The Housing Bubble

The Recordnet reports from California. “When Consuelo Magat bought a Mossdale Landing home in Lathrop three years ago, she had no idea she was buying into an area that would emerge as one of the hotbeds of foreclosure activity in California. Magat said she bought the Lathrop house for $636,000 as a residence but then had to buy a home in another area when it turned out that a daughter was unable to get into a nearby Catholic school.”

“Magat rented out the Lathrop house in April, she said, but was in mortgage trouble by June because she became unable to carry the monthly payments on two houses. Her lender was unsympathetic to her plight and declined to refinance because there was no equity in the house and its valuation was less than the loan balance, Magat said.”

“She wanted to sell the Lathrop house, she said, but in this slow market, ‘nobody wants to buy it.’”

“Nearly 3,000 households in San Joaquin County received a notice of default in the third quarter, DataQuick reported. That jumped by nearly 1,000 from the second quarter and represents a nearly 230 percent from 898 notices issued in the third quarter of last year.”

“There were 431 homes repossessed last month in San Joaquin County. There were, though, six other counties with greater repo totals for September: Los Angeles, 1,476; Riverside, 1,070; San Diego, 866; San Bernardino, 860; Sacramento, 721; and Contra Costa, 524.”

“Real-estate agent Dave Harmon (has) foreclosures now accounting for 80 percent of his listings, said that over the past six months, the number of foreclosures quadrupled and then doubled again.”

“There are plenty of investors who are willing to take a chance on the Central Valley again and count on the long-term upswing, he said, but many of the offers on foreclosure homes are ridiculous low-ball pitches.”

The Modesto Bee. “The region’s top real estate pros warned us a couple of years ago that home values in the Northern San Joaquin Valley were overinflated.”

“One of those who identified in early 2005 that the market was headed for a fall, Mike Zagaris, president of PMZ Real Estate in Modesto, said the current slide shouldn’t be a shock, given the market’s previous peak.”

“‘In our industry, you tend to pay to the extent to which you were rewarded,’ Zagaris said. ‘If you have a hot cycle at which you are increasing at double-digit rates, when the market turns, it tends to turn more dramatically.’”

“Zagaris said people got caught up in the easy credit terms, which created a spend-now, pay-later attitude. ‘So the availability of money to, in effect, take what was a historically conservative investment asset and convert it into an ATM that can be used for current expenses, has undermined the basic security that investment has had in the past for many people.’”

“One of the things driving the downward spiral these days is people’s attitudes. But don’t blame the messenger, that’s just an easy out; the numbers are the numbers.”

“For those who can’t lower the price enough to be competitive in today’s market, finding a way to hang on is critical. If all else fails, selling that sweet SUV, hot ski boat or radical motorcycle just might generate some needed revenue and reduce the debt load. There’s also the option of taking on a second job, putting the kids to work to help pay bills or renting out a room.”

“Right now it’s a buyer’s market, said Larry Matos, co-owner of Century 21 M&M and Associates of Modesto. ‘There’s an abundance of selection, prices continue to decline, sellers are willing to negotiate, and you can get a very favorable loan.’”

The Ventura County Star. “Citing slumping market conditions, a developer has abruptly halted construction of a 66-unit condominium development near what is known as Happy Face Hill in Simi Valley, city officials said Tuesday.”

“‘I know the council’s very concerned that they would stop at the point they’re at,’ said City Manager Mike Sedell.”

“At the site, on Kuehner Drive from the west side of Highway 118 to Mount Sinai Drive, trucks were spraying water to control dust Tuesday. Since the project is on the edge of the highway…it has high visibility in the community, Sedell said.”

“‘There are just so many questions that need to be asked,’ Williamson said. ‘My concern is that the city of Simi Valley and the residents aren’t left with a big mess over there.’”

“Encino-based Larwin Co. said it also is putting a separate condo development on hold in the city, Sedell said. The 12-unit condo project is further along in construction, city officials said.”

The Press Enterprise. “Inland Southern California’s consumers don’t seem panicked about declining home values and rising gas prices. But they say they’re being careful, and that could affect how much they spend in November and December.”

“Housing is an issue for Rich Thomas. He recently moved to Lake Elsinore from San Jose and hopes to buy a home. He has a potential buyer for his Bay Area home, but that buyer also needs to sell an existing home.”

“‘I try to take a Zen approach to this and not let things I can’t control bother me,’ said Thomas.”

“He’s said he is also concerned about the job market. As a sales representative for a company that makes building materials, he’s seen some industry-wide cutbacks. His own position seems safe, he added.”

“Sharon Way can’t help but notice that problem. She said there are ‘for sale’ signs all over her Corona neighborhood. ‘I know people who are trying to sell and can’t,’ Way said. ‘It’s a mess.’”

From KPBS. “The Index of Leading Economic Indicators for San Diego County fell 1 percent in September, the 17th decline in the past 18 months, a University of San Diego economist reported today.”

“According to Alan Gin, who compiles the index, the outlook for the local economy continues to be weak at least through the first half of next year.”

“Big drops in building permits, consumer confidence and help-wanted advertising along with an increase in the number of people who applied for unemployment insurance offset positive news, according to Gin.”

