The Housing Bubble

The Fresno Bee reports from California. “Hovnanian was the latest home builder to have a blowout special or hold promotions in the central San Joaquin Valley, but isn’t likely to be the last. A sluggish real estate market is prompting companies to pull out all the stops, giving discounts, cutting prices and even offering such special promotions.”

“Jonathan Dienhart, director of published research for market-tracking firm Hanley Wood Market Intelligence, said some of those deals are likely to fall through because buyers can’t get loans or sell their first house.”

“‘It doesn’t do any good to save 10% on a new house if you have to cut the price of your existing house 15% to move it,’ he said.”

“Like most builders, Hovnanian, a public company, is not buying any more land. Builders throughout the Valley have lots for sale, but buyers are few. ‘The price of land may come down further,’ explained Terry Mangum, director of Hovnanian’s Fresno-area division.”

The Recordnet. “The sea of foreclosed homes in San Joaquin County and its flotsam of tall weeds, partying teens and green pools are testing neighbors’ patience and code enforcers’ limits.”

“Auctions of houses owned by people who failed to make their mortgage payments are held at weekdays on the steps of the San Joaquin County Courthouse. Most of the sessions, though, there’s nothing to do because there are no bidders.”

“And while those houses await a buyer, or change of ownership, they’re often empty. And sometimes even if the property is occupied, it isn’t maintained.”

“‘It’s a real sticky situation in making sure our code enforcers aren’t overworked. It’s very difficult for our staff to track down the folks who are taking off,’ Tracy Spokesman Matt Robinson said. ‘They’re just walking away from their homes.’”

“Ossie Chapman said she remembers when neighbors of neglected homes would pitch in to maintain its appearance. ‘That doesn’t go now, apparently,’ she said.”

“Lathrop’s two-person code enforcement team now has 120 active cases at foreclosure properties alone, said city Spokesman Mike Esau. Tracy is faced with more than 700 foreclosed properties, and about 1,100 other properties are headed that direction, according to Realtytrac.”

“One burning question these days is: Why have foreclosures sledgehammered the Stockton metro area more heavily than about any place in the country?”

“There is no simple answer. Instead, there are several interwoven reasons why in the beginning, a search for affordable housing by Bay Area workers at the turn of the decade created a flurry of buying and surging prices that ultimately led to the huge market ‘correction’ of today, according to interviews with economists, real-estate experts, agents and brokers.”

“A real-estate boom in the Bay Area beginning in the late ’90s sent prices there sky-rocketing. Multiple offers at tens of thousands of dollars over listing prices made headlines. By 2001, Stockton real-estate agents reported that eight out of 10 home buyers were coming from the Bay Area. Sales prices began soaring in San Joaquin County communities by 20 percent to 40 percent annually.”

“‘And then when prices quit going up, it was like musical chairs, and there was no place to sit down,’ said John Knight, professor of finance and real estate at UOP’s Eberhardt School of Business.”

“One usual wisdom when buying a house for investment says that potential rent should cover the monthly mortgage requirements, Knight said. With investors quickly flipping in a soaring market, that evaporated, he said.”

“When prices got so expensive that the market slowed and prices started slipping, homeowners and investors who bought late in the game - in 2005 and 2006 - found themselves unable to sell at a high enough price to cover their mortgage debt, if they could sell at all.”

“‘It started off innocently enough with fundamental reasons for price appreciation,’ Knight said, ‘but once price appreciation started and there was more oxygen to the flame, so to speak, the rest kind of created itself.’”

The Pacific Coast Business Times. “The Federal Reserve’s bold move to reduce short-term interest rates by 50 basis points gave a temporary lift to publicly traded companies in the Tri-Counties. But it left area experts worried about the prospect for slower economic growth in the United States, the Golden State and the Tri-Counties for the balance of the year.”

“The problems of housing, particularly in Ventura County, in north Santa Barbara County and for entry-level sales across the region, won’t go away overnight said Bill Watkins, head of the University of California, Santa Barbara Economic Forecast Project.”

“‘It’s going to help some individuals whose rates were going to adjust and it will help some developers carry projects for a little longer,’ he said. But, he added, the problems of two major employers, Amgen and Countrywide, are having a large impact on Ventura County that can’t be eased with a single rate cut.”

“‘These are idiosyncratic problems,’ he said.”

