The Housing Bubble

It’s Friday desk clearing time for this blogger. “The mulish housing market will bedevil us for another year or so, a pair of economists predicted. ‘Sellers are having trouble getting over the fact that they can’t get 10 percent appreciation anymore, and buyers are looking for deals at $50,000 or $100,000 off asking price,’ said Dennis Winters, chief of the Office of Economic Advisors for the Wisconsin Department of Workforce Development. ‘In my neighborhood, they’re lopping $30,000 off asking price. That’s 10 percent.’”

“For the first time in more than a decade, Palm Beach County’s taxable value is expected to drop next year by 5.4 percent, according to preliminary estimates. But Mayor Lois Frankel said she saw a silver lining.”

“‘I think that it’s better to have more realistic prices,’ she said. ‘The cost of housing has been too high. Maybe we’ll get some reality here.’”

“No doubt about it, the pace of new home building in Central Oregon, as in the nation, has sagged badly this year. People who sell cars, furniture, and other expensive items that would be expected to feel pain in a weakening housing economy say business has been fine this year, if not as easy as it was when houses were selling like iced drinks on a hot day.”

“For Bill Moseley, president of a software company, weakening in real estate prices is good news.”

“‘The builders, I understand their frustration, and their importance to the economy. But to someone who is in manufacturing and production, like we are, high housing values are not in our interest,’ Moseley said. ‘It puts too much pressure on wages. Our customers don’t care what it costs to buy houses in Bend. We have to keep that in mind.’”

“Prices for high end homes in China’s capital have been bouncing to record new levels all year, even with dramatically fewer transactions, rental prices flat and many new units empty. Some showrooms have fallen dead quiet.”

“And the euphoria is running particularly high as the Beijing Olympics approach, analysts said. ‘Market growth is the rule here,’ noted Anna Kalifa, the head of research for Jones Lang LaSalle in Beijing. ‘It’s just a question of more or less.’”

“For the first time the Reserve Bank named pockets of Australia, particularly in western Sydney, where it believed households were under financial stress. A Reserve Bank analysis points to regions in NSW, Victoria and Queensland where mortgage payments are consuming more than 30 per cent of household income.”

“‘A disproportionately large number of borrowers in this part of Sydney took out investment housing loans around the peak of the house price cycle,’ the Reserve Bank says.”

“A substantial erosion in housing affordability over the past few years combined with a surge in new listings has started to bring the Calgary housing market back down to earth, says a TD Bank Financial Group report.”

“‘Notably, in Vancouver and Calgary, a substantial erosion in housing affordability over the past few years has started to weigh on demand. This development, combined with a surge in new listings, has started to bring those markets back down to earth,’ says the TD report authored by economist Pascal Gauthier.”

“The report says the ‘main corrective force’ currently at work in Canada’s hottest markets - Calgary, Edmonton and Vancouver - is affordability.”

“Sales of new homes in the United States sank to their lowest level in nearly a decade last month. There is now an eight-month supply of newly built homes, twice the backlog there was when the market was booming. The median sales price was $225,700 last month, down 7.5 per cent from a year ago.”

“The full impact of the credit crunch hadn’t even hit the mortgage market in August, suggesting further declines in the months ahead, said economist Ian Shepherdson. ‘People don’t like borrowing to buy depreciating assets, and lenders don’t like to lend on them either,’ he said. ‘Housing is nowhere near bottom.’”

“Eyewitness News has uncovered an amazing case that involves a victimized grandmother in San Diego, a failing Los Angeles loan company and a Las Vegas man who doesn’t care who he hurts.”

“‘I’m struggling right now,’ said Paul Mangione. He is about to lose his house to foreclosure. ‘I was ready to flip out. That’s why my walls look like this,’ Mangione says he went nuts and took a crowbar to the walls.”

“The former head of the US Federal Reserve has denied that regulators failed to foresee the problems which caused the global credit crunch. Alan Greenspan said they had not acted on concerns about complex and risky financial deals because only very wealthy people invested in them.”

“‘Hedge funds, who are presumably the largest culprit of all of this, are organisations in the US in which wealthy investors invest, Greenspan said. ‘I must admit that I do not have considerable concern about their net worth going from 40 million to five million, which in many cases is what’s happened.’”

“Back in the 17th Century in the Netherlands, there was a mass rage for, of all things, tulip bulbs. Prices got bid way up, and speculators jumped in to bid them up higher still. But eventually the market fizzled and prices plunged.”

