The Housing Bubble

KCBS reports from California. “About 500 Sacramento and Bay Area homes are being auctioned off over the next two weekends, and next month 34 homes in a Manteca subdivision will be on the block, starting at 40 percent below previous prices. The idea is to get qualified buyers off the fence, says Darryl Franks of Pacific Auction Exchange. ‘Are we going to see more of the auctions? Absolutely.’”

From CNBC. “I’ve been waiting for a call back from the press contact at D.R. Horton all morning, and now…I’ve decided to give up. I called the company (three times) to ask for a bit more information regarding an auction of 53 new D.R. Horton-built homes in San Diego this weekend.”

“We’ve been doing quite a bit of reporting on foreclosure auctions as well as big ‘fire sale’ type deals from the big builders, like Hovnanian, but this is the first home builder auction I’ve seen yet, and I’m curious why they’re taking this course, rather than trying to sell the properties at a discount.”

From CNN Money. “For vulture investors, it’s not only about the discounts. In order to hold a real estate asset for the several years it might take to turn around, properties have to generate ample cash flow while they wait.”

“Some of the down markets Redbrick Partners’ Jonas Lee is not considering include the Central Valley cities of California, where prices in places like Stockton soared for several years. Moody’s projects prices there will fall 25 percent.”

“Lee doesn’t like Stockton’s prospects because,’It was so overpriced there and there are few constraints on building.’ If prices start to recover, developers can quickly build again, putting a damper on price growth.”

The Fresno Bee. “Stockton is the foreclosure capital of the nation for one key reason: Families had to stretch financially to buy a house.”

“Families that fled the high-cost Bay Area to buy a house now are losing them at record rates, according to RealtyTrac. Other regions close to high-cost urban centers — Modesto, Merced and Riverside/San Bernardino — are also high up the foreclosure list.”

“About 25% of home buyers in Stockton used risky, or subprime, loans to finance purchases. Many of those transactions occurred between 2003 and 2006 when prices were tripling in some areas.”

“And today, with home values falling and strapped owners unable to sell their properties, a quarter of those who took out such loans are in default at least 60 days, according to LoanPerformance. As a result, Stockton, a haven for refugees from Bay Area prices, had the nation’s highest rate of foreclosures in the first six months of 2007, according to RealtyTrac.”

“Bud Martini took an early retirement, sold his house in Gilroy for $825,000 and used some of the cash to buy a four-bedroom house in Yosemite Lakes in Coarsegold in 2004 for $318,000. He and his wife aren’t alone. ‘We’ve met a ton of people from the Bay Area, Gilroy, San Jose and Sacramento,’ he said.”

“About one of every 27 households in the area was in the foreclosure process in the first six months of 2007, according to RealtyTrac. ‘They couldn’t afford a home [in the Bay Area], and they started pulling themselves out to the Valley,’ McGee said. ‘A lot of people bought houses they couldn’t afford.’”

“Los Banos, too small to make it on national lists but a commuter town for San Jose, also has been hit hard, said Bill Pfeif, a Fresno real estate agent who specializes in finding buyers for troubled properties.”

“Pfeif…is trying to sell 300 lender-owned houses in the central San Joaquin Valley. ‘We’re not really that far behind those guys,” he said of Stockton and the other commuter markets. ‘The numbers continue to rise.’”

“And foreclosures will persist through 2008, he said. LoanPerformance estimates 31% of all the adjustable-rate loans issued in the last three years have ’set’ to the higher rates, with 22% more ratcheting upward before year’s end. An additional 37% will reset next year.”

“‘The pig won’t be through the python until third quarter 2008,’ said Bob Visini of LoanPerformance.”

“A financially troubled Sacramento developer that stopped building a project in Dinuba has been sold to an investor who said he plans to reorganize the company and resume construction.”

“Dunmore Homes announced Wednesday that it sold its assets to Sacramento native and businessman Michael A. Kane, who said he intends to restructure and jump-start development activities.”

“Dunmore fell victim to a real estate downturn that is wreaking havoc in the industry. Builders are cutting staff, trying to sell excess lots and offering concessions to sell houses.”

“‘The recent decline of sales in today’s home building industry has had a devastating effect on most private and public home builders,’ Sid Dunmore said in a statement.”