“As much as the Fed’s move might cheer the markets in September, that optimism could fade if inflation returns. ‘The flip side is that we are already pushing the boundaries of inflation,’ said Watkins. ‘Given the first opportunity, they are going to take this away.’”

“Watkins warned that Countrywide may be forced to sell to Bank of America or another suitor. ‘I am not very confident that Countrywide will remain an independent company with big operations in Ventura County,’ he said.”

The Voice of San Diego. “To a frustrated home seller in the current real estate market, it sounds like an offer from an alternate, utopian universe: A buyer offers to pay as much as you’re asking — plus 10 to 30 percent — and you just kick the difference back to the buyer in cash after the deal closes.”

“But it’s a scam that can defraud the lender, artificially inflate values in entire neighborhoods and leave an economy reeling from the effects of foreclosure.”

“But so far, federal law enforcement appears to have been silent locally on the phenomenon. Cases have come forward in Riverside and Orange counties, but in San Diego, no charges have been brought on cash-back cases like these.”

“Todd Lackner’s Mission Valley office holds boxes and boxes of printouts on deals he says match the cash-back scheme, most since January 2006. (The) San Diego mortgage fraud expert said it kills him how little it takes to buy off one of his fellow appraisers on these deals.”

“‘The key is on all of these, no matter what, there’s a fraudulently inflated appraisal,’ he said. ‘And they’re not usually getting more than $350 an appraisal, the normal fee. They’re just getting work — and that’s how slow it is right now.’”

“Many of the lenders that allowed the price to be adjusted have gone out of business. In fact, Lackner has observed that the implosion in recent months of dozens of mortgage lenders that specialized in the zero-down, no income verification loans used widely in these cases has begun to dry up the occurrences of deals that look like fraud.”

“But so far, a crackdown on such schemes in San Diego has remained elusive, he said. ‘There’s just no enforcement in California,’ Lackner said. ‘That’s unfortunate, but what can you do?’”

“Tom Pool with the state Department of Real Estate said the number of complaints against licensed agents or brokers for particular transactions, the category under which mortgage fraud complaints would fall, is growing. And, he said, wherever the DRE investigates and suspends or revokes licenses, law enforcement officers are often close behind.”

“‘The feds have been on the heels of a number of accusations that we’ve filed,’ Pool said, referring to some cases in Northern California and Bakersfield.”

“For Lackner, the calls come from everyone ranging from real estate professionals to neighbors suspicious of the deal down the street. He shows files to governments and public agencies. And he hopes that one day, the schemes will be busted open and the market will heal.”

“‘It’s my goal to get every one of these people busted,’ he said. ‘I just don’t know how they sleep at night.’”

The Union Tribune. “Thanks to the nearly flat-lined downtown real estate market, what was supposed to be a luxury condominium tower is morphing into a landmark low-income apartment project.”

“Goodbye KB Homes…got approval in April 2006 for a ritzy 184-unit condo design on B Street. Enter a San Diego firm planning to tweak that blueprint into 226 apartments for families who earn less than $42,000 a year.”

“The developer, San Diego-based Affirmed Housing, got the land at the bargain-basement price of $4.4 million, or $202 a square foot. The current per-square-foot average is $250; the average was $350 during the market heyday two years ago, said one real estate economist.”

“The area is on the edge of the downtown renaissance, with new residential towers popping up all around.”

“Across the street, a new condo complex is halfway finished. Vantage Point is selling at market prices, with one-bedroom units advertised at $350,000 and up. Two other new market-rate condo buildings, Smart Corner and Aria, are a few blocks away.”

“While acknowledging the need to accommodate people with modest paychecks, a few members of the Centre City Advisory Committee, an elected board of downtown residents, said the financial investment for the city doesn’t look so hot.”

“The Centre City Development Corp.’s loan will be paid back over 60 years at 3 percent interest. That’s well below market rates.”

“‘We’re getting hardly anything for our investment,’ said Paul Robinson, an advisory committee member, adding that a 60-year-old building will be more of a liability than an asset.”

The East Valley Tribune reports from Arizona. “Elliott Pollack, president of Scottsdale-based Elliott D. Pollack & Co., said the economy should avoid a recession, but the slow pace of growth may make it feel like a recession. ‘The economy is no longer running on eight cylinders but on three or four cylinders,’ he said. ‘So the economy will still be driving forward, but…it will be a sub-prime year.’”

“Potential new residents will have a harder time selling their homes in California or the Midwest, he said. The result is the housing market will remain weak for several years, he said. ‘This will take a while to resolve,’ he said of the housing slump. ‘The next few years could be ugly.’”