“If I had been one of the people who invested in flowers during the frenzy, I would have felt bad to lose my money. But I like to imagine I would also have taken great comfort in seeing the triumph of rationality.”

“Back in 2005, you could hardly hear a word about real estate without wondering who repealed the law of gravity. At the peak last year, home prices in this country were up 134 percent over the previous decade. They are not rising anymore.”

“In truth, the great majority of us will be better off in the long run if the housing bubble has finally burst. Most homeowners, after all, don’t face foreclosure even if their houses are suddenly worth less than before. Not until they sell will they take a hit. But even then, the pain should usually be mostly theoretical.”

“Of course, speculators who sunk money into second homes and investment properties figuring they could flip them in a year or two for a handsome profit will also get the short end of the stick. But that’s why it’s called speculation, not certainty. No one said they couldn’t buy Treasury bills.”

“Like many events in a dynamic capitalist economy, the overdue cooling of an absurdly overheated housing market will inflict some pain. But that doesn’t make it a bad thing.”

The Tracy Press reports from California. “The number of houses on the market in Tracy, 946, is closing in on the total number of houses built in town at the peak of the housing boom in 2004, the last year the city added more than 1,000 houses. At the same time, RealtyTrac reported this month that 1,138 Tracy homeowners had received notices of default. As a result, homeowners have slashed their asking prices to 2004 levels.”

“‘Actually, I’d have to say it’s a little lower than that,’ said local broker Dave Konesky, a director with the California Association of Realtors.”

“Konesky said one of his clients bought a Tracy house in 2004 for $430,000 and now is asking $419,000, ‘with no bites, and it’s a beautiful home,’ Konesky said.” “He said that’s about as low as the homeowners want to go. ‘They said they’ll sell it for less than they paid for it,’ he said, ‘but they won’t give it away.’”

“This summer, the median asking price for existing homes in Tracy, Banta and Mountain House dropped below the median sales price. As of this week, that price was $475,000, $35,000 less than in mid-July. Local real estate agent Donna Baker said that of the 946 homes for sale in Tracy right now, about a third either are bank-owned, meaning they’ve been through foreclosure, or are ’short sales.’”

The Recordnet. “Homeowners in the upscale Paseo West development in Manteca are getting organized to see whether they can convince Lodi-based Anderson Homes to change plans to auction off 34 homes next month.”

“Owners of 26 homes there think the home builder is treated them unfairly and in bad faith by planning to auction off vacant or under-construction homes at prices that could be more than $200,000 less than what current residents paid for their homes within the past year, said Dave Cantrell, one of the first to buy a home in the subdivision.

” “‘We’re looking at a loss of potentially up to a quarter million dollars (per home),’ he said.”

“Earlier in the week, Craig Barton, Anderson Homes chief financial officer had said the slow housing market had pressured the company to turn to auctions as a way to sell homes in the partially finished subdivision. Otherwise, the homes would remain vacant for the foreseeable future, he said, and that wouldn’t be good for the neighborhood.”

“Cantrell said he doesn’t like the empty houses around his house, ‘but at what cost do we fill these?’”

“Stockton resident Zelda Falkner said Thursday that she and her husband will be checking out homes in Anderson Homes’ Teal Landing development in Los Banos. Twenty-five homes in that development will be auctioned off Oct. 14 in San Jose with minimum bids starting at $215,000.”

“The Falkners want to live closer to friends there, and they’re hoping to get a great deal on a new home and would pay cash. She wouldn’t feel a twinge of guilt if they snagged a great deal, Falkner said, ‘because I’d be getting a bargain.’”

From News 10. “In some cases, the starting bids are about half of what some current homeowners paid for nearly identical homes just over a year ago.”

“‘They didn’t treat us very good as far as I’m concerned at all,’ said Amy Sturdevant who in August 2006 paid $585,000 for her family’s four-bedroom, two-bathroom home. Now, a nearly identical home with the same floor plan right across the street from Sturdevant is set to be auctioned at a starting bid of $295,000.”

“Barton said this is their neighborhood, too. He said that they will keep building there. ‘This is the right decision for us,’ Barton said. ‘In this type of market, the auction will tell us what the current fair value of the homes is.’”

“Barton said it’s not because they’re in financial distress but instead to spur a sluggish market.”