“Analysts say Dunmore likely won’t be the last victim. ‘It’s survival of the fittest,’ said Robin Kane, a Fresno-based consultant who is unrelated to Michael A. Kane.”

The Sacramento Bee. “Nine months ago, Granite Bay home builder Sid Dunmore predicted local builders like himself would emerge stronger from a housing downturn that was battering the stock prices of the giant national home builders that dominate the Sacramento market. Wednesday, Dunmore announced the sale of the family business.”

“‘During the run-up, we had 17,000 sales a year, and all these companies were here or coming here predicated on a certain amount of volume,’ said Greg Paquin, owner of the Gregory Group. ‘If volume slides to 9,000 a year and you cut that up among the same number of builders, the picture doesn’t look as good.’”

“In an interview earlier this year, Dunmore criticized some of the publicly traded home-building giants that dominate the Sacramento market. He said many kept churning out hundreds of new homes even as the market weakened, and he contended that private builders would survive because they could respond more quickly to changes in the market.”

“But many of the biggest builders also offered discounts and thousands of dollars in incentives, a tactic difficult for private, locally owned builders to match.”

“John Slaughter, (a) Dunmore executive, said the market had changed dramatically from three years ago, when the company’s sales peaked. ‘We weren’t selling as much as we did while costs continue to go up,’ he said. ‘It became necessary, unfortunately, to make this change.’”

The Gilroy Dispatch. “The boom in real estate lasted so long and the downturn came quickly and in a surprising manner. The decline in home sales and its financial repercussions for real estate agents hit South County coincidentally on the onerous date of Sept. 11 when more than 90 agents with Century 21 Premier in Gilroy and Morgan Hill learned they would lose their jobs as the offices announced their closures.”

“Fueled by low interest rates and let’s say a number of ‘creative’ mortgage plans, in hindsight it is clear that some folks who didn’t have the resources were able to become homeowners. It is the American Dream. But sometimes dreams become nightmares.”

The Daily Star. “Some of the former employees of Tucson-based First Magnus Financial Corp. had much more money on the line than a twice-monthly paycheck when the mortgage lender filed for bankruptcy last month.”

“Managers of so-called ‘net’ branches, offices that were operated using managers’ funds, said that when First Magnus filed for bankruptcy, it took possession of accounts, holding more than $100,000 in some cases, that were rightfully theirs.”

“Darrell Giannone, a net-branch manager in California, said he has paid $650 after checks bounced, and expects he will have to pay about $4,000 more. At the time of the bankruptcy filing, he had about $110,000 in a branch account.”

“Financial documents filed with the bankruptcy court on behalf of First Magnus do not appear to include branch managers as creditors.”

“‘Unfortunately, they were using our money and basically stole it,’ said Sue Marshall, a net branch manager in Modesto, Calif., who said she had $118,000 in an account under First Magnus’ control.”

The Voice of San Diego. “With a highlighter, Bill Curtis issued the San Diego housing market a grand ultimatum a few months ago, circling January 2009 in bright yellow. If housing prices don’t crash by then, he’s moving to Wichita, Kan.” “‘You know how much a house costs in Wichita?’ Curtis said. ‘I could get three houses for what I’d pay for one here.’”

“Curtis and his ideological bedfellows…decry the lax lending that kept prices high but have stuck borrowers with ballooning payments and unmanageable terms. Now, as more houses than ever enter foreclosure and some politicians brainstorm bailouts for lenders or homeowners, Curtis cringes.”

“‘Why would they want to support that?’ he said. ‘It’s completely opposite. If the market came down, everybody would be able to afford to buy a house.’”

“Curtis began to research the market. He learned about lending and investment properties and no-documentation mortgages and lucrative commissions for loan and real estate agents and brokers. And he’s grown to detest the news coverage of some of the people who are now facing foreclosure, because he sees himself and others of his ilk as the real victims of the current market.”

“‘The only solution to this whole housing mess is to get prices back down to where an average family can afford to buy an average home to live in,’ he said. ‘Why is that such a terrible goal to work toward?’”