“The weak housing market continues to be the dominant strain on the local economy, according to Gin’s index.”

Inside Bay Area. “San Mateo County supervisors issued a call Tuesday for a three-month halt of foreclosure proceedings in the county, but industry experts say that’s unlikely to happen.”

“The county board of supervisors unanimously passed a resolution asking mortgage lenders to voluntarily suspend foreclosure activities.”

“Supervisor Rose Jacobs Gibson, who wrote the resolution, said residents who find themselves trapped by subprime mortgages should be able to reach out to lenders and renegotiate interest rates or the loan’s principal.”

“‘Subprime loans have turned the dreams of home ownership into nightmares,’ Jacobs Gibson said. ‘This three-month window will help people keep the dream of home ownership alive.’

“But real estate observers said lenders have shown no signs that they’re willing to suspend foreclosures, which have skyrocketed nationwide as consumers have found themselves unable to make rapidly increasing payments on adjustable-rate mortgages.”

“‘We can certainly tell (the resolution is) well-meaning, but I don’t know what kind of an effect it’s going to have,’ said Geoff Craighead, president of the San Mateo County Association of Realtors. ‘Another three months isn’t going to bail them out, because it’s just going to give them three more months of free rent.’”

“A report released last week by DataQuick Information Services found 155 homes in San Mateo County were foreclosed on during the third quarter this year compared to only 37 during that time frame last year.”

“Notices of default, issued if a borrower stops making payments, also jumped from 290 in third-quarter 2006 to 581 this year.” “One member of the community group ACORN, Estela Baldovinos, told the board she went from paying $2,700 a month at 6.5 percent interest in 2004 to facing a payment of $8,200 at 12.5 percent interest next month.”

“She is now four months behind on her payments but is trying to renegotiate the loan with her lender. ‘We can’t even concentrate on our personal lives,’ she said. ‘We have no vacations, no weekends, nothing.’”

KPVI reports from Idaho. “In Bonneville County in September, the number of offers to reduce a price in order to induce a sale tripled over the same month last year. The number that could prevent an overall record year in sales is the number of homes sold lately, in September and October, 189 this year, versus almost 100 more in 2006.”

“Jim Windmiller: ‘I don’t have the California and Nevada people buying many homes here anymore.’”

“And Californians and others were the ones buying homes of more than $300,000. Jim Windmiller: ‘Their market has come down a lot, so those people are not selling out, moving to Idaho and buying our bigger units.’”

The Gazette Times from Oregon. “Last August Lori DeBord sat down with a mortgage broker and stretched, taking out a subprime loan to buy her first home, a modest 1,200-square-foot condo in southeast Albany. The interest rate was high, 9.75 percent, but she figured she could swing the monthly payments.”

“It was a proud moment, but it didn’t last. First she lost her second job, then her son’s disability benefits. Now she’s six months behind on her mortgage payments and on the verge of losing her home to foreclosure. ‘I gave up,’ she said. ‘I just went, ‘I don’t have the money.’”

“Thousands of Oregonians have subprime mortgages, the kind that have been making bad-news headlines nationwide. In Oregon, subprime loans are 11 times more likely to be in foreclosure than prime rate loans, according to a recent study.”

“‘Oregon has actually fared better than many other states, and we believe it is in large part due to continued appreciation of home values in our state,’ said Berri Leslie, the mortgage lending program manager for the state Division of Finance & Corporate Securities.”

“But, she added, there are ‘pockets of concern’ in places such as Medford and Bend, where home prices shot up rapidly in recent years. In the mid-valley, the problem is worse in some places than in others.”

“‘It’s a little harder hit in Albany, Lebanon and Sweet Home, where incomes tend to be a little lower,’ said Tom Kosta, a senior loan officer with the Corvallis office of Meridian Mortgage.”

“Linn County, however, has 255 properties either in arrears, scheduled for auction or already foreclosed by the lender. Counselors at Willamette Neighborhood Housing Services say…they are getting more calls on the matter than they used to.”

“‘Most people don’t realize what they’re getting into until they’re at the closing table,’ said Ken Smith, homeownership program coordinator for the Corvallis-based nonprofit. ‘Yeah, people should know better. But people don’t.’”

“In Oregon, said Angela Martin of Our Oregon, there are roughly 40,000 families with ‘exploding ARM’ loans that will reset to a higher rate this year or next. ‘We’re looking at a large number of borrowers — who are about to face their first payment shock,’ she said.”

“‘A lot of folks went into this believing the person that was representing them to get a loan was representing their best interests,’ Martin said. ‘The market was going well. Homes were sold on the promise that, yeah, you can’t afford this now, but in a few years you’ll be able to refinance.’”

The Register Guard from Oregon. “Rather than selling the lots in his latest subdivision to builders, developer David Corey is looking to individual buyers to purchase the upscale home sites in Legacy Estates, south of the Mc­Kenzie River in the Hayden Bridge area of north Springfield.”

“‘Most of the time, developers sell lots in subdivisions like Legacy Estates to builders, but with the housing market the way it is now, too many builders have too much inventory, and they’re not looking for more,’ Corey said.”

“‘Most of the time, I’d be selling all 20 of these lots to builders — in fact, at one point I had all 20 reserved by three builders, but now only one of them’s still planning to go ahead,’ he said. ‘I’m prepared that things may move slowly over the winter and not pick up until spring, but that’s just the way it is.’”