“‘I was talking to my wife just an hour or so ago and I told her, you know, I think we made a very serious mistake by buying this home,’ Cantrell said.”

The Press Enterprise. “Home construction is falling more dramatically in Riverside and San Bernardino counties than anywhere else in the state, as builders put on the brakes until they sell a glut of completed houses and wait for the market to rebound.”

“Steve Johnson, a director of Metro-Study, said even homes for which builders have obtained permits from counties and cities may not get built. He said there are about 15,000 permits for single family homes that recently were close to expiring.”

“There are also 27,000 lots prepared for new homes on which construction has not begun, he said. Johnson said a majority of the empty lots are in emerging housing markets such as Banning, Beaumont and south Riverside County.”

“Alan Nevin, chief economist of the state builder’s association, said (buiolders) are trying to ignite buyer interest with price cuts and a host of other incentives.”

“‘Now is the time to buy,’ said Frank Williams, CEO of the Baldy View chapter of the California Building Industry Association. ‘If buyers go to the builders they can pretty much cut their own deals.’”

“To sell homes, he said some builders are willing to just break even while others are taking losses. He said all are laying off personnel and he believes there is ‘a good chance’ that some Southern California home builders will go out of business.”

The County Sun. “From the 15 Freeway, Rosena Ranch is advertised with great fanfare. Flags are waving. Signs and banners lead drivers into a newly paved and planted community of homes. But then the excitement stops.”

“Construction is coming to an end - at least temporarily - at the project just north of Fontana off Glen Helen Parkway where the developers, Lennar Corp. and SunCal Cos., once envisioned a school and 2,100 homes.”

“Now there are fewer than 100 houses and no indication of when new foundations will be poured.”

“In Rosena Ranch, 54 homes are occupied or ready for occupancy, and when “a handful” more are finished, it’s not clear when construction will continue, Rynerson Rock said.”

“‘My staff says they have been frighteningly quiet, and that’s not typical for them,’ Rynerson Rock said of the developers working on the project.”

“But the developers are continuing to plan and seek county approval for their homes, Rynerson Rock said.”

“Chino’s director of community development, Chuck Coe, said building has slowed at The Preserve but that no one is talking about making changes to the project. ‘There’s no panic or going back and rethinking,’ he said.”

“Rynerson Rock said the developers are being prudent. ‘We don’t want them going out of business, going broke and never being able to come back again.’”

The Appeal Democrat. “If misery loves company, area residents trying to sell a home should be feeling plenty of love. The Yuba-Sutter market’s 35 percent drop in housing sales between August 2006 and August 2007 puts local homesellers in the same lousy neighborhood as nearly everyone else, according to numbers compiled by the Sutter Yuba Association of Realtors.”

“Comparing August to August sales, Yuba-Sutter weighed in with a relatively steep median sale price drop of 8.1 percent – $290,000 to $260,000, according to the SYAR numbers. Yuba City Realtor Lloyd Leighton noted that in December 2005, when the area’s house prices peaked, the median sale price was $315,000 – 17.5 percent higher than in August 2007. ‘That’s been a pretty dramatic decrease over less than two years,’ Leighton said.”

“Among the reasons for downward pressure on prices, he said, is the continuous growth of new housing developments. ‘The new homes compete with all the other homes,’ he said.”

“Companies like Lennar, which cater largely to first-home buyers, are under increasing pressure, ‘to sell their product, even if it means lowering price and sacrificing profit,’ Leighton said. ‘They’re offering huge incentives.’”

The Orange County Register. “Mid-September sales data from DataQuick show further evidence of how that midsummer credit crunch has iced an already chilled O.C. real estate market. Sales for the 22 days ended Sept. 14 are off 35% from a year ago. The mid-September median for all residences of $605,000 is the lowest since January; 4% below a year ago; and 6.2% off June’s peak.”

“Sales of new autos plunged 17 percent in Orange County in August, one of the steepest drops in memory, the Orange County Automobile Dealers Association reported Thursday.”

“‘Blame it on housing,’ said Art Spinella, auto market analyst for CNW Market Research. ‘Buying a car with a home equity loan is a California pastime and when home equity drops, it’s tough to get a home equity loan.’”

The Union Tribune. “San Diego County’s leading economic indicators took a sharp plunge in August, according to a report released yesterday by the Burnham-Moores Center for Real Estate at the University of San Diego. All six components used in the index were negative last month.”

