 9 percent and further tightened guidelines,’ said Syd Leibovitch, owner of Beverly Hills-based Rodeo Realty. ‘It became almost impossible to find a jumbo loan.’”

“The HomeData figures show that the four Palmdale ZIP codes experienced a whopping 70 percent decline in home sales last month from August 2006 levels. Prices were off 6 percent to almost 15 percent. In three Compton ZIP codes, volume was off 62 percent to 75 percent, with price declines reaching almost 14 percent.”

The Orange County Register. “Recent financial turmoil has slashed the number of shoppers willing to enter contracts to buy O.C. homes from their owners by 33% in just four weeks.”

“New inventory stats from Steve Thomas at Re/Max Real Estate Services show 1,206 deals in the works as of last week, down 600 from four weeks ago, before nervous traders in financial markets made it hard to get riskier mortgages and far more expensive to get big-dollar home loans.”

“By Thomas’ math…it would take 14.73 months for buyers to gobble up all homes listed for sale at the current pace of deals vs. 12.12 months two weeks earlier and vs. 7.12 months a year ago. Market time in Santa Ana, for example, is now FOUR YEARS!”

“And Thomas notes: ‘Many loan programs have all but evaporated. So, in the interim, demand in Orange County is taking a hit.’”

The Record Searchlight. “Housing starts in Redding in August practically came to a screeching halt. The city’s building department reported that nine permits were issued last month for homes valued at $1.9 million. It’s the smallest one-month total since the city started keeping electronic records in 1997, Permit Supervisor Wayne Gungl said.”

“‘It was a pretty slim month, let’s be honest,’ said Gungl, who’s been with city for 27 years. ‘For sure, it’s the weakest summer that I can ever remember in housing.’”

“The lethargic pace of building mirrors the rate of home sales in the area. In Shasta County, July home sales, August statistics have not been released, reached their lowest point in 12 years.”

“Greg Moss, president of Moss Lumber Co, supplies homebuilders in Fresno, where he says his business has declined 70 percent from its peak of two years ago, when an average of seven Moss Lumber trucks a day would travel from Redding to Fresno.”

“‘Today, it’s one truck a day,’ Moss said.”

The Fresno Bee. “Cheer up, Valley homeowners. Tumbling house values mean a payback for some is coming next year — in the form of lower property taxes.”

“After next year’s valuations are completed in January, homeowners who bought at the highest end of the market will likely see their taxes drop automatically by hundreds of dollars, said Fresno County Assessor Bob Werner. Others may have to file appeals to the assessor’s office to benefit from the declining values.”

“‘I think we will see a significant increase in appeals once the bills go out,’ Werner said.”

“Tim Hauschel of Clovis bought his home 18 months ago for $368,000. A similar home a block away is being sold for $315,000, and it had a pool. Hauschel’s house does not have a pool.”

“‘My wife called because we have seen the price of houses drop,’ he said. ‘We were thinking about selling just to break even.’”

“About a mile away, Mike Kerr bought a home for $420,000. Based on other sales in the neighborhood, his home is now valued at about $330,000.”

“‘So far, however, Kings County Assessor Ken Baird’s office is not seeing the price drops. ‘They are offering homes at a discount, but the problem is they are not selling,’ Baird said.”

“Buying a home in Fresno County just got a little easier, according to the California Association of Realtors. In Fresno County, 44% can afford a home, up from 39% a year ago.”

“Dropping prices are driving the improvement, said Leslie Appleton-Young, the association’s chief economist. ‘Prices are going down,’ she said. ‘Fresno is one of the highest in the state in terms of being a place first-time home buyers can get in.’”

“The slowing market is helping, said Elaine Colett, a Guarantee Real broker. ‘There are 7,000 listings in [Fresno and Madera counties] and very few buyers,’ she said. ‘Right now you can get a nice, decent home for $200,000,’ she said.”

“And many are buying without down payments, Colett said. Buyers with a 10% or 20% down payment are now the exception, not the rule, she said.”