The East Valley Tribune reports from Arizona. “Valley home prices fell at a faster pace in July than in prior months, mirroring a national trend, a home price index released Tuesday shows. The S&P/Case-Shiller index of 10 cities, which measures change in single-family home values, slid 4.5 percent in July from a year ago, the sharpest drop since July 1991.”

“Prices have also fallen at an increasing rate each month since the beginning of the year. Meanwhile, the Valley’s index rating slid 7.3 percent in July from a year ago, as sellers and real estate agents continued to slog through the dampened market.”

“‘I just don’t see an end in the near future,’ said Brian Bell, a real estate agent in Mesa.”

“Valley home prices are still steadily declining, though some areas are hurting more than others, Bell said. In some subdivisions, people are just dumping properties, slashing prices in the process, Bell said. Sellers in outlying areas, such as Queen Creek, are also getting hammered hard by builders, who are offering steep discounts and incentives.”

“Prices were definitely inflated in 2005, largely a result of a huge influx of investors, and that has now been corrected, said Christian Broadwell, owner-broker of AZCO Properties.”

“‘I think we are pretty much at the bottom at this point,’ Broadwell said. ‘It’s probably one of the best markets I’ve ever seen for a buyer.’”

“Sales of foreclosure properties and homes that have been repossessed by banks are on the rise — snapped up by savvy investors at hefty discounts. Short sale deals often come in 20 percent below the value of a property, Broadwell said.”

“Brian Judy, broker in Gilbert…said he believes prices will continue to drop for now. More than 57,000 existing homes are on the market and would take roughly a year to sell if no new homes were listed for sale, Judy said. And sales will continue to drop as the slower holiday season approaches, he said. It may take years for the market to fully stabilize, Judy said.”

The Arizona Daily Star. “As more homeowners end up in foreclosure, one investor in distressed properties has ended up in financial trouble, too. Deed and Note Traders LLC, which has operated a foreclosure rescue service under the name HomeSavers, filed for Chapter 11 bankruptcy Sept. 7.”

“Scott Gibson, an attorney representing Deed and Note Traders, said the company suffered from a recent tightening in the credit market as many would-be buyers have been unable to get mortgages.”

“‘It was really a function of the whole thing happening with the financial markets, and the slowdown in sales of residential properties,’ Gibson said.”

“Gibson said he could not speak to the condition of specific properties, but said some scheduled repairs haven’t been done because of a ‘negative cash flow.’”

“Meanwhile, August foreclosures were up more than 140 percent in Pima County compared to the same month a year ago, according to RealtyTrac.”

Bloomberg Nevada Nevada. “What happens in Las Vegas doesn’t stay in Vegas when it comes to the city’s housing market. Tumbling home prices in the gambling Mecca will show how far and how fast U.S. property values will fall in 2008 as the housing decline enters its third year, said William Wheaton, an economics professor at the Massachusetts Institute of Technology.”

“‘Las Vegas is an important barometer for where the rest of the nation’s home prices are going because it’s going to show us how quickly the investors head for the doors,’ Wheaton said. ‘It will put the floor under the housing correction.’”

“‘They had the biggest price bubble, so they’re going to have the biggest price drops,’ said economist Patrick Newport.”

“The slump in Las Vegas could last until 2010, even if gamblers and vacationers continue to boost the city’s economy, Newport said. Prices have already dropped 5 percent from last year’s peak and may fall another 15 percent over the next three years, he said.”

“As homebuyers descended on the desert city, it changed the way Americans look at real estate, said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. After Las Vegas, the investment boom spread across the country from Florida to Arizona and California, Swonk said.”

“‘The city that gave us gambling gave us house gamblers,’ Swonk said. ‘Buying a home became like buying a stock on margin, with no money down.’”

“Almost half of Las Vegas home sales in 2005 and 2006 were to people who intended to resell quickly for a profit, according to data compiled by Fannie Mae, the world’s largest mortgage buyer. Nationally, investment purchases accounted for 28 percent of sales in 2005, the peak of the housing boom, according to the National Association of Realtors.”

“Builders…have about 23,000 homes under development in the area. MGM is constructing a 66-acre condominium and casino complex scheduled to open on Las Vegas Boulevard in 2009.”