“Meanwhile, the slower housing market notwithstanding, other developers in the Eugene-Springfield area also continue to bring new subdivisions to the market.”

The Seattle Times from Washington. “Puget Sound-area new-home developers, motivated by an increasingly soft real-estate market, are resorting to something they haven’t done in years. They’re enticing buyers with big TVs, motorcycles and other inducements.”

“Now there’s a four- to 13-month inventory in King and Snohomish counties of new houses, town houses and condominiums available, according to New Home Trends, a Bothell data-research firm. That’s spawned a goody-laden battle for buyers.”

“‘We got the mortgage flu, and got a few more homes on the books than we’d like to be carrying right now,’ confesses a local home builder who declined to be named because he’s prohibited from talking to the media. ‘There have been an awful lot of homes that came back to us’ after the initial buyers backed out.’”

“A Pierce County builder learned that when he tried to lure buyers to a $489,000 new house with a plasma-screen TV. There were no takers, so he lowered the price and threw in a new $23,000 Harley-Davidson motorcycle.”

“‘We didn’t get any bites, any low-ball offers, nothing,’ recounts real-estate agent Jeff Jensen.”

“‘As a first-time buyer in this market,’ says Brandon Smith, ‘not only would I expect an incentive to help pay closing costs, but I would also need to feel I wasn’t paying a price based on the real-estate frenzy of the last few years.’”

“That feeling caused Smith to cancel a recent deal on a new Everett condo. The developer offered a $7,000 buyer bonus, but Smith decided the asking price was too high.”

“‘Sure enough, just days after I backed out of the sale, the asking price of all units in the complex were dropped by 7 or 8 percent,’ Smith says.”

The News Tribune from Washington. “An ambitious deal between the City of Tacoma and a Seattle developer to create affordable housing for artists on a downtown parking lot site is crumbling.”

“The city has told Catapult Community Developers that it’s in default on its development agreement to create a 76-unit, 150,000-square-foot housing, retail and parking structure across Market Street from the Tacoma Municipal Building.”

“Catapult principal Michael Trower said the development company is discussing options with the city, including return of the land to city ownership. Trower said an oversupply of new housing units in downtown Tacoma, coupled with rapidly rising construction costs, put the project in deep freeze.”

“On the same block as the Art Lofts project, developers turned the former Tacoma YMCA into a condominium project and are selling units in the Roberson Condominiums next door. Nearby, the Walker Condominiums are also for sale.”

“Trower said Catapult caught the first wave of buyer interest with the other projects, but a surge in condominium and apartment construction, combined with a credit crunch, is slowing the market.” “‘There are some developers who are building now who wish they weren’t,’ Trower said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Defaults by U.S. homeowners with private mortgage insurance jumped by 22 percent last month after house prices fell the most in at least six years, an industry report said. The number of insured borrowers more than 60 days late on their payments climbed to 54,699 in September from 44,791 a year earlier, according to the Washington-based Mortgage Insurance Companies of America.”

“‘The speed and the depth of the deterioration we saw in the third quarter, and in particular the month of September, was greater than we had expected,’ said PMI CEO Stephen Smith in a conference call after reporting a net loss of $86.8 million.”

“Total U.S. losses, including money set aside for future claims, increased fivefold to $348.3 million in the third quarter, the Walnut Creek, California-based insurer said”

“‘Things are going from bad to worse,’ said Ajay Rajadhyaksha, head of fixed-income strategy in New York at Barclays Capital Inc. ‘Overleveraged borrowers are meeting falling home prices.’”

The Associated Press. “Mitsubishi UFJ Financial Group Inc. on Wednesday slashed the outlook for its net profit by 25 percent for the current fiscal year due to subprime-related losses and sluggish domestic lending business.”

“The banking group said estimated losses on investments, including some related to subprime loans, stood around 20 billion yen ($173.91 million) at the end of last month. Its write-down of investments with subprime loan components fiscal first half will be about 5.0 billion yen ($43.48 million), it said.”

From MarketWatch. “The Bank of Japan trimmed Wednesday its forecast for the Asian nation’s economic growth this year and slashed inflation estimates to zero, dashing hopes that Japan had won its long bout with deflation and raising doubts that its longest expansion since World War II is running out of steam.”

“‘The environment overseas has changed, and uncertainty over the global economy persists,’ media reports cited Bank of Japan Governor Toshihiko Fukui as saying at a Tokyo news conference.”

“Fukui also said global growth could be crimped by the ongoing problems gripping the U.S. mortgage market.”

The Sydney Morning Herald. “Borrowers in NSW marginal electorates are defaulting on ‘dramatically’ more loans than they did last year, indicating a rising tide of financial stress, credit check figures show.”

“The biggest increases in borrowers not being able to meet credit card, personal loan and mortgage payments are in drought-affected rural regions and the ‘mortgage belt’ in Sydney’s west.”

“In the federal seat of Calare in the central west, there were 77 per cent more defaults than last year, the figures, released by credit check company Veda Advantage yesterday, show.”