The Chicago Tribune reports on Nevada. “The upscale San Niccolo neighborhood to the south of this city’s bustling Strip once offered the real estate equivalent of the town’s loosest slots. The guy who sold Karen Lewis her house for $435,000 in June 2006 raked in a $200,000 profit after holding it less than two years, she figures. ‘Houses were really cheap. Loans were really easy,’ said Lewis, who moved from California. ‘These were investors who didn’t ever live here. Now, they’re totally walking away.’”

“Those who failed to cash out ahead of the bust have left owner-occupants such as Lewis stranded in a lonely landscape. Almost half of the 30,000 homes listed for sale in the Las Vegas metropolitan area stand vacant, making it that much tougher to sell the rest, said Frank Nason, president of Las Vegas real estate firm Residential Resources.”

“‘It’s kind of a downward spiral,’ he said. ‘In the next year or two, it could get a heckuva lot worse.’”

“From her front door, Lewis stares across Arcata Point Avenue at the for-sale signs on two abandoned houses in foreclosure. The house next door stood empty for months as well.”

“Lewis said she intends to stick it out. Anyway, she added, ‘I’m sort of stuck. If I were to move, I would take a bit of a loss.’”

In Business Las Vegas. “Las Vegas Realtor Eric Young prides himself on being a numbers guy, and when it when comes to the local housing market, the numbers paint an awful picture.”

“In the last six weeks, the average home prices are down 2.6 to 3.5 percent, Young said. The price per square foot that many homes are selling for today is the same as it was in early 2004 when the market was still appreciating, he said.”

“‘It is far worse than the numbers are showing,’ said Young, echoing what a few others have been saying about statistics on the housing market. ‘If you start to dig into the numbers, the research shows the prices for the same home are declining greater than the averages are showing.’”

“A North Las Vegas house a client bought a year ago for $399,000 couldn’t sell for $350,000 Young said. Comparable homes sold for $310,000 to $320,000, prompting the owner to take it off the market, he said.”

“A home the same person sold a year ago in North Las Vegas for $320,000 is on the market today for $247,000, Young said.”

“‘We continue to see an increase in listings every single day,’ Young said. ‘The supply is growing and the number of closings are declining every month. We now have a situation where you have a breakdown in the mortgage market. It is difficult to see when that will turn around. Clearly the market is not going to turn around until the mortgage situation is straightened out. And the easy credit is never coming back.’”

“The high rise and mid-rise condo markets continue to weaken as demand has softened and supply continues to increase - a problem that will worsen as more and more projects come on line in the next year, analysts said.”

“Las Vegas is facing problems that are emerging in other markets and are a byproduct of the speculative boom of 2004 and 2005. Buyers who signed contracts two to three years ago may not be able to close when those projects are completed. In some cases, they may not be able to get financing from lenders and in other cases buyers may walk away.”

“‘We are hearing the potential that some of the units aren’t going to close,’ said John Restrepo, principal of Restrepo Consulting Group that tracks the condominium market. ‘Some people are walking away because of the credit markets or because what they agreed to pay is not what they thought it would be worth today.’”

“There are 5,849 luxury condominium units in Las Vegas and another 14,149 units under construction, according to Applied Analysis. By the end of the second quarter, 718 resale luxury units were on the market, Applied Analysis reported.”

“‘I hear from condo owners every single day. They bought it to flip it and they can’t sell it,’ added Eric Smith, owner of Colorado-based Corporate Housing By Owner.”

“Bruce Hiatt, co-owner/broker of Luxury Realty Group, said he expected a window of about 12 months in which there would be an oversupply of condos, calling it the ‘perfect storm.’”

The Las Vegas Business Press. “The Falconi Group recently named its third general contractor for the planned $740 million, 1,100-unit condominium-hotel development at Tropicana and Cameron avenues, across from The Orleans.”

“Dick Pacific Construction’s involvement has since lowered the project price by 13 percent. Pinnacle Las Vegas was cited as an $850 million development in July. Yet the basic makeup of Pinnacle Las Vegas hasn’t changed.”