“‘It’s going to take up to two years for the market to work itself out,’ said Ryan McPhee, owner of a Las Vegas real estate investment company. ‘We have too much inventory, and more on the way.’”

“When the value of a house is less than the mortgage, owners who want to sell have to pay the lender the difference to buy out the loan, in some cases as much as $50,000, McPhee said. ‘It’s not that prices have plummeted, they’re down about 5 percent so far. But if you bought near the top with no money down, you’re under water,’ he said.”

“Some of the owners who bought in the early years of the boom are stuck, even after seeing prices double in five years, McPhee said. ‘Some people have seen their home values soar, but a lot of them refinanced to pull out that equity and spend it on cars or gambling,’ he said.”

The Las Vegas Sun in Nevada. “If location, location and location are the most important factors in real estate, timing is not far behind. You don’t need to tell that to Igor Doncov, who had the misfortune of investing in the booming Southern Nevada housing market just before it began to collapse three years ago.”

“But today the San Mateo, Calif., computer consultant considers himself one of the lucky ones as he watches from afar the valley’s rising foreclosure rate which, driven primarily by investors walking away from their homes, has become the nation’s highest.”

“Doncov didn’t lose his two $450,000 homes to foreclosure. But he did lose $100,000 in down payments after he was able to sell both properties for what he owed on them a year after buying them.”

“Unlike Doncov, who escaped with only a hefty financial loss, many other investors are now caught up in the valley’s growing foreclosure epidemic.”

“A Sun computer-assisted analysis of RealtyTrac data found that new foreclosure filings in Southern Nevada have skyrocketed in the past six months, from 2,165 in March to 5,242 in August.”

“Combining the RealtyTrac figures with data from the Clark County assessor’s office, the analysis found that 74 percent of all single-family homes in foreclosure during the past six months were owned by investors who did not live in the homes.”

“Roughly 85 percent of actual auctions or repossessions of homes from March 1 through Aug. 31 involved properties not occupied by their owners, the figures show.”

“As of Sept. 1, however, the Sun analysis found that 38 percent of all single-family homes in Southern Nevada were still owned by investors.”

“Even the homebuilders, who were cashing in on the real estate bonanza, knew something was wrong. ‘Many builders were trying to discourage the speculators,’ said Irene Porter, longtime executive director of the Southern Nevada Home Builders Association.”

“‘We could just feel it and know that we would end up with these problems. But we really couldn’t do much to stop it. You can’t refuse to sell a house to someone who has a loan,’ Porter said.”

“Clark County Commissioner Bruce Woodbury doesn’t have as much sympathy for the speculators as for the homeowners who have fallen on hard times.”

“‘You hate to see foreclosures, but frankly I would rather see investors get foreclosed upon than homeowners,’ he said.”

The Review Journal from Nevada. “Boomtown bravado aside, the next year figures to be extremely difficult for many Nevada homeowners being gradually eaten alive by adjustable-rate mortgages and the collapse of segments of the subprime-lending market.”

“Nevada reported 1,470 new foreclosures in August, the highest one-month number in recent history and more than a dozen times higher than August 2006, according to information provided by Applied Analysis.”

“Jeremy Aguero of Applied Analysis, says the foreclosure issue is ‘trending toward the worse side, not getting better,’ but he anticipates a positive surge in 2008 when the massive employment call for the new resorts will begin to be answered.”

“‘Are we seeing some cyclical instability?’ he asks. ‘You bet we are.’”

“For every 1 percent homes dip in value, Nevada loses approximately $800 million in household wealth, Aguero observes.”

“But, again, he sees a pattern where others feel the panic. He asks, wasn’t it 18 months ago that affordable housing was the big question? ‘It seems to me the debate has turned 180 degrees,’ he says.”

The Salt Lake Tribune from Utah. “Zions Bancorporation, the Salt Lake City-based lender with operations in 10 Western U.S. states, said its bad loans will probably rise in the third quarter as home building and land values decline.”

“Zions expects loan charge-offs of $17 million, up from $8.7 million in the second quarter, Chief Financial Officer Doyle Arnold said at an investment conference Wednesday. The bank also plans to set aside $44 million to $46 million for potential loan losses in the third quarter, compared with $17.8 million at the end of the second quarter.”