“‘This study demonstrates that a significant number of people living in regional NSW are struggling to repay the credit they owe - a rise in defaults of almost 60 per cent over the previous year indicates the situation is getting desperate for some,’ said general manager Erica Hughes.”

“Nick Collins, an independent London real estate broker who’s had record profits every year since 2003, took a hit in September, and that may be bad news for a U.K. economy built on a housing bubble.”

“Five of his 50 buyers pulled out of purchases, spooked by a run on mortgage lender Northern Rock Plc that left it 2 billion pounds ($4.1 billion) poorer.”

“‘It’s undermined people’s confidence,’ says Collins, who sells homes worth as much as 5 million pounds. ‘The market’s not as frothy and competitive as it was.’”

“Now, with mortgage lending cooling and house prices falling for the first time this year in September, the economy may be in the early stages of a slowdown. ‘U.K. house prices are significantly overvalued and extremely vulnerable to a correction,’ said Danny Gabay, a former Bank of England economist.”

“Consumers have spent some of these gains and loans on goods such as new kitchens and cars they otherwise couldn’t afford, said Alan Clarke, a London-based economist for BNP Paribas SA, France’s biggest bank. ‘The only thing that has been supporting consumer spending growth is wealth gains from house price inflation,’ Clarke says. ‘This is about to disappear.’”

“Gabay says so-called buy-to-let properties, which investors acquire for rental income, are more vulnerable to a fall in prices. The value of new buy-to-let mortgages soared more than 12-fold from 1999 to 2006 to 38.4 billion pounds, or 11 percent of new property loans, according to the Council of Mortgage Lenders.’

From Reuters. “Equity Residential, one of the largest U.S. apartment owners, on Tuesday reported weaker quarterly funds from operations…fell partly because of competition from single-family homes and condominiums for rent.”

“Some markets, such as Florida, Phoenix and Las Vegas, have seen many condominiums or single-family homes appear on the market as rentals, competing with traditional apartments.”

The Consumerist. “Foreclosure tracking firm RealtyTrac has been delivering lots of bad news this year, not least of which is some sobering numbers on Real Estate Owned properties or REOs.”

“And there have been a lot of them. 255,129, according to RealtyTrac’s records.”

“Just how many homes are we talking about? 255,129 is more housing units than the entire city of New Orleans. 255,129 is enough housing to hold about 790,900 people, according to the average family size reported in the 2000 U.S. Census.”

“If those 790,900 people formed a city, ‘Bank Repossessionville’ would be the 13th largest city in the U.S. Right in between Jacksonville, Florida and Indianapolis, Indiana.”

“The 13,674 houses owned by just one lender, Countrywide, are valued at 2,867,767,788.”

The Star Bulletin. “Three months ago, Central Pacific Financial Corp. assured investors it had no exposure to the subprime lending market. But what a difference a quarter makes.”

“The parent of Hawaii’s fourth-largest bank, Central Pacific Bank, said today that third-quarter net income plunged 55.8 percent after it took a $21.2 million provision for loan and lease losses due to a rapid downturn in California residential construction.”

“‘What happened is the national homebuilders took the strategy of just unloading inventory and they discounted it significantly from 10 to 30 percent, and many of our projects were located next to projects that national homebuilders have,’ said Clint Arnoldus, president and chief executive of Central Pacific. ‘All that happened in a very short time.’”

“Arnoldus said he had never seen a downturn occur so quickly. ‘In this case, it’s a rifle shot right into the housing industry because the other economic indicators in California are still relatively strong. What happened in this case is the market got overheated by the subprime mortgages that were created, and that came to a grinding halt. Then the national homebuilders dumped inventory,’ he said.”

“Home prices have further to drop as builders become increasingly concerned about turning over their inventory, former Federal Reserve Chairman Alan Greenspan said.”

“‘We’ve got this huge overhang of newly constructed homes … which are vacant and deteriorating,’ Greenspan told a financial services trade association. ‘You cannot keep a very large inventory of single homes for sale because their value declines. There is very considerable pressure for home builders to unload these on the market and they’re starting to do that.’”

“He said that housing prices will be key to whether the economy begins to contract and will be more of an influence than the turmoil in the credit markets.”

“‘It’s going to depend more on the issue of prices of homes than it will be on the resolution of what has been a fairly significant credit crunch,’ Greenspan said. ‘If we didn’t have the house price problem, we’d be well along on the way of getting out from under this.’”

“The former Fed chief indicated there was more pain coming, even after home prices in 10 major U.S cities showed a 5 percent year-over-year drop in single-family homes in August.”

“‘There is very little evidence that we’re making much progress because sales were falling almost as rapidly as new construction,’ Greenspan said.”

“A Federal Reserve interest rate cut this week won’t be enough to save the reeling housing sector, overwhelmed by unsold homes. ‘We think the more significant problem in the housing sector is the inventory. It’s not just the affordability of the credit, it’s even the access to the credit, which is a question today,’ says Nicolas Retsinas, director of the joint center for housing studies at Harvard University.”

“Order cancellations are escalating as lenders crack down after being burned by mounting defaults and foreclosures. ‘If mortgage rates go down, they still have to make it through the hurdle of credit quality,’ said Gregory Miller, chief economist at SunTrust Banks Inc.”