“Pinnacle Las Vegas comes during a market adjustment with a glut of available inventory and several project cancellations. ‘Buyers want a prime location for the cost they are paying and they can get real good deals,’ said Bruce Hiatt, owner of a Las Vegas high-rise residential specialist. ‘If it’s not well-located and branded, projects are going to face challenges. There is about two years of resale market inventory.’”

“‘Only 12.9 percent of the market’s planned 27,268 luxury high/mid-rise condo units had been completed in the second quarter, whereas 49.5 percent had been canceled or suspended,’ says John Restrepo, principal of Restrepo Consulting Group.”

The Review Journal. “The drumbeat of bad news on residential mortgages continued, as the Mortgage Bankers Association reported that new foreclosures and past-due loan numbers increased in Nevada during the quarter ending June 30.”

“Bill Ochs Jr., owner of Nevada Mortgage, blames a large portion of the problem loans on investors. ‘Speculators and investors came from anywhere and everywhere just to see if they could make a fast buck (in Nevada),’ Ochs said.”

“Now, speculators are defaulting on mortgage loans, he said, mentioning one investor who allowed 40 single-family homes to go into foreclosure.”

“Southern Nevada’s economy, dragged down by the slumping housing industry, posted another month of modest performance. New and existing home sales dropped 40 percent and new home permits are off by 45 percent, contributing to a 0.11 percent decline in the Southern Nevada Index of Leading Economic Indicators.”

“The number of new residents moving to Las Vegas dropped by double-digit figures for the third consecutive month, to 6,168 in July. Seeing all the vacant homes, Andrew Pugh of SellFastLV.com wonders how many people are leaving Las Vegas, though he’s certain more people are coming than going.”

“‘It’s just unfortunate we can’t nail down the historical numbers and really figure out if the current numbers are changing significantly,’ he said. ‘My contention is that the lack of white-collar jobs and relatively high housing costs would eventually slow down the migration, but without good data, it’s hard to know for sure. Affordable housing was one of the big draws and now that’s pretty much gone, for now.’”

The Las Vegas Sun. “People lose homes in Las Vegas every day because they can’t pay the mortgage. But when real estate agents and brokers start hitting the wall financially, it perhaps is a sign of even more troubling trends in the home sales market.”

“Jimmy Dague, who has sold real estate in Las Vegas since 1978 and whose business was the No. 1 worldwide in sales for Century 21 from 2002 to 2006, filed last week for Chapter 11 bankruptcy protection from creditors while he reorganizes to pay off his debts.”

“‘This is the result of an exuberant market and us growing and, honestly, I had signed leases for nine offices. Now I have five,’ he said. ‘As you can imagine, the four landlords are not happy.’”

“A year ago, he said, 700 real estate agents worked in his nine offices. Today, he has five offices and about 500 agents. He also has cut 50 percent of his hourly staff.”

“‘Wow,’ said Jeremy Aguerro, principal of Applied Analysis. ‘Is it a harbinger, a sign that our economy is shifting?’”

“The causes? Home prices inflated beyond the means of those who would normally buy them, rising interest rates and a halt in buying by investors.”

“And in Dague’s words, ‘perception.’ ‘If someone thinks if they only wait a few months, they’ll be able to get that $400,000 house for $350,000, they’re going to wait it out,’ he said.”

“Are they right to do that? ‘Right now, they probably are,’ he said.”

Some housing bubble news from Wall Street and Washington. Reuters, “Washington Mutual Inc, the largest U.S. savings and loan, may set aside $500 million more than it had previously forecast for loan losses in 2007, amid what CEO Kerry Killinger on Monday called a ‘near perfect storm’ in U.S. housing. ‘Most housing markets appear to be weakening,’ Killinger said at a financial services conference. ‘We would not be surprised to see declines in housing prices in many regions of the country … for the next few quarters.’”

From Bloomberg. “‘The combination of rising delinquencies, higher foreclosures, more housing inventories, increasing interest rates on many mortgages and greatly reduced availability of mortgages due to limited liquidity is creating what we call a near-perfect storm for housing,’ Killinger said.”