“A slowdown in home construction and declining land values in the Southwest are affecting results, Arnold said. Residential land prices in suburban Phoenix declined as much as 35 percent in the past year and loan growth remains unchanged in most parts of the West, said Clark Hinckley, Zions’ investor relations director.”

“‘Our best guess is that in Arizona we won’t see the housing market recovering until 2009,’ Hinckley said.”

The Spectrum from Utah. “Elim Valley, a master-planned community, will celebrate its ground breaking at 11 a.m. Friday. The community is located near Sand Hollow and will reside in Hurricane’s city limits, said Ed Hemmer, who works in Elim Valley’s sales department.”

“Laura Carlson, executive administrator for Bloomington Suites, said she ‘loved it’ but thought Elim Valley chose a bad time to begin development. ‘With the economy and the real estate market right now, they’ve come at a bad time.’”

Some housing bubble news from Wall Street and Washington. Dow Jones, “New-home sales resumed falling in August, sinking to the lowest level in seven years, and prices tumbled. Year-to-year, new-home sales were 21.2% lower than the level in August 2006. The median price of a new home decreased by 7.5% to $225,700 in August from $243,900 in August 2006. The average price declined by 8.0% to $292,000 from $317,300 a year earlier.”

From CNN Money. “It was the slowest pace of sales since June 2000. The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high, with 180,000 completed homes listed for sale, just off the record high of 182,000 set in May of this year.”

“As weak as the new home sales report is, experts caution it could actually be masking other signs of weakness. Builders have reported significantly higher cancellation rates for buyers who have signed a contract but then back out of the sale. So demand could be weaker than the report suggests.”

“Also about three quarters of builders surveyed by their trade group report offering incentives…in order to maintain demand. So the drop in prices could actually be more severe than the report indicates.”

From Bloomberg. “Sales of new homes in the U.S. dropped more than forecast in August and prices plunged by the most since 1970. The number of properties completed and waiting to be sold rose by 2,000 to 180,000.”

“KB Home today reported a third-quarter loss on lower sales and $690 million in expenses to write down real estate.”

“‘We see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins,’ Jeffrey Mezger, CEO of Los Angeles-based KB Home, said today in a statement. ‘The oversupply of unsold new and resale homes and downward pressure on new-home values has worsened in many of our markets.’”

“KB Home, the homebuilder that has lost half its market value this year, reported a third-quarter loss on costs to abandon land purchases.”

“‘The oversupply of unsold new and resale homes and downward pressure on new home values has worsened in many of our markets as tighter lending standards, low affordability and greater buyer caution suppress demand,’ said Mezger.”

“Net orders fell 6.2 percent to 3,907 in the third quarter, KB Home said. The average selling price slid 7 percent to $267,700.”

“KB Home’s biggest markets by deliveries are Las Vegas, Houston and Orlando, Florida, according to the company.”

The Street.com. “‘Our third-quarter results reflect the seriously challenging market conditions that prevail for homebuilders across most of the nation,’ said Mezger.”

The Wall Street Journal. “Mezger also noted impacts from higher foreclosures and builders and investors cutting prices to move supply, all of which cut the company’s prices and profit margins and ‘prompted us to take substantial write-downs of inventory and goodwill.’”

“Excluding charges, gross margins fell to 13.9% from 23.3%.”

From Reuters. “The cancellation rate for the quarter was 50 percent, compared with the prior quarter’s 34 percent, reflecting the troubles in the mortgage market, KB said. For the just-completed quarter, net orders for new homes, an indicator of future sales, were off 6 percent at 3,907.”

“‘I was kind of surprised to see that their orders were actually down compared to a really bad number last year,’ said analyst Alex Barron.”

“The value of the assets of Carlyle Capital, the publicly traded credit fund backed by the private equity firm Carlyle Group, fell 24 percent in August as it sold holdings and global debt prices declined.”

“Credit fund managers were hurt as rising mortgage defaults sent investors fleeing all but the highest-rated securities. Carlyle Group twice propped up the fund in August, lending a combined $200 million and buying $900 million of its assets.”