“‘Banks have been very scorched, very burned by the quality of, in particular, subprime ARMs,” or adjustable-rate mortgages made to borrowers with weak credit histories. “You could end up at that market-clearing, inventory-reducing price, but not be able to get financing. This one’s getting rough,’ he said.”

“The interest rate cut Wall Street believes will buffer the economy from housing market woes is unlikely to boost hard-hit banks and homebuilders much in the near term, analysts say.”

“‘The problems in the housing market, the problems in the credit markets are not easily solved by the Fed cutting rates,’ said Steve East, chief economist for investment bank Friedman Billings, Ramsey & Co.”

“Struggling homebuilders, such as D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc., are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower.”

“Lower interest rates are ‘certainly not the panacea’ for getting the housing market back on track, said UBS homebuilding analyst David Goldberg.”

“Jefferson Harralson, a banking analyst…who follows banks such as Bank of America Corp. and Wachovia Corp., said an acceleration in losses from defaults .seems to be a given, whether or not a rate cut occurs..”

“He says home equity lines of credit will be less likely to default if rates are lower. But that’s hardly a revenue cure for banks in an environment in which housing prices continue to fall and foreclosures continue to rise.”

“‘The home equity business isn’t going to be a growth business,’ Harralson said.”

The Washington Post. “Remember all those stories about how the nose dive in financial markets was the first big test for Federal Reserve Chairman Ben Bernanke, the academic economist who was still developing his feel for the interplay between the central bank and Wall Street?”

“Well, it turns out that was only a midterm. The final exam begins today, when Bernanke will either show that he is capable of standing up to the insatiable demands of Wall Street, or that he is so spooked by the prospect of being blamed (unfairly) for triggering a financial meltdown that he puts the short-term interests of big banks and investment houses before the long-term interests of the global economy.”

“Even if you believe, as some of us do, that the bursting of the housing and credit bubbles will eventually drag the economy into recession, there is little evidence that this is happening yet. And when the economy does begin to hit the wall, there is little the Fed will be able to do, or should do, to prevent it: It is part of the economy’s natural self-correcting process.”

“But what a rate cut surely would do is to encourage investors and bankers in their belief that the Fed is so desperate to avoid a credit crunch that it is willing to reinflate the bubbles and keep the party going anyway it can.”

The Montgomery Advertiser reports from Alabama. “There may be more houses on the Montgomery market than at any time in its history, and this glut of homes has led to the average price of existing homes in the area dropping about $20,000 in the past two months. The 3,629 homes on the Montgomery market was by far the highest number since the University of Alabama began its tracking of them in 2000.”

“Despite the large number of homes on the market, just 369 of them sold. The number of homes on the market is about twice what it was 18 months ago, and the monthly sales total from last month was the area’s lowest since January 2005.”

“That soft market pushed the average price of an existing home in Montgomery down to $156,418. It was $176,368 in August and $163,661 in September 2006.”

“Real estate veterans, they said, will recognize the current trend as part of a long-term cycle. Taylor Jernigan, president of the Montgomery Area Association of Realtors, said it was just the nature of the market. ‘I think all of it is cyclical,’ he said. ‘We have had five record years in a row, so certainly there is going to be a correction in the market.’”

From Online Athens in Georgia. “Owners of some units in the Georgia Traditions, a high-rise luxury condominium complex on the east end of downtown Athens, began using their condos recently, and the nine-story residential building should be completely ready for occupancy by the middle of November, the developer said.”

“Three more condominiums at 412 Thomas must be sold before financing will become available for construction, said Judy McDonald, a real estate agent.”

“The luxury condos, priced between $250,000 for the smaller units to $850,000 for the largest, were marketed to wealthy people with ties to the University of Georgia and the UGA Athletic Association, said Mark Jennings, the developer.”

“So far residential sales have not been robust, but once the buildings start rising, more interest should come, said Mike Travis with the Atlanta company developing the project.. ‘Most people are kind of waiting until we get out of the ground,’ Travis said.”

“Regarding the high prices on these downtown condominiums, the location dictates the market, said Barbara Dooley, the real estate agent overseeing sales of the Georgia Traditions condominiums. ‘They’re only pricey because of the location and convenience and everything else we’re offering,’ Dooley said. ‘A place like this in Atlanta you couldn’t touch for what we’re selling them for.’”

“For a project tied with UGA sports, winning seasons also help, Dooley added. ‘This market depends on Georgia football,’ Dooley said. ‘They need to keep winning so we can sell these.’”

The Herald Tribune from Florida. “As condo owners across the state bemoan a downward slide in values, an unusual situation is taking place at the Bermuda on Osprey condominium complex near downtown Sarasota.”

“A group of Californians — two of whom were arrested in March on charges of running a brothel in the Anaheim area — have been snapping up units at prices that are hundreds of thousands of dollars higher than those paid during the boom.”

“The buyers say they will convert the 46-unit complex into a senior-living center complete with a luxurious clubhouse, communal dining room and limo service. They believe the high prices they are paying are justified by all the improvements they plan for the flesh-colored, two-story walk-up built in 1969.”

“Since November, group members have paid an average of $566,667 each, for 15 of the units, and they have received an average of $480,000 per unit, in loans from a variety of lenders, Sarasota County Clerk of Court records show.”