“(Analyst) R.L. Brown said a lack of consumer confidence is the biggest obstacle to a recovery in the housing market. ‘When a consumer has no confidence in a market, he doesn’t buy,’ Brown said. ‘He sits on his hands because no one wants to appear stupid in making a purchase decision.’”

“Brown said the Valley has a 15-month supply of new, resale and foreclosed houses that are available for buyers, even if there were no new construction. Housing is ‘dramatically’ overpriced for such a large inventory, he said.”

“‘Those of us in the industry need to recognize we are living in today’s marketplace,’ he said. ‘We must accept the market as it is.’”

The Arizona Republic. “‘How do I define a full recovery?’ Pollack asked a packed ballroom at the Arizona Biltmore. ‘Supply and demand is back to normal. We’ve absorbed that excess supply (of housing stock).’”

“Pollack estimated that an excess inventory of at least 40,000 homes exists in the Valley.”

“Caught in the midst of the housing market turmoil, real estate agent Tina Eacret held out as long as she could — using up her entire savings before deciding to go part time in December.”

“Eacret had lost roughly half of her database of 500 contacts to the new agents who flooded the Valley market in recent years, trying to capitalize on the boom. Even her most loyal clients opted to use friends and relatives who had gotten their licenses or obtained a license themselves.”

“‘I almost felt like I had failed, but I had to realize that it wasn’t just me,’ Eacret said. ‘Everybody’s going through it right now.’”

“Many of the real estate agents who jumped in during the housing frenzy are now out of a job, said Patti Crawford, director of Intero Real Estate’s foreclosure division in Mesa. Some didn’t hold on to the money they made at the height of the market, Crawford said.”

“‘I’m seeing a lot of real estate agents with their houses in foreclosure,’ she said.”

“But despite the exodus of some agents, hundreds of newcomers have streamed into the industry in recent months.”

“As a rising number of distressed borrowers falls into foreclosure, lenders are increasingly being forced to take back properties, which are typically then bought up by investors.”

“But with so many houses hitting the market after unsuccessful foreclosure auctions and lenders eager to clear the properties off of their books, savvy home buyers now have more chances to snap up houses at hefty discounts.”

“Patti Crawford, who runs a foreclosure division for Intero Real Estate in Mesa, said the buyers she works with are split fairly evenly between homeowners and investors. Her job is to market repossessed properties for lenders.”

“‘Regular homeowners want a good deal right now because they have been burned paying too much for their property in the past couple years,’ Crawford said.”

“An auction marketing firm will host a massive auction in Mesa next month with nearly 100 houses up for sale. Bids for the homes, some of which were previously valued at more than $300,000, will start as low as $89,000, according to Real Estate Disposition Corp.”

“Set for Oct. 14, the auction will include 44 Casa Grande and 53 city of Maricopa properties. The homes run as large as four bedrooms, three baths and have been previously valued up to nearly $355,000.”

The Sierra Vista Herald from Arizona. “In fiscal year 2007, the city issued 159 residential construction permits, a significant drop when compared with 537 the year before, according to Sierra Vista’s Community Development Department.”

“Robert Carreira, the center’s director, said that since the beginning of the city’s fiscal year 2008 on July 1 through the end of August, construction permits are down about 75 percent in Sierra Vista, in contrast with a slightly lower decline in Cochise County and a statewide decline closer to 50 percent.”

“‘I think what we’re seeing is a reflection of that now, and I think Sierra Vista’s drop in new construction in the first nine months of this calendar year dropped a little bit more than what we’ve seen in other areas,’ Carreira said. ‘I think that’s because we saw a bigger boom than in other areas.’”

“From his academic perspective, Carreira commented about the relevance and potential impact of the Federal Reserve’s lowering of interest rates by half a percentage point Tuesday.”

“Concerns are that the rate cuts will cause inflation and that it interferes with long-term market adjustment that should be allowed to run its course to correct the aftermath of ‘easy money policies’ of lowered borrowing standards that existed from 2003 through 2005, he said.”

“Carreira warned the Fed is merely prolonging or expanding the crisis by ‘pushing the day of reckoning further into the future,’ or ‘by encouraging more unwise lending and borrowing.’”

In Business Las Vegas from Nevada. “This is not a news flash. But the first numbers are coming out further clarifying the impact of the credit crunch on people’s ability to buy a new home.”