“The index fell 1.4 percent in August. That is the steepest decline since 1979, although USD economist Alan Gin, who compiles the index, cautioned that there may be some upward revision. The index has fallen 16 of the past 17 months.”

“‘Things are pretty bad,’ Gin said. ‘Not only are all the components down, but they’re down by hefty amounts.’”

“At the center of the economic problems is the continuing decline of the local housing market. ‘There’s a connection to the weakness of the housing market in every one of the components,’ Gin said.”

“‘This is very painful for homeowners, but for an economist it’s a good sign. It may begin to correct the housing price imbalance,’ said Stephen Levy, who heads the Center for Continuing Study of the California Economy in Palo Alto, referring to the gap between high home prices and relatively stagnant incomes.”

The Chicago Tribune reports from Illinois. “By any measure, including the two released Tuesday, little is coming up roses for the housing market, locally and nationally. Chip Wagner, a Naperville appraiser, said sellers’ asking prices appear to be on the way down, which might generate some momentum. ‘People have become more realistic on their pricing,’ Wagner said. ‘The average price of a house for sale today is $436,000; a year ago it was $467,000.’”

“Local real estate agents echoed this. ‘Sellers out there now really want to sell,’ said John Veneris, a broker in Downers Grove. ‘They’re getting less than they had wanted, but they’re happy to get them sold.’”

“Inventory continues to climb in the area.Wagner said the number of single-family homes listed for sale in the MLS of Northern Illinois as of Tuesday had surged to nearly an 11-month-supply, up from about seven months a year earlier.”

“‘I hate to throw salt into the wound to show how bad it has gotten, but we have almost doubled the number of active listings since September 2005,’ when the nation’s housing boom peaked, he said.”

“The deeeper America drops into the housing slump, the further out go predictions of when the market will recover.”

“David Mudd, CEO of Fannie Mae, told Bloomberg News it could be years before the slump is over. ‘I don’t think we hit a bottom until the end of ‘08, and then we have some period of time to work our way back up again,’ he said.”

“He joins the chorus of economists and industry experts looking into 2009 or beyond.”

“‘I’ve stopped making predictions,’ said Chicago builder Alan Lev. ‘You ask 10 different economists, you get 10 opinions. The real answer is, nobody knows.’”

“‘Mismatched expectations,’ explains Jay Ritter, a professor of finance at the University of Florida who says that consumer behavior is the wild card in the marketplace impasse.”

“Many home sellers, he says, are in love with the old days, when home prices seemingly rose by the hour. And sellers, he said, are stuck in neutral, waiting for a better deal.”

“‘When prices are going down and there are articles in the news about prices dropping, it leads more people to wait and see, and it becomes a self-fulfilling prophecy,’ Ritter said. ‘Rather than closing the deal now, they’re on strike, waiting until after prices have fallen.’”

“Stephen Baird, president of Baird & Warner Real Estate in Chicago, says the increasingly gloomy forecasts are an overreaction.”

“‘I think 2008 is a little long [to expect the market to bottom],’ he said. ‘One of the things you have to keep in mind is those guys now want to be overly negative. They don’t want to sound like Pollyanna because there’s been criticism that they were just too rosy about the housing picture. Now, if they’re going to err, they’re going to err on the negative side.’”

“‘You ask me when the market is going to bottom out, and my take is, I have no idea,’ Baird said.”

“The developer of the proposed Chicago Spire will host a preview and party for the global press, but the celebratory mood could be dampened by the worldwide credit crunch and a postponement of the tower’s preconstruction sales.”

“‘If I didn’t think I could deliver, I’d have a good excuse to pull out, but I’m not doing that,’ said Garrett Kelleher, who two weeks ago delayed the launch of sales from this week to Jan. 13, citing the complexity of the documents that must be filed with federal regulators.”

“The preview of the $1.5 billion, 150-story building, slated to be the tallest in the U.S. and the highest residential tower in the world, comes at a tough time for high-end residential developments in Chicago and around the country.”

“Real estate buyers and investors in Chicago, around the nation and in Europe, where Kelleher plans to sell more than half the Spire units, wonder what property is really worth and if it will appreciate.”

“Understandably, European investors are cautious, said Dominic Grace of London-based Savills PLC, who is directing the Spire sales effort. ‘The whole world is spooked,’ he said. ‘They’re aware of the malaise potentially hanging over the U.S. investment market, but Chicago is steadier than Miami and a huge market.’”