“But the owners of the complex say they have received only about $300,000 for each unit, explaining that the remaining $250,000 or so from each sale has been placed in an ‘amenity fund’ controlled by the buyers to be used for future improvements.”

“Local appraisers, real estate experts and community leaders say they have never seen deals in which banks are willing to lend more than 50 percent of a condo’s purchase price on the promise that the extra cash will be placed in an amenity fund.”

“‘These are the kinds of deals that ruined the market in the first place,’ said Kerry Kirschner, executive director of a business-centered public watchdog group. ‘They are phony transactions that artificially inflate the value of property and lead to the fact that people are having to pay higher taxes.’”

“Dennis Black, a Port Charlotte appraiser instructor, agreed: ‘No one in this market is doing deals in which 50 percent of the purchase price is given back to buyers and placed in some sort of amenity fund. Speaking as a person with 25 years’ experience, this stinks like a five-day-old fish.’”

“Neither the buyers nor the sellers seem to know where that amenity fund is. Bryan Bond, whose Newport Beach, Calif., mortgage company made seven loans totaling $2.7 million, was so concerned about the amenity fund that he promptly canceled an eighth loan his firm had been processing.”

“After reviewing the HUD statements, Bond acknowledged that they contained a line item about amenity fund payments, but he said he did not know what an amenity fund was. ‘I’ve never heard of one.’”

“Appraiser…Terrie Moore in Brandon, said she was initially squeamish about appraising the Bermuda units when she saw that other appraisers were coming in with values of $700,000 to $900,000 per unit.”

“‘Other appraisers were trying to appraise the units as if some sort of exclusive club existed,’ Moore said. Moore said she insisted on appraising the units on an ‘as is’ basis, and ultimately presented a value of $525,000 for one. Critics say that number is still way too high.”

“‘When they told me about the prices being paid there, I was taken aback,’ said Richard Dear, a Siesta Key hotelier and real estate developer familiar with the Bermuda on Osprey project. ‘I don’t think the units are worth more than $400,000.’”

“Buyers who purchased units before the Californians got involved at Bermuda agree. ‘The market dropped after we purchased,’ said Dona Norton, who paid $359,857 for a unit in May 2006. ‘We took a loss on our investment. Everyone did.’”

“‘If Coldwell Banker sells one unit for $300,000, we’re dead,’ said Christopher Woods, brother-in-law of the leader of the California buyers group. ‘All our units would lose value.’”

The Tampa Bay Business Journal from Florida. “Prices of existing family homes continue to slide nationally and especially in the Tampa area where prices are down 10.1 percent over the previous year, according to a new report from Standard & Poor’s S&P/Case-Shiller Home Price Indices.”

“Prices of existing family homes continue to slide nationally and especially in the Tampa area where prices are down 10.1 percent over the previous year, according to a new report from Standard & Poor’s S&P/Case-Shiller Home Price Indices.”

The Tampa Tribune. “A federal judge has granted Tampa-based SimDag LLC up to 65 more days to respond to a lawsuit Donald Trump filed in May seeking to terminate his licensing agreement with the developer. The agreement allows the developer to market the building as a Trump property.”

“That comes a week after SimDag representatives told a group of 80 buyers it hopes to secure financing from an unidentified New York hedge fund by early January. The order is the latest twist for a developer that refuses to give up on its dream to build the 52-story waterfront tower in downtown Tampa despite financing problems, construction liens and lawsuits from buyers wanting their money back.”

“Florida’s housing funk already has battered the state’s single-family home and condo markets. Now, signs are appearing that the once-hot ‘rackaminium’ industry - basically condominiums for boats - is beginning to feel the heat.”

“Sales at Tampa Harbour Yacht Club in South Tampa, which might be the area’s highest-profile rackaminium project, are 50 percent behind schedule, said project developer Steeven Knight.”

“Meanwhile, Kirby Cay Scheimann, a managing director of Marinas International, which owns and manages marinas nationwide, said some of the momentum in the entire rackaminium industry has been lost, as banks tighten their lending practices and some investors put their money elsewhere.”

“‘There are some site-specific locations where rackaminiums work, but it’s no where near the broad-based appeal people thought it would be,’ said Scheimann, whose company owns Harborage Marina in downtown St. Petersburg.”

“In recent years, dozens of marinas across the state have stopped renting boat slips to boaters and began selling slips instead. Knight said the sluggish real estate market is creating challenges for rackaminium and dockominium projects. The slips don’t come cheap, running from $125,000 to $600,000.”

“But Knight is marketing the yacht club as part of a prestigious boating lifestyle, instead of just a place to store boats.”

“So far, he has sold 114 dry rackaminiums and one wet dockominium, which is about half of what he had expected to sell by this time, Knight said. To save on expenses, he has cut some of his in-house sales staff and outsourced sales to a local real estate firm.”

“For now, the slumping real estate market is giving potential rackaminium buyers the jitters and causing them to hold off on purchases, Knight said.”

“Overall, the industry faces new challenges, such as tighter lending standards by banks. Also, the industry had been counting on purchases by investors, who were betting the slips would continue to rise in value.”

“However, ‘the investors aren’t there like they were before,’ Scheimann said.”