“‘It was a common theme that these companies moved to rescue their affiliates during a month of extreme losses,’ said Bradley Alford, who runs an investment firm in Atlanta. ‘I would question how long Carlyle is willing to prop up this entity if losses continue.’”

“Kenneth Heebner, manager of the top-ranked real estate fund in the United States, has sold stakes in New York property owners, saying he believes prices will decline as banks, hedge funds and buyout firms fire workers.”

“‘You’re seeing a retrenchment in the private equity, hedge fund and brokerage businesses, and there could be a lot of layoffs,’ Heebner said. ‘That could have a devastating impact on high-end residential real estate in New York.’”

The Seattle PI. “Last month, Carol Allen was two months out of bankruptcy and set to refinance her Seattle home. Just before closing, Option One decided to ‘reprice’ loans in its pipeline, adding 1.6 percentage points to her interest rate and about $400 a month to her payment.”

“‘I can’t afford that,’ Allen said last week.”

“So Allen) walked away, sticking with her adjustable-rate mortgage. Allen’s story is just one example of how the hangover in the subprime mortgage market, which serves people with poor credit, is causing headaches for many Seattle-area homeowners and buyers.”

“Lenders who previously approved mortgages to people with bad credit, no down payment and little or no documentation of income now are refusing loans if even one of those three factors is questionable.”

“Option One spokeswoman Christine Sullivan acknowledged Monday that the repricing of loans such as Allen’s was part of the larger fallout. ‘Like other lenders, Option One has tightened underwriting guidelines and made product and pricing changes,’ she said.”

“Tightening standards is good, but it has gone too far in certain cases, said Adam Stein, president of the Washington Association of Mortgage Brokers.. He noted that a recent customer’s low credit rating and high-debt level precluded him from getting a loan, despite an income of more than $200,000 a year.”

“‘This guy’s still got $80,000 to $90,000 a year of discretionary income,’ he said. ‘The market just isn’t tolerating exceptions right now, even if they would make sense.’”

“The subprime market has nearly dried up altogether during the past two to three months, said Angela Ceaser, who owns Integrity Community Mortgage in Lakewood, and worked with Allen on her loan.”

“But while the subprime market has been most affected by recent problems, prime borrowers are not immune. Ceaser said she recently ran into problems with a prime borrower whose information she fed back into Washington Mutual’s system to look at other options after the bank already had approved a loan.”

“‘It wouldn’t even price her,’ she said, even though she still was able to close the already approved loan.”

“Patricia Sawyer of Renton refinanced into an adjustable-rate mortgage in December, after hearing a radio ad promising low payments and no closing or appraisal costs.”

“‘Now I know it was too good to be true,’ she said last week.”

“Her new payment was lower than her old one, but higher than expected, and she didn’t realize it added $1,100 a month to her principal because it was less than the interest charge. With her payment set to jump in October, Sawyer would like to refinance.”

“But her credit is bad, she said, and if she qualified for a new loan, the added principal and prepayment penalty from her current lender would push her payment above what she could afford.”

“Allen, who walked away from her refinance, said her adjustable-rate loan resets in October. She plans to save and work on her credit in hopes of qualifying for a better loan in a year or so. ‘I can’t even tell you the last time I even went shopping,’ she said.”

The Bradenton Herald reports from Florida. “In August, the median sales price for existing homes in the Bradenton-Sarasota market was $273,500, almost $35,000 below the median home price a year earlier. But falling home prices did nothing to stop the number of existing home sales from dropping 13 percent and condo sales from slumping 7 percent, according to numbers released Tuesday by the Florida Association of Realtors.”

“The elimination of the subprime lenders has led to fewer people qualifying for loans. ‘When the market was booming, there was a lot of cheap money available to anyone who could fog a mirror,’ said Patrick McGuire, broker associate with Coldwell Banker’s Lakewood Ranch office.”

“Where there were once seminars on how to flip a home for a large profit, now more and more workshops focus on how to find and buy properties as short sales or in other stages of preforeclosure. ‘I guess in any gray cloud, there is a silver lining. In this case, if you’re a buyer, you can get a great deal,’ McGuire said.”

The Herald Tribune. “Lennar Corp., the big Miami-based home builder, has trimmed about 150 jobs in the region amid the housing slowdown. Last last month, Lennar trimmed more than 60 additional positions from its Southwest Florida division, from Naples to Manatee County, bringing it to its prehousing-boom levels of about 300.”