“In the U.S., capital for property development and purchases has become more difficult and more costly to secure.”

“‘The debt market is frozen for the inexperienced developer,’ said Robert Horowitz, a partner at Cooper-Horowitz Inc., which places about $15 billion in real estate debt a year. ‘To finance a supertall luxury condo project today, you need to have be an experienced developer with at least 30 percent cash equity, 50 percent presales and the ability to pay 9 to 10 percent interest.’”

“Kelleher, chief executive of Shelbourne Development LLC, said he won’t seek financing until he has the requisite amount of preconstruction sales. Before he would close on a loan for perhaps 70 percent of the cost, he’d have to spend about $500 million on construction. That is a lot of building that will take a lot of time.”

“Lenders not only worry about backing new development but also fret over buildings in construction that still have units to sell, said Richard Blum, chief financial officer for Chicago-based Fifield Realty Corp. ‘Some [banks] aren’t making new loans because they may face bad loans for projects already in construction that have unsold, unclosed units,’ he said.”

“To protect themselves, banks and private-equity lenders have raised the cost of capital, Blum said.”

“In Chicago, where 13,448 new downtown condos are due for delivery from now through 2010, sales fell 35 percent by midyear from a year ago, and in the past few weeks ‘luxury sales have been way down,’ said Gail Lissner, a VP at Appraisal Research Counselors.”

“Here, ‘everyone is skeptical of everything until it closes,’ said James Kinney, president of Rubloff Residential Real Estate.”

“The tall residential towers in development in Chicago all have vulnerabilities. The $650 million Mandarin Oriental Tower Chicago residential and hotel condominium project has not started construction. The $500 million Waterview Tower and Shangri La Hotel is in construction but hasn’t closed on its construction loan.”

“The half-built, $725 million Trump International Hotel & Tower had more than 200 units to sell as of May, the most recent figures available.”

“Spire developer Kelleher isn’t worried about selling enough units at $750,000 to $10 million to get financing when the time comes. ‘There’s pent-up demand all over the world,’ he said.”

The Columbia Missourian. “Real estate foreclosures in Boone County this year have already set a record, following a trend that has gripped the national housing market.”

“A total of 163 foreclosures were recorded through Sept. 14 in Boone County, 13 percent over last year’s total and topping the previous record of 150 set in 2003, according to information provided by the Boone County Recorder’s Office.”

“Dale Whitman, real estate finance expert and professor at the MU School of Law, thinks the ARMs weren’t responsible for the market crisis. Rather, it was the ‘irresponsible’ way they were handled, with ‘teaser rates’ placed below already-low mortgage rates to attract less-qualified borrowers.’”

“‘Lenders made many loans without much regard to whether borrowers would be able to repay them, assuming that increases in housing prices would inflate borrowers out of their financial troubles,’ Whitman said. ‘Borrowers were willing to accept (adjustable-rate) loans… even when they should have known they would probably be unable to make the higher payments.’”

The Union Eagle from Minnesota. “Princeton area realtor Jan Wokson likely wouldn’t have sold the home she did to a certain young man in his 20s a couple of years ago if she knew then what she knows now. What she knows now, she explained recently, is that the young man got in over his head in what he could afford.”

“Now it looks like he is headed towards foreclosure, Wokson said last week. (The man was asked to talk about his case for this story but declined.)”

“One of the negatives in the foreclosure mess, Wokson said, is that realtors are getting the brunt of the blame, when ‘most are not at fault.’”

“Local banker Ken Haskamp at the Princeton office of Peoples Bank of Commerce, expressed worry last week about the record number of foreclosures resulting across the United States from too many people having qualified for mortgages when they shouldn’t have.”

“Many borrowers, he explained, looked at the low beginning interest rate, translated that to a lower mortgage payment and bought a more expensive house than they otherwise might have.”

“Haskamp said those mortgage payments grew beyond the ability of many homeowners to maintain. Coupled with the rising interest rates, has been the declining value of homes in the midst of a housing glut. That has caused problems for people trying to get another loan or refinancing because their home is worth less than what they need to borrow to pay off their mortgage, noted Haskamp.”

“‘A $310,000 home two years ago may be worth only $270,000 today,’ he said. In the ideal world, Haskamp observed, a person wanting to borrow for a home valued at $270,000, would seek a loan for $216,000.”