“Home Builders Research released its stats that show the cancellation rate on purchases of new homes in the valley jumped to 53 percent in August.”

“The rate had been closer to 30 percent two months ago before lenders starting tightening credit. ‘Buyers are certainly not canceling because they are changing their minds,’ said Dennis Smith, president of Home Builders Research. ‘They are canceling because something has changed in their monthly payments.’”

“The cancellation rates have been evident in homebuilders drastically dropping their prices in the last two to three months.”

“Smith reports Meritage Homes lowered prices in some of their subdivisions by $50,000. KB Home is now selling a 1,553-square-foot home for $174,990 ($112.68 per square foot) and an 1,898-square-foot home for $202,990 or $106.95 per square foot, Smith said.”

“The valley’s biggest cancellation rate was 77 percent in the south, followed by 60 percent in the east, Smith said. The southwest and northwest had a 48 percent and 47 percent cancellation rate, respectively. The cancellation rate in North Las Vegas was 43 percent, and Henderson had a 42 percent cancellation rate.”

“Las Vegas overbuilt? If you believe NuWire Investor, Las Vegas was the No. 1 ranked overbuilt market in the U.S. during 2007.”

“Smith said he doesn’t understand that assessment by NUWire. There is only about a six week supply of new homes because of cancellations and builders are cutting prices to get rid of them, Smith said.”

“The bigger oversupply is in the condo market where demand has softened, Smith said. More than 40 percent of resale homes on the market are vacant.”

“The Las Vegas Sun reported that 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 in 2002 and 2006, filed for Chapter 11 bankruptcy protection from creditors while he reorganizes to pay his debts. Dague reported his sales fell 60 percent from 2005 to 2006.”

“The number of Nevada bankruptcy filings grew more than twice as fast as those filed in the United States as a whole, according to data released by the federal judiciary.”

“During the first half of 2007, filings in Nevada jumped by 113 percent, to 4,922 from 2,310, when compared with the first half of 2006. During the same time period filings nationwide increased 48.2 percent. California bankruptcy filings grew by 97.5 percent.”

“The Silver State has had fewer Chapter 11 filings than other states in other regions, although there has been a significant increase in those this past year, from September 2006 to September 2007, said Assistant U.S. Trustee August Landis, who works out of the Las Vegas field office.”

“Much of the increase in business bankruptcy filings can be attributed to failed real estate developments and entrepreneurs, he said.”

“Bankruptcy reform is working, Landis said. ‘Reform does help,’ he said, adding that the legislation provides for effective tools, such as the means test, in ferreting out abuse of the system. ‘The bankruptcy is not as simple. You don’t just file a piece of paper and not pay your debts anymore.’”

Some housing bubble news from Wall Street and Washington. The Guardian, “Thousands of homebuyers have abandoned plans to move house after the British banking crisis surrounding Northern Rock led to fresh uncertainty in the housing market. David Salvi, director of Hurford Salvi Carr, said his office had compared the traffic with that of the other property websites coming through internet search engines and that the same trend was evident elsewhere.”

“‘The public’s appetite for buying and selling property completely dropped off after last Thursday [13 September], although some of this has now returned. We do not believe it is a coincidence that our quietest weekend of the year occurred immediately after the Northern Rock share crisis,’ he said.”

“‘Last week shows what happens when an event in one part of the world can affect us all within just a few weeks,’ Chancellor Alistair Darling will today tell the Labour Party conference. ‘The time was when a small bank in an American state got in trouble, it was bad news for that town or maybe that state but nowhere else. But today, when a Florida householder defaults on his mortgage, the effects are felt not just in America but across the world.’

From Bloomberg. “The government of Prime Minister Gordon Brown, which insured the deposits of Northern Rock customers to stop a run on the bank, seems willing to sacrifice its investors and executives to lawmakers looking for someone to blame.”

“‘No government should ever be in the business of protecting executives who make the wrong call or bad decisions,’ Darling said Sunday at the governing Labour Party’s annual conference. ‘My job is to protect ordinary savers.

From Reuters. “Deutsche Bank’s profit could be hit by up to 1.7 billion euros ($2.4 billion) due to loans that have dwindled in value as a result of the credit market crisis, sources familiar with the situation said.”

“Deutsche would normally farm these loans out to other banks, but it has become harder to sell on such debt in the wake of a credit squeeze that began with a wave of mortgage defaults in the U.S., and the bank now faces having to write down the value of these loans to reflect this.”