“‘It is already well documented that the housing market has continued to deteriorate throughout our third quarter. Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward,’ said CEO Stuart Miller. ‘Consumer confidence in housing has remained low, while the mortgage market has continued to redefine itself, creating higher cancellation rates.’”

“The average sales price of homes delivered sank to $296,000 from $316,000 in the same period last year, mainly due to higher sales incentives.”

“The Three Fountains apartment complex on Webber Street is rapidly developing a reputation for controversy. The complex was sold to a group led by Warren Hickernell just a few months before the Sarasota real estate agent and condominium converter ran into financial trouble that ultimately resulted in eight loan defaults and two Chapter 11 bankruptcy filings.”

“Now Three Fountains is being pursued by Californian David D’Angelo, who wants to buy the complex for $6 million and immediately resell 17 of the units to a group of investors and end users at per-capita prices far outstripping the amount at which Hickernell’s deal valued them.”

“That has Sarasota appraiser Greg Haarer, hired by J.P. Morgan Chase to price two of the units, breaking the traditional code of silence between appraisers and their clients.”

“Haarer said that there is no way the property is worth what D’Angelo’s customers are willing to pay. Haarer also claims that he was pressured by lenders at Chase to boost his valuations.”

“‘I’m appraising the units at $150,000 and they’re telling me that everyone else is appraising them for $270,000 to $350,000,’ Haarer said. ‘I said, ‘$300,000, you got to be out of your stinking minds.’”

“When he turned in his appraisal, Haarer said lenders at Chase sent him valuations completed by other appraisers and told him that they needed him to bring his numbers up to the same level. To hit those numbers, Haarer said other appraisers used sales of comparable units in downtown Sarasota.”

“‘From Bee Ridge Road to Bahia Vista, which is the same neighborhood as Three Fountains, nothing is selling for $280,000,’ Haarer said. ‘But I can find you 50 comps in that stretch that are selling for $150,000.’”

“Haarer also questioned how D’Angelo has been able to line up end users so quickly. ‘There’s no sign on the property. There’s nothing on the Web,’ he said.”

“D’Angelo said that some of the units at Three Fountains are being sold to investors, but the bulk are going to end users. ‘Four are from Florida and the rest are from northern California,’ he said.”

“Grant Thrall, a University of Florida land economist and board member of the Appraisal Institute, agreed it was strange that so many buyers were coming from California. ‘Studies have been done showing that people who go into senior centers remain within their own neighborhood,’ he said. ‘They don’t move from Toledo, Ohio.’”

The Sun Sentinel. “Like many South Floridians, Sheridan Lydon is frustrated by the pillow-soft housing market. She has houses in Boca Raton and Pompano Beach but can’t sell either and now is asking less than she paid for each.”

“‘Isn’t that lovely?’ Lydon said. ‘And I’m not even the worst one. There are a lot worse off than me.’”

“Sales of existing homes in Palm Beach County declined 13 percent to 568 from 655 a year ago. The median price of $366,200 was off 5 percent from $386,000 last August. And the number of homes on the market hit a record as the inventory topped 40 months.”

“There were 33,708 homes and condos for sale at the end of August, a 10 percent increase from 30,774 a year ago, according to Illustrated Properties in Palm Beach Gardens.”

“‘That’s an all-time high,’ said Chappy Adams, president of Illustrated. ‘That’s horrible.’”

“Lydon, the woman stuck with two properties she can’t sell, paid $600,000 for her Boca Raton home last year. She’s now asking $579,000. Even after moving to Boca, she wasn’t able to unload her home in Pompano. She’s listing it for $450,000 after buying it for $479,000 and making major upgrades.”

“‘How was anyone supposed to know the market would get this bad?’ said Lydon.”

“Not everyone is cursing the market. Kellie and Scott Collins recently listed their three-bedroom home in Florida Gardens, near Lake Worth, for $269,000. A buyer stepped forward after about a week and is paying close to the asking price.”