“‘It now appears that housing and capital market corrections will be worse and longer lasting than even we expected,’ Killinger said.”

The Tampa Bay Business Journal. “Countrywide Financial Corp. said it plans to cut up to 20 percent of its workforce and shift its residential lending business into its thrift subsidiary.”

“Countrywide, the nation’s largest home lender, expects total mortgage market origination volumes will drop by about 25 percent in 2008, compared to 2007 levels. Reductions of workforce will occur in areas most impacted by lower origination volumes, the release said.”

“‘When you’re born in a boom, you generally die in a bust,’ Countrywide CEO Angelo Mozilo said in an interview after the company announced the cuts. ‘Most of the companies that are gone have never been through a period like this.’”

“Employees remaining in the mortgage industry probably will have lower pay, including executives whose bonuses depend on profits and brokers who get paid on commission, said Bert Ely, an Alexandria, Virginia-based consultant.”

“‘The slowdown is deeper than a lot of people thought,’ Ely said. ‘I don’t think there’s anybody now, even the optimists, who think this will run its course by the end of the year. And this isn’t something that’s going to bounce back quickly.’”

“The contraction may also lead to lost jobs and income for mortgage appraisers, title-company clerks and settlement attorneys, he said. ‘All kinds of people that feed off the origination activities are suffering cutbacks,’ he said.”

From CNN Money. “In yet another sign of pain in the troubled real estate sector, title insurers are seeing a big increase in the number of claims, according to a new report. The Wall Street Journal reported on its website Sunday that title insurers like First American Corp. are fielding a significant rise in claims, yet more evidence of the housing market’s woes.”

“Some title insurers also say new business has slowed - a possible sign, the Journal said, of more problems ahead.”

“‘If you want to know what’s going on with mortgage activity, you look at title orders,’ Nik Fisken, an insurance-industry analyst told the paper.”

The Associated Press. “Credit rating agency Moody’s Investors Service said Monday it expects the housing-market slump to last at least until 2009, likely precipitating numerous ratings downgrades at publicly traded homebuilders.”

“‘Our current thinking is that the downturn, currently two years in the making, will last until 2009, with any sector recovery likely to be sluggish for some time after that,’ said Joseph Snider, senior credit officer at Moody’s.”

“‘Many of these companies may see further downgrades, with multiple-notch downgrades possible for homebuilders,’ Moody’s said.”

“Moody’s said it expects builders to violate the terms of existing credit agreements as conditions on the housing market remain poor. That will lead lenders to ‘tighten restrictions on credit facilities, either through taking collateral, reducing the size of the facility, or restricting borrowing base calculations,’ the agency said.”

The Financial Times. “The R-word is usually avoided by Wall Street’s economists. It tends to be a conversation-stopper when investment bank clients are told to prepare for the worst.”

“‘It is like looking a client in the eye and telling them that their child is ugly,’ says David Rosenberg, chief economist at Merrill Lynch. ‘It is not what people want to hear.’”

“But the parameters of polite conversation have shifted following the shock decline in the employment market revealed last week. Recession is the word on everyone’s lips.”

“‘You are talking about a $23,000bn asset class – there is nothing on the planet as big as that,’ says Mr Rosenberg, who is predicting a fall in house prices nationally of up to 15 to 20 per cent.”

“The job of declaring recessions, generally defined as two consecutive quarters of economic contraction, does not belong to the White House or Wall Street. That task belongs to Martin Feldstein, head of the National Bureau of Economics.”

“Mr Feldstein has been blunt about his outlook. He used the word recession seven times in a recent speech to central bankers, telling them that ‘a sharp decline in house prices and the related fall in home-building … could lead to an economy-wide recession.’”

“He said the type of collapse in housebuilding recorded in recent months was ‘a precursor to eight of the past 10 recessions”; there was ‘a significant risk of a very serious downturn.’”

“Mr Rosenberg says it may be ‘too late’ for the Federal Reserve to prevent a recession by cutting interest rates aggressively this month.”