“Mitsubishi UFJ Financial Group, Japan’s biggest bank, says it may need to mark some of its investment securities at ‘a significantly lower price’ due to credit market deterioration from subprime mortgage defaults in the United States.”

“Prices for some securities have declined because the market ‘is depressed or not properly quoted,’ the Tokyo-based bank said.”

The Wall Street Journal. “In its semi-annual review of global financial issues, the IMF concluded that the ‘threat to financial stability increased,’ in good measure because of the uncertainty over how credit problems are transmitted globally and how deeply the credit crunch will bite in markets around the world.”

“Now, the IMF says it’s trying to help head off future crises by highlighting potential problems ahead of time. ‘The new element [in the global economy] is the complexity of the new financial system,’ said the International Monetary Fund’s top financial review official, Jaime Caruana.”

“Mortgages, for instance, are packaged in so many different kinds of financial instruments that are held by so many different kinds of investors, that individual investors lose incentive to do sufficient due diligence, figuring someone else in the chain has already done so. Ratings agencies also have a hard time properly understanding the risks.”

“‘Investors need to look behind the ratings,’ the IMF report said. ‘They should not assume that the simple letter rating provided by ratings agencies show equivalent risks as those for other asset classes.’”

The New York Times. “Denial is a powerful thing, and nowhere is that more evident than among companies holding mortgage securities that are on the skids. Nine months into the meltdown of the home loan market, investors are still waiting for banks, brokerage firms and other companies to come clean on losses incurred on those securities.”

“Consider the announcement last week from the E*Trade Financial Corporation about problems in its mortgage operations. Mitchell H. Caplan, E*Trade’s CEO, said the company would likely take a $95 million charge in the second half of 2007 and a $245 million provision for loan losses. The company also expects to record an impairment charge of $100 million to reflect deterioration in the performance of second lien loans and collateralized debt obligations.”

“But Sean Egan, managing director at Egan-Jones Ratings, said he expects that this was not the last of the bad news from E*Trade on its mortgage holdings. In the most recent quarter, which ended in June, E*Trade held $47 billion in mortgage securities, home equity loans and loans receivable, or three-quarters of its total assets. So the charges and loan loss provisions recently taken by the company total less than 1 percent of those loans.”

“Not enough, Mr. Egan argued. ‘They are still marking to model, not to market,’ he said.”

“Indeed, E*Trade, as is common practice, does not recognize losses in problem loans until it considers them ‘permanently impaired.’”

“It showed $690 million in unrealized losses in securities held on its books at the end of June, a vast majority in mortgages. These losses represent temporary impairments only and are attributable to changes in interest rates, not a decline in credit quality, the company said.”

“Nationstar Mortgage, the subprime unit of Fortress Investment Group, said it is no longer accepting new loan applications from brokers, a signal the lender is winding down operations. Nationstar has been a leading U.S. subprime lender.”

The Pacific Coast Business Times. “The Federal Reserve’s bold move to reduce short-term interest rates by 50 basis points Sept. 17 gave a temporary lift to publicly traded companies in the Tri-Counties.”

“Richard Weiss, chief investment officer at City National Bank said the underlying message is that Fed Chairman Ben Bernanke and his Open Market Committee must see serious problems ahead for the economy. ‘At the end of the day, the economy is not in great shape, and the doctor is providing serious medicine for us,’ Weiss said.”

The Baltimore Sun. “Fasten your seatbelts; it’s going to be a bumpy ride. Last week’s announcement that the Federal Reserve was cutting a couple of key interest rates by a whole half of a point, not just the quarter-point that many economy-watchers expected, set off one heck of a party.”

“But for some of us scaredy-cats, the news set off memories of the Carter years and double-digit inflation. It also brought back the dot-com bubble - before that roller-coaster ride dipped precipitately at the end. How long, some of us wonder, before references to the Greenspan Put are replaced by talk of the Bernanke Bubble?”

The Union Tribune. “The fire that Bernanke hopes to put out is the Great American Mortgage Crisis, which has burned brighter and hotter than many economists had previously thought possible.”

“But in the world beyond Wall Street’s movers and shakers and CNBC’s talking heads, the reaction was a bit different.”

“From the Persian Gulf to Beijing to Zurich, there is increasing skittishness about the health of the U.S. economy and the wisdom of our economic policies. Bernanke’s kowtowing to the powers-that-be on Wall Street did nothing to allay those fears.”