“One reason Haskamp was so animated as he spoke about the foreclosure issue, was his explanation that banks don’t want to have to take homes back for non-payment. The reason, he explained, is because banks look at homes as ‘earning assets.’ That means, he said, as long as the payments are being made, they are earning interest for the bank.”

“There have been many unscrupulous lenders that verified a borrower qualified for a mortgage, when the borrower was not near that, Haskamp said. Along with the record number of foreclosures have been a large number of mortgage companies ‘going away,’ from the mortgage business, as Haskamp politely put it.”

“Haskamp also suggested that people steer clear of offers that only require paying the interest. That kind of loan is a ’stupid thing,’ he said.”

The Roanoke Times reports from Virginia. “The latest figures from the New River Valley Association of Realtors indicate…the volume of sales is down 4 percent from the first eight months of last year, and real estate agents say sellers are facing a far tougher environment than they did at the height of the housing boom. The median price of homes sold in the Southwest Virginia region served by the association actually declined nearly 3 percent for 2006.”

“If large numbers of homes are sitting unsold, as some real estate agents report, those slow-moving homes will not be reflected in the sales statistics until they finally do change hands.”

“‘What happens to the sellers in this market is they’re holding on for, pretty much, what the property is worth, which means that they’re staying on the market,’ said Jim Owens of Century 21 Jim Owens & Associates in Blacksburg and Christiansburg.”

“‘Buyers are very picky right now,’ agreed Louise Baker, supervising broker for Long & Foster’s Christiansburg office, who on Friday cited 164 single-family detached homes on the market in Christiansburg.”

“Baker said the number of homes on the market was at the highest level she has seen in her nearly 30 years in the business. Jo Alderson, an agent and broker in Radford, echoed that, and she has been in real estate even longer.”

“‘Prices are beginning to moderate a bit, but they needed to do that,’ Alderson added, referring to the unusually fast run-up in real estate value seen in recent years.”

“In another illustration of the ascendancy of buyer over seller, Baker cited two homes, one priced at $359,900, another about $458,000, for which sellers were willing to pay cash at closing to lower a prospective buyer’s interest rates for the first few years of a mortgage.”

“‘When that didn’t work, we just went back at the different [sale] price range that made it more attractive,’ Baker said.”

“In other words, they dropped the price.”

“‘They really need to listen to their agent about what’s going on in the marketplace,’ Baker said. ‘We have some sellers that still think it’s 2005.’”

The Laurel Leader from Maryland. “Foreclosures are soaring in Maryland. Prince George’s County is leading the state’s foreclosure list, with foreclosed homes in 2007 jumping from 2,300 through July up to 2,800 in August, according to RealtyTrac.”

“No specific totals were available for Laurel, but RealtyTrac listed 1,100 homes in foreclosure in the 20707 and 20708 zip code areas on Sept. 21. There were 749 listed in the 20723 area code and 397 foreclosed homes listed with a 20724 area code.”

“‘I can’t imagine this area is insulated from what’s happening over the country,’ said City Council President Frederick Smalls. ‘People in Laurel got in homes with Adjustable Rate Mortgages and they have matured, their loan payments have ballooned, there may not be enough equity in the home to refinance, so I’m sure there are people in Laurel in this same situation.’”

“‘These types of loans weren’t for people to purchase homes but for investors who planned to sell the home in a year. They (investors) want the lowest payment possible and don’t care what will happen in future years because they will sell before the rate changes,’ said Richard Milton, president of Metropolitan Financial in Upper Marlboro.”

“Homeowners are seeing their monthly payments increase by $1,000 or more in many cases, depending on the terms of the loan. For example, Milton said, ‘You may be paying $2,700 a month on a $600,000 house when the real mortgage is $5,000. When that amount comes due and you can’t pay it you have a problem. You can’t sell the home in this flat market, you can’t refinance and your balance is now $620,000.’”

“Mosi Harrington, executive director of a group that provides financial advice to homeowners, said she blames unscrupulous lenders for putting borrowers in ‘dumb’ loans.”

“‘A lender only has to qualify a borrower for the first year of the ARM, so some (lenders) did these loans even though they knew the borrower wouldn’t qualify for the second year (when the interest rate increased),’ said Harrington.”

“Michael Reza, owner of Breeze Mortgage in Laurel, said some brokers were selling other products, like cell phones, in past years and switched to mortgages when the market was hot to make a quick dollar.”