“Federal Reserve Bank of Philadelphia President Charles Plosser said there is an ‘underlying stability’ in the U.S. economy and policy makers need not always cut interest rates in response to financial-market turmoil.”

“‘Disruptions in financial markets can be addressed using the tools available to the Federal Reserve without necessarily having to make a shift in the overall direction of monetary policy,’ Plosser said at a conference.”

“Plosser said it was not the U.S. central bank’s job to protect individuals and firms from taking risks. ‘The Fed does not seek to remove volatility from the financial markets or to determine the price of any particular asset; our goal is to help financial markets function in an orderly manner,’ he said.”

“‘Policy-makers must be careful to allow the marketplace to make necessary corrections in asset prices,’ he said, adding that a failure to do so would ultimately increase risks to the financial system.”

The BBC News. “Leading UK and European banks may be forced to pay out as much as £70bn ($142bn) over the next 10 days as the global credit crunch continues to bite.”

“As US mortgage rates have risen sharply over the past year, it has led to record levels of loan defaults and home repossessions. This crisis has spread across the Atlantic, as US sub-prime loans are often combined with other debts and then resold around the world.”

“An unnamed boss of one of the UK’s largest banks told the Sunday Times at the weekend that conditions in the money markets were the worst for 20 years.”

The Independent. “Property and economic experts are warning that an over-supply in the housing market will cause prices to fall further in the short run, but that long-term the market will recover.”

“A survey of house prices has shown that since March almost 4,000 houses have dropped in price, wiping €113 million off the value of properties.”

“John McCartney, Head of Research with Lisney estate agents said yesterday: ‘What we are seeing at present is the backlog of an exceptional year in terms of supply last year coupled with a reduction in demand. Of course when there is over supply, prices will come down.’”

“The experts don’t believe there has been a credit squeeze but the reduction in loans being offered is simply an issue of affordability. Dermot O’Leary, chief economist with Goodbody stockbrokers, said: ‘There hasn’t been a criteria change in the bank’s policies. It is only about what people can now afford given all the successive hikes in interest rates.’”

“The Sunday Independent has identified a number of multi-million-euro houses that have seen their values slashed in recent months, both in Dublin and other areas around the country.”

“Last month, more than 700 properties dropped their price with more than 20 seeing their prices drop by more than €100,000. Also included in the 723 house price drops for August, which wiped €20 million off the value of the properties, were a number of houses and buildings over the €1 million mark.”

“Many of these have seen price reductions of over 10 per cent, with a small number dropping by a staggering 25 per cent.”

“Central bankers are alert to the prospect of a hit to growth from the last month’s financial market upsets but are not responsible for rescuing unwary investors, top policymakers said on Monday.”

“After talks at the Bank for International Settlements in Basel, central bankers vowed to keep a close eye on market developments and take action as needed.”

“G10 chairman Jean-Claude Trichet, who heads the European Central Bank, pointed to past warnings about investor overconfidence on risks and said markets were now in a process of correction including bouts of volatility and overshooting.”

“Central banks had taken action to ensure stability on money markets but were not responsible for rescuing the unwary.”

“‘It’s certainly the sentiment of central bankers who are around the table that bailing out bad investors would be the worst thing to do,’ he said.”

“Other central bankers present at the meetings, including Mexico’s Guillermo Ortiz and Chile’s Vittorio Corbo, said the global economy would not escape a hit to growth but central bankers were ready to deal with the situation.”

“‘Fortunately the world economy is in good condition but we are aware that there will be an impact,’ Corbo said. ‘As central banks we are prepared to deal with (the) consequences. It could last six months, it could last a year.’”

A report from Newszap Delaware. “Local homes staying on the market longer and for-sale signs advertising ‘reduced prices’ are clear indicators the housing boom of recent years is drawing to a close. ‘The big party is over,’ said Edward Hammond, a member of the Kent County Association of Realtors.”

“Dee Hake DeMolen, president of the association, said the boom of the past few years was an anomaly and could have never lasted long term. ‘It can’t continue,’ she said. ‘It is just a physical impossibility in our marketplace.’”