“In July, foreigners sold a net $9.4 billion in U.S. Treasury bonds, one of the largest sell-offs on record. Foreign sales of dollars have pushed the value of the U.S. currency to its lowest point ever against the euro. The Canadian dollar, which used to trade for less than 70 U.S. cents, is now equal to the U.S. dollar and will probably soon surpass it.”

“The fact is that just as it required a lot of foreign money to get us into the economic mess we’re now dealing with, it may require a lot of foreign money to pull us out. And if we treat them too cavalierly – or if we make our market too unprofitable – they might take their money and run.”

“Following the Asian economic crisis of 1998, Greenspan and other central bankers created a virtual sea of liquidity in the world marketplace, printing money and lowering interest rates to prevent a worldwide recession.”

“Wall Street firms, awash with cash, helped develop increasingly risky securities for foreign investors who were also awash with cash. Those investors may have had no idea what ‘no down, no doc ARMs’ were. Instead, they probably had the idea that nobody goes broke buying U.S. real estate.”

“Ironically, last week’s interest-rate slashing by the Federal Reserve, designed to keep the economy from falling into recession, may chase away so much foreign money that our economic problems will only grow worse. If you were a foreigner, why would you invest in a country where the combination of an anemic dollar and interest rates robs your investment of its value?”

“In May of 2004, Dean Baker, an economist in Washington who had been warning about excesses in the housing market, sold his two-bedroom condo after concluding that the market had lost its moorings from reality. In a way, he was two years too early.”

“In a replay of the years before the tech-stock bubble burst in 2000, housing market skeptics have spent much of this decade being tarred as the boys who cried wolf. Academics and economists like Mr. Baker came across as gloomy sourpusses who did not want Americans to have fun and grow rich by flipping second homes on the New Jersey or Florida coasts.”

“Some in the real estate industry say the early cries of bubble should be called to account on the grounds of intellectual fairness. If the boosters have to acknowledge they were wrong when they provided justifications for prices that were, well, unjustifiable, then the doubters should also own up to the fact that they were too negative, too early.”

“‘Even the people that were talking about booms busting, my goodness they were talking about it in 2001 and 2002,’ said David Lereah, the former chief economist with the National Association of Realtors. ‘And they were wrong for four years and they only became right at the end of 2004.’”

“He and his former employer had been criticized for the optimistic forecasts they made during the boom.”

“Newspapers during the boom in the 1990s and in the early years of this decade expressed warnings about the housing market, along with more upbeat sentiments. But the critical voices often did not register above the din of the frenzied market.”

“‘You got some of us sitting there in a distance saying that this is a bubble, we don’t know when its going to end,’ said Christopher F. Thornberg, an independent economist. ‘And then you have mortgage brokers and real estate agents who are much closer to the buyer who are whispering in their ear that, well, yeah, there are some markets that are out of line but not this neighborhood.’”

“Almost everyone would agree that of far greater import to the timing and performance of bubbles are interest rates and the availability of credit. Both are set by the market, but regulators at the Federal Reserve exert significant influence over them.”

“The main discussion now, with the benefit of hindsight, is whether the central bank should have taken a more muscular approach in regulating mortgage lending and raised interest rates sooner.”

“Last week, the Fed cut rates sharply to ease conditions in the credit market, kindling some fears of inflation.”

“‘We have had two bubbles in the last 10 years,’ noted economist Allen L. Sinai, the president and chief at a consulting firm based in New York. ‘The only way I would say it won’t happen — and this is arguable — is for the central bank to do something about it before it gets too far, and right now the central bank’s religion is not to interfere.’”

The Bradenton Herald reports from Florida. “Jo Lynne Navarro wants her $270,000 back. That’s how much the Sarasota County woman paid to reserve two Bel Mare at Riviera Dunes condominium units two-and-a-half years ago. The units existed only in glossy sales brochures at the time, but Navarro - like many others lured by a sizzling condo market - was eager to buy early.”

“Now, units 206 and 801 in Bel Mare’s second 12-story building in Palmetto are complete but empty, as are numerous others, making the brand-new building resemble a ghost tower. Navarro doesn’t want the units anymore and is suing the developer because it won’t let her out of her purchase contracts for $1.35 million, or return her deposits. She has a lot of company.”

“Real estate and legal observers say the rise of ‘buyer’s remorse’ lawsuits is just the latest legal fallout from an unprecedented housing slide. ‘This might just be the tip of the iceberg,’ said William P. Sklar, a West Palm Beach real estate attorney following the trend.”