Here is the Clear Channel Radio program I did this past weekend. Right click / save link to disk. Save the audio to your hard drive. Only takes 45 seconds.

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

The Modesto Bee reports from California. “A buyer in the current market has several advantages, particularly if they have good credit, a sizable down payment and a willingness to shop thoroughly. When the market was at its peak, Kimiko Horiuchi avoided buying because prices were too high. Now, she and her husband are buying a 2,700-square-foot house in Patterson for $329,000.”

“She said her real estate agent told her that a few years ago the home was worth $600,000, because it’s a former model home with several upgrades.”

“‘We’re definitely getting a home for a good price,’ said Horiuchi. ‘You’re going from renting to paying on the mortgage, and if the economy comes back, then I’ll have a house that I bought for less than it’s worth.’”

“Horiuchi said she knows she may be taking advantage of someone else’s misfortune or bad loan. ‘I just feel bad that I’m taking someone’s house,’ she said.”

“Horiuchi’s house was owned by a bank, which many experts said is a niche that may allow buyers more opportunity to get homes at bargain prices. Banks don’t get involved in selling homes willingly, and those that own foreclosed properties want to quickly move them off the books, experts say.”

“That, said Michael Tedesco, a Realtor in Modesto, can make negotiations with a bank easier. ‘If buyers see something they like, they should throw an offer out there,’ he said. ‘You won’t insult the bank like you would an individual seller, and with a bank, they’re going to counter back.’”

“After two price adjustments, Realtor Ken Ernst said he still thinks the owners of a Salida home he’s listing will come out ahead. The couple bought the home when it was new, in 1994. Equity has soared since, even taking into account the recent drops, he said. The house is listed at $299,900, but the owners bought it for $133,000.”

“‘The biggest time of price depreciation has come about,’ Ernst said at an open house in September. Although they missed out on the boom, Ernst said, they will benefit because they can pay less for a new home in Manteca.”

“‘They held back during the high price time, and it definitely made a difference,’ Ernst said.”

The Orange County Register. “Metrostudy’s third-quarter look at SoCal’s new home market says Southern California recorded 8,470 single-family starts during the third quarter of 2007, a decline of 38 percent compared to the third quarter of 2006.”

“Single-family quarterly closings totaled 8,815 units, a decline of 47 percent compared to the third quarter of 2006.”

“Single-family inventory, which is composed of units under construction, finished vacant units and model homes, totaled 39,839 units at the end of the second quarter of 2007, declining by less than 1 percent to an 11.9-month supply.”

“Metrostudy’s Steve Johnson: ‘The region’s residential real estate market has been experiencing a decline that has affected all price segments. Some projects have had limited success by offering ’super discounts’ of up to 50 percent of original asking prices, even when such reductions price homes below cost. Unfortunately, the sales momentum has been short-lived, as there is no sense of urgency to buy a home.’”

The Daily News. “California faces a potentially grim economic outlook as the effects of growing foreclosures amid a faltering housing market ripple statewide, experts warned Monday.”

“Economist Ross DeVol of the Milken Institute, part of a panel examining the impact of problems in the subprime-mortgage industry, said a drop in home sales affects everything from employment and consumer confidence to retail sales and tax revenue. And he warned that if reduced consumer spending leads to a recession in California, the (problems) could spread nationwide.”

“Countrywide Financial Corp. CEO Angelo Mozilo, whose company has become a symbol for the problems in the housing market, said his firm has received no help from the government and is bearing the brunt of criticism for the current problems.”

“‘The problem we are seeing now is that first-time homebuyers can’t get into the market,’ Mozilo said. ‘This is the most expensive housing market in the country and the federal government has not done anything to help ease lending.’”

“‘Programs (like Freddie Mac and Fannie Mae) have the same limits for North Dakota as (they do) for Los Angeles. And no one here can buy a house with what they are offering,’ he said.”

“Mozilo said the problems stem from the loosened lending and credit rules in the late 1990s through 2004.”

“‘It was an easy market,’ Mozilo said. ‘People subscribed to the belief they couldn’t lose - and for a while they didn’t. Prices continued to go up. What created the problem we have now is that prices began to fall and panic set in.’”

The Mercury News. “Alameda Realtor David Gunderman said he’s seen home prices and sales soften. In general, he said, the softening market is affecting those buying homes for the first time. The reason is that lenders have tightened their lending standards.”

“‘Those people (buyers) were taking a risk, and the lender was allowing them to do so,’ he said. ‘Those people are no longer in the market, which is good, responsible lending. It got irresponsible for a while there and that’s why we’re feeling the pinch right now. It’s a correction, a necessary correction.’”

“Broker Michael Studebaker said…Harbor Bay Isle home sales were suffering.”

“The whole ‘pie’ of home sales volume has shrunk this year by more than 20 percent compared with sales in 2006, said Leslie Appleton-Young, chief economist for the California Association of Realtors. But ‘the part of the pie that’s moderate and low-end housing has shrunk even more.’ With so many sales of lower-price homes out of the picture, the median price has been bumped up artificially.”

Inside Bay Area. “Foreclosures in San Mateo County shot up more than threefold in the third quarter compared to the same time last year, and there’s no relief in sight, according to a real estate report.”