The Record from New Jersey. “Hoping to profit from a red-hot housing market at the Jersey Shore, Jamie Errico bought a cottage two blocks from the ocean in Bay Head in 2004. She tore it down and replaced it with a 4,600-square-foot Victorian, planning to flip the property.”

“‘A couple of years ago, anything on the Jersey Shore that was halfway decent was selling as fast as you could put it on the market,’ Errico, of New York City, said recently.”

“But the house has been for sale for nearly two years, though Errico has cut the price to $1.495 million, from $1.69 million. Errico recently decided to rent it out while she waits for a buyer.”

“As summer draws to a close, it’s clear that the real estate frenzy has ended at the Jersey Shore, with the leveling off of the wild price rises of the early part of this decade. ‘Prices have come down a bit,’ said Karen Symington of Re/Max Limited in Brick. ‘The cost of housing just skyrocketed, and now we’re at a point of correction.’”

“Statewide, house sales volume this year is running about 20 percent lower than in 2005. Prices at the Shore have fallen about 5 percent or less from their peaks in 2006, according to data from Realtors.”

“Tony Belli, president of the Ocean County Association of Realtors and an agent in Lavallette, said condo sales seem to have been hurt more than single-family homes. For example, in Ocean County, condo sales this year are running at half the rate of 2005, and prices are down about 14 percent in that period.”

“‘It’s not a bad market, it’s a market that’s trying to correct itself,’ Symington said. ‘History runs in cycles, and so does real estate. This is probably the best time in eight years for buyers. It truly, truly is a buyer’s market.’”

“In Brielle, The Robertson Douglas Group dropped the price of its 18 waterfront town houses on the Manasquan River. The town houses went on the market with a starting price of $975,000; now they start at $825,000. Earlier, the developer had offered a boat as an incentive to buyers.”

“Hovnanian Enterprises of Red Bank, the state’s largest homebuilder, estimates that its Shore sales volume is down 30 percent to 40 percent from the peak in 2005. ‘Our biggest challenge continues to be our prospective purchaser selling their existing home,’ said Barry McCarron, president of Hovnanian’s Coastal Division.”

“Hovnanian has cut prices or added incentives to a number of its Shore communities, adding up to total discounts of 5 percent to 15 percent, depending on the location. And it has dropped plans for several developments it had planned to build in Monmouth and Ocean counties.”

The Press of Atlantic City in New Jersey. “K. Hovnanian is holding its first-ever “nationwide” sales event this weekend. Through today, K. Hovnanian is offering discounts at all of its residential developments.”

“A sampling of price reductions in the area includes: as much as $81,887 at Hidden Pines and Oak Manor in Egg Harbor Township; as much as $60,000 at Manors at Freedom Hills in Barnegat Township; as much as $106,609 at Tides at Seapoint in North Wildwood; as much as $51,000 at Four Seasons in Galloway Township; and $43,000 off the last home available at Four Seasons at Mirage in Barnegat.”

“Michael Skea, VP of sales and marketing for the New Jersey-southern New York region, said K. Hovnanian discovered two things about the market in the past couple of months. One was that many buyers are selling their house first and then looking for a home they can move into within 90 to 120 days. The other is that pricing the homes correctly ‘dramatically increased the number of prospects visiting a community.’”

“That led to the first companywide sale. ‘It has taken quite a while to determine the right pricing for each community, but now we think that we’re there,’ Skea said. ‘I believe the right pricing will drive this event.’”

“‘In January and early February, there was a psychological malaise, and just when we were starting to overcome it, the subprime crisis arose almost simultaneously,’ he said. ‘Now we’re finding that malaise starting to be overcome again, notwithstanding the number of stories about the terrible state of the housing industry.’”

“K. Hovnanian couldn’t help contributing to such media coverage this week when it reported a quarterly loss of $80.5 million, having taken a charge of $108.6 million for land-deposit writeoffs and reductions in land values.”

The Morning Call from Pennsylvania. “Buried deep among the multitude of numbers in the state Labor Department’s monthly unemployment report recently was this fact: The Lehigh Valley’s work force is stagnant.”