“‘Some inexperienced (brokers) are intentionally giving the highlights of these loans and not the cons, and some are green to the business and know only one or two loan products,’ Reza said. ‘Mortgage financing should be custom fit for the borrower and it’s vital to know what your payments will be long range.’”

“According to Phillip Robinson, executive director of the Baltimore-based Civil Justice Network, ‘A lot of people in Prince George’s County who were prime borrowers (high credit scores) were steered into these subprime loans when they refinanced by brokers they trusted. Now that the introductory teaser rates are over, the loans have become unaffordable and unmanageable.’”

“‘All new developments in Laurel, Bowie and Upper Marlboro are seeing foreclosures,’ he said.”

“Milton blames the developers of the creative mortgage loan products, builders and Wall Street for the increased use of the unconventional loans.”

“‘It’s not just the brokers’ fault, but the product developers and regulators who allowed the loan products to be out there,’ Milton said. ‘Wall Street made money on these loans, and builders were allowed to triple the cost of their homes and they aren’t worth it.’”

“And due to a flat real estate market, those who are selling their homes before going into foreclosure, are going about it in creative ways, such as throwing in plasma television sets with a sale. ‘I had one client who threw in a car,’ Milton said.”

The Citizen Times from North Carolina. “The Blues Brothers at the Biltmore Estate. Bruce Hornsby playing a private party in Jackson County. Helicopter and hot air balloon rides. Catered food, acrobats, fly-fishing lessons, fireworks.”

“If you’re buying upscale property in Western North Carolina, you can expect to be feted — in a big way. Local developers are upping the ante when it comes to extravagant parties for buyers.”

“‘Over the course of time we’ve had Chris Isaak, Michael McDonald of the Doobie Brothers, and then this year we’ve had Bruce Hornsby and Bad Company,’ said Jason Maring, marketing director at Bear Lake Reserve, an upscale community planned for 800 homes in Jackson County.”

“The Asheville area has plenty of high-dollar developments, too, so look for the trend to continue. Two decades ago, million-dollar homes were a rarity, and even as late as 2002, Buncombe County had just 38 homes with an assessed tax value of $1 million or more. In 2006, a property revaluation year, the number jumped to 484.”

“Western Carolina University economist James F. Smith said such extravaganzas are not new to the real estate industry, but they may be escalating in WNC, where upscale developments abound.”

“‘Even as tremendously expensive as these things are, if they sell one lot from that, they’ve made that back and more,’ said Jack Teague, who has bought property in Seven Falls. He may have a point, many of the lots in Seven Falls go for about $300,000. Homes will cost three to four times that.”

“Smith, the economist, notes that the parties also serve as a way to get investors who’ve bought a lot to get busy building a home — and paying for it. That keeps cash flow coming in for developers and builders.”

The Charlotte Observer from North Carolina. “At The Vineyards on Lake Wylie this afternoon, potential homebuyers can sample wine, look at boats and take helicopter tours.”

“A handful of southern Mecklenburg neighborhoods have gone to similar lengths to sell houses. And many communities are targeting brokers and buyers with luncheons, open houses and promises of rebates, upgrades and other perks.”

“Some say the efforts are a creative way to generate buzz. Others say the incentives are a sign of a slowing housing market in Charlotte, developing on the heels of a nationwide slump.”

“‘I think it shows that builders are going to any and all lengths to sell their product and create hype,’ said Brian Passarelli of RE/MAX Executive Realty in Ballantyne. ‘If people get the sense that things are going quickly, they might be forced into making a decision quicker.’”

“The Vineyards event is meant to promote the first four neighborhoods in the 600-acre community, with homes ranging from the $250,000s to the $600,000s. The event is free, but organizers are ‘highly encouraging’ people to consider buying a home, said Demi Clark, marketing director for builder D.R. Horton’s Charlotte division.”

“Longtime agent Dan Cottingham said such incentives could be signs of a slowing market. Part of the reason is the nationwide slump, and another part is that developers here continue to roll out new homes, crowding the market, he said.”

“‘We have a market that’s gaining in inventory, and that always happens when the market slows a bit,’ Cottingham said.”

“Still, incentives work, mainly to help buyers justify a purchase, he said. ‘I’ve never been able to convince someone to do something they don’t want to do,’ he said. ‘But it is a positive.’”

“Debe Maxwell of Coldwell Banker’s SouthPark office, said incentives aimed at the general public can be fruitless. ‘It’s an expense, I feel, that doesn’t generate purchases,’ she said.”

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