The Herald Tribune. “When Joseph Long conceived the idea of buying homes and condominiums in Southwest Florida at 70 cents on the dollar, he was thinking in terms of tens of millions rather than hundreds of millions of dollars.”

“But as the former elevator company executive…discovered that 10 times as many builders and developers wanted to participate as he had anticipated.”

“‘People are calling me and saying: ‘Please, Joe, do this deal,’ he said. ‘One guy told me he would lose $3 million if I succeed, and $13 million if I don’t.’”

The St Petersburg Times. “For most home builders in the Tampa Bay area, the gold mine of 2005 has turned into the money pit of 2007. Pulte Homes lost $122-million in Florida in the three months ending June 30. Lennar bled $214-million in just three months this year in its Southeast region, which prominently includes Florida.”

“Standard-Pacific lost $24.6- million in its Southeast division and, in a note to its shareholders, singled out Tampa for dragging down business. KB Home lost nearly $50-million in Florida, Georgia and North Carolina. Heavy into the Tampa-area suburbs, KB said it cut prices by a third locally since January, a move that’s improved sales but decimated profits.”

“‘I haven’t talked to a happy builder in about two years,’ said Marvin Rose, a Tampa Bay area housing analyst who advises local builders. ‘Demand has completely evaporated. So what is out there for sale is moving slowly.’”

“Houses bought by investors, new but empty, continue to compete with those offered by builders. Tony Polito, a housing analyst in Tampa with Metrostudy, counted 4,200 unoccupied new homes in the Tampa Bay area.”

“Most analysts predict the new home market won’t reach a healthy balance until 2009, when buyers and sellers can meet at prices that please both sides. For most of this new century, the industry has been distorted, first by overdemand, and now by oversupply.”

“‘We haven’t had a normal market since 2002,’ Rose said.”

The News Press. “The parent company of First Home Builders is negotiating with a federal agency about what to do with a slew of shaky loans used to construct houses in Lehigh Acres and Cape Coral.”

“But experts say it’s questionable how much any deal could accomplish, given Lee County’s downward spiral of property values.”

“Norlarco and Ann Arbor, Mich.-based Huron River Area Credit Union collapsed earlier this year, mainly because loans they made to build houses here ran into problems when property values plummeted. Both are being run by the National Credit Union Administration.”

“Now numerous investors are unwilling or unable to close on those houses and numerous lawsuits have been filed — 20 of them against D’Alessandro & Woodyard, the real estate firm that handled many of the deals.”

“Norlarco has loans totaling $238.4 million on 1,035 homes in Lee County, McKechnie said. Hovnanian has a backlog in Lee County of 1,787 homes worth $496 million, said J. Larry Sorsby, the company’s chief financial officer.”

“‘We typically receive between 75 percent and 90 percent of the purchase price from our Fort Myers customers via their construction loans,’ he said. ‘However, given that the market has deteriorated so significantly in Fort Myers, many buyers are now refusing to convert to permanent financing where we would receive the balance of our sales price. They are effectively defaulting on their construction loan. Therefore it is likely that we will not receive the balance of the purchase price on many of these homes.’”

The Palm Beach Daily News. “Many experts say the deals could get progressively better for potential buyers as more banks start attempting to unload foreclosed properties at below-market prices.”

“Real estate consultant, Jack McCabe, CEO of McCabe Research & Consulting LLC, recently told me of a Tampa developer who had bought at the top of the market and needed to sell some condo units. At auction, some $180,000 units went for as little as $90,000. Three-bedroom units that had retailed for $295,000 to $325,000, sold for as little as $180,000.”

The Palm Beach Post. “The eagerly anticipated home-sales reports for August comes out tomorrow, but we get an early peek at Palm Beach County numbers thanks to Illustrated Properties Real Estate and IPRE.com, which posts the latest MLS results.”

“Sales of single-family homes fell again in August - no surprise there - to 688. The drop is in the neighborhood of 15 percent year over year. Also, the median price of homes in Palm Beach County fell to $280,000 in August, according to IPRE.com. That’s down from $300,000 a year ago.”

“The most alarming trend the August report reveals is that ‘inventory’ continues to mushroom. In August, there were 24,428 existing homes and condo units for sale in Palm Beach County, according to the report. Wow! At the current pace of sales, that’s almost a three-year supply.”

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