“The Collins’ agent, Mike Kleinrichert, said sellers have to price their homes as if it were 2003 or 2004. ‘I ask my clients, ‘Do you want to list your home or do you want to sell it?’ Kleinrichert said. ‘If you price the house right, it’s going to sell.’”

The News Journal. “Home prices fell 5.4 percent on average in Volusia and Flagler counties last month from a year earlier and the number of sales plunged 16 percent in the same period as the slump in the area’s housing market deepened.”

“A local broker, Maggi Hall, said she has not seen much interest among potential buyers. Sellers are refusing to lower their prices more, and buyers are trying to out-wait them, Hall said. ‘It’s almost like it’s a standoff.’”

The Times Union. “Realtors, builders, developers and others in the industry expect today’s 28th annual Realtor-Builder Tradeshow to focus on the optimistic side of the statistics.”

“‘The mood will be good. It will be upbeat and fun,’ said Mark Downing, first VP of the 2,100-member Northeast Florida Builders Association.”

“‘As we look at things, this is the bottom,’ Downing said, although ‘we still have a period of time before we are back on track.’ He said most members believe 2009 will be good, ‘but ‘08 probably is not going to be.’”

The Sun Herald. “Economic uncertainty is one of life’s few certainties. The truth is, most families teeter on a fragile tightrope, strung together paycheck to paycheck.”

“Former bank president Sandy Scribner and her fiancé came to North Port seven years ago. She’d suffered a stroke in Connecticut, leaving her 100 percent disabled. They planned to invest an $80,000 nest egg in a home and two rental properties.”

“‘It worked fine until I made a mistake and bought our second residence,’ she said.”

“Scribner paid $242,000 for a three-bedroom house on Warrior Drive in early 2005. ‘It was too small, so we bought a third before we sold the second,’ she said.”

“Scribner paid $279,000 for a three-bedroom home on Ponce De Leon Drive. She was carrying a $1,300 monthly mortgage on the Warrior house; $1,800 monthly mortgage for the Ponce De Leon home. It seemed a reasonable risk in 2005. The housing market was hot. Scribner reasoned the home would sell quickly.”

“‘That didn’t happen,’ she said. ‘What happened is the market went the way it did.’”

“The Warrior home idled unsold. All along, Scribner paid two mortgages, as well as insurance and taxes, for both. She sold the rental units. ‘I used every penny I had, along with using my credit card, to pay bills,’ she said. ‘By March of this year, I had no more money.’”

“When her husband died in May, Scribner moved in with a brother because disabilities preclude her from living alone. In July, the Warrior home finally sold — for $130,000. To avoid a similar loss on her other home, Scribner found a new mortgage.”

“‘I called Countrywide,’ she said. ‘I have a Realtor who has two buyers, but Countrywide is so messed up, they have turned around and sued me for foreclosure. I owe $220,000 on the property.’”

“Meanwhile, she’s left with mounting debt, a disability stipend, and a room in her brother’s home. ‘Now I own nothing,’ Scribner said. ‘I’m not a deadbeat. I’m a statistic of the real estate market.’”

“The Charlotte County market was down considerably from its frenetic post-Hurricane Charley pace, when anything with four walls and a roof could find a buyer. August’s 223 houses represented a 19-percent drop in volume from the 274 dwellings sold in August 2006.”

“The median price of the homes sold in August was $186,500, an 11-percent drop from the same month in 2006.”

“Locally, brokers and builders alike are hoping the market has nearly completed what most agree was an inevitable price correction. ‘Everyone is having to do what they have to do to make a living,’ said Ellen McCarthy, president of McCarthy Realty in Murdock.”

“Probably the main factor speeding the market correction is sellers finally realizing that today’s market is not the same market that followed Hurricane Charley, she added.”

“For many sellers, backing off a little on price is no great hardship, if they bought their houses in the 1990s before prices began spiking, they could still walk away from a sale with a fair profit, although certainly not as much as if they had sold at the height of the market.”

“But some sellers are getting squeezed by either losing employment, paying top dollar for a house just a few years ago, or both.”

“McCarthy noted she’s had to handle several short sales in recent months. In many cases, lenders will forgive part of the debt, provided that the hardship can be documented. ‘The banks know that the market has fallen and they can’t sell the house for what they paid for it,’ McCarthy said.”

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