“That’s relatively shocking, considering the tremendous migration of people into the Lehigh Valley in recent years. That migration has been the main driver of the local economy, responsible in part for skyrocketing home prices, high consumer prices and the exploding number of restaurants, retailers and other service businesses that have cropped up.”

“The sluggish work force growth may signal, though doesn’t conclusively prove, that the en masse flocking of people to the Lehigh Valley from New Jersey, New York and the Philadelphia region has ended.”

“The slowdown is something real estate agents have noticed for months. ‘We have seen it in the trenches, that migration has slowed,’ said Clay Mitman, president of an Easton agency that traditionally has had a large portion of clients moving from New Jersey.”

“Slower housing markets outside the Valley are the primary reason, he said. ‘Two years ago, if someone had to sell their house in New Jersey [to buy one in the Lehigh Valley], you didn’t care because you knew it would take them three days. Now it could take three or six months, or not sell at all.’”

“The number of out-of-state home buyers might have started going down as early as summer 2006 when gas prices spiked, said Mark Molchany, president-elect of the Lehigh Valley Association of Realtors. ‘When gas hit $3 a gallon last summer, it was like somebody closed a door,’ he said, adding that repeated media reports about a slow housing market scared a lot of would-be sellers into staying put.”

Bloomberg reports on New York. ” The cost for 30-year fixed-rate jumbo mortgages, those exceeding $417,000, has increased more than one percentage point since March to about 7 percent, data compiled by Bankrate.com show. August rates were the highest since December 2001.”

“Prices may start to drop in the New York City metropolitan area beginning in the fourth quarter of this year and continue falling 1 percent to 7 percent per quarter through 2008, according to estimates from economist Mark Zandi.”

“Meghan Fajardo of New York City ran through two mortgage brokers and multiple lenders as interest rates rose to more than 7.25 percent from 6.25 percent for her $680,000 condominium in the Windsor Terrace section of Brooklyn, New York.”

“Fajardo closed on the 1,100-square-foot apartment on Aug. 9, agreeing to a 30-year fixed-rate loan at 6.875 percent with terms that call for her to pay interest only for the first 10 years. She initially planned to pay down the principal too. In the end, that would have been too expensive.”

“‘It was a shock to me,’ she said. ‘I wasn’t really following the market that well.’”

“Four business days after the loan closed, the same mortgage Fajardo got from Countrywide had a rate of more than 8.5 percent, said Robert Raush, her broker in Manhattan.”

“In East Hampton, New York, real estate broker Diane Saatchi of the Corcoran Group just dropped the price on a four-bedroom classic 1910 house to $2.2 million from about $2.6 million. She had been trying to sell it for 10 months.”

“‘People are adjusting their dream prices back to reality,’ said Saatchi. ‘If they want to sell in this market, they have to drop the price.’”

The New York Times. “During the recent boom the best indicator of value became ‘what houses are selling for’ — another variation, in other words, on the greater-fool theory, which holds that commodities are worth only as much as someone else will pay for them and that someone (a greater fool) will always be willing to pay more than the last buyer.”

“To anyone who shopped for a home in a booming metropolitan area over the past few years, though, this was also the defining conundrum of the era: an apartment or house couldn’t possibly be worth the stratospheric asking price — but then again, maybe it could. Wouldn’t that have to be true if six bidders were considering buying it?”

“In New York City, builders are finishing about 30,000 new units a year, which is one and a half times the rate at the start of the boom. Logic suggests that so much new housing, along with tighter credit markets, will dampen both supply and prices.”

“My friend Jim, who lives in Brooklyn and whose house has appreciated to about seven times what he paid for it in 1994, recently told me about watching a house-hunting show on HGTV with his 10-year-old son. The episode featured a couple who had $435,000 to spend on a good-size house.”

“My friend’s son shook his head. ‘No way,’ he said. ‘That’s just wrong. You can’t get a house for $435,000.’ Well, not in Manhattan or brownstone Brooklyn. At least not anymore. And at least not yet.”

Please post off-topic ideas, links and Craigslist finds here.