“Some 155 homes were foreclosed on countywide, up 319 percent from 37 in the third quarter of 2006, according to DataQuick.”

“‘It’s just the start of it, and it’s going to continue on through next year,’ said Geoffrey Craighead, president of the San Mateo County Association of Realtors. ‘Borrowers seem to think a magic knight’s going to come in, but then the sheriff’s knocking at the door.’”

“The local areas hardest hit are lower-end neighborhoods in places like Daly City, South San Francisco, East Palo Alto, Redwood City, Pacifica and San Mateo, Craighead said.”

“‘People forget, because it looks pretty affluent around here, but there are a lot of areas where working people are working hard to stay here,’ said Brian McNamara, a lender in Half Moon Bay. ‘They took a loan to stay, and thought they could refinance, but they can’t.’ McNamara also sees foreclosures increasing in the next year countywide.”

“Other areas were hit even harder in the third quarter by foreclosures, with Santa Clara County up 704 percent, Contra Costa County up 874 percent and Alameda County up 486 percent.”

“Home sales fell 37 percent in September in San Mateo County. With home sales slumping and appreciation flat or slipping, many first-time home buyers are trapped.”

“‘There’s never been such a lax lending market,’ said John Gieseker, a real estate broker in San Bruno. ‘With no money down and adjustable loans, there was a big danger of getting in trouble.’”

“Gieseker said the foreclosure market is mostly affecting first-time buyers. ‘Consumers saw easy money, and they flocked to it,’ said Gieseker. ‘A lot of borrowers closed their eyes and went ahead.’”

The Press Democrat. “The sluggish economy, a sharp drop in foot traffic and a pull-out by a major investor are all being blamed for the tough times facing the Town Green Village. It’s a setback for a fast-growing project that has literally transformed the face of downtown Windsor in a few short years.”

“Politicians, planners and business groups have hailed the project as a model of smart, mixed-use urban redevelopment. But ‘For Lease’ signs now litter the colorful, historically inspired storefronts, and more may be on the way.”

“‘I have been living this nightmare for 17 months,’ said Kathy Flinn, owner of Creative Wick, a create-your-own candle studio. ‘I’ve got $100,000 invested here. I can’t afford to walk away.’”

“The town, which has invested millions of in redevelopment funds in the area, encouraged rapid growth in an effort to quickly get new residents living there so the new businesses would thrive, said Debra Fudge, Windsor mayor pro-tem.”

“Orrin Thiessen, the developer and general partner of Town Green Village, said he’s built about 200 residential and commercial units in buildings along the Town Green since 2002. The first few years were fantastic, but he acknowledged the slow housing market and a recent decision by a key investor have limited his ability to extend much help to ailing retailers.”

“‘We’ve got a little bit of a double whammy going on right now,’ Thiessen said.”

“The slow housing market has hit his project harder than other developments because of the way the retail and the residential components are intermingled, he said.”

“In 2005, when Flinn was considering opening her business, she scouted out the area and thought it couldn’t miss. But Flinn hasn’t turned a profit in any of the 17 months she’s been in business. She blames a bad location and poor marketing efforts by the developers. She said there is nothing wrong with her core business model, which involves hosting parties where people pay about $12 to make their own candles.”

“The buildings are comprised of street-level shops with residential units upstairs. Neither are selling as well as they were two years ago, Thiessen said. ‘I have the buyers,’ Thiessen said. ‘I have a big list that have already picked out their condominiums, but they have to sell their homes first.’”

The Business Journal reports from Indiana. “Melinda and Brooks Bertl know the ups and downs of the current real estate market—personally. They started looking for a home to buy this spring and it took them only two weeks to find one they liked in Carmel. In March, the couple put their Castleton-area home on the market, where it has languished ever since.”

“They’ve lowered the price 15 percent and recently installed new carpeting throughout the A-frame, tri-level house to make it more attractive to prospective buyers. Since listing the property, the Bertls have had two offers well below their asking price. Behold the down side.”

“Recent data from the Metropolitan Indianapolis Board of Realtors show they’re far from alone. The nine-county Indianapolis metropolitan area had 1,998 pending sales of single-family homes and condominiums in September, down 16.8 percent from the same month last year.”

“The more than 20,600 active listings in September were up 5 percent over the same month last year.”

“‘The thing we cannot control is consumer confidence,’ said James Litten, president of F.C. Tucker Co.’s Residential Real Estate Services Division. And when people worry, it has a ripple effect because they don’t spend money.”

“That’s something the Bertls know well. ‘It’s not a conducive market right now for people selling their homes,’ Melinda Bertl said. ‘Just lowering the price doesn’t entice people to buy.’”

The Courier News from Illinois. “Chances are that the people walking into Caroline Hernandez’s South Elgin office aren’t thrilled to be there. And Hernandez, a real estate attorney specializing in foreclosures, readily admits that her newfound popularity may be a little bittersweet.”

“‘People were given the wrong impression of what they could afford,’ she said. ‘As opposed to being frugal and saying, ‘I know how much I can afford,’ it became, ‘Why don’t I buy?’”

“Lenders may or may not have run a credit report on potential buyers, said Hugh Smeed, with Crown Community Development in Naperville., ‘but nobody called your employer or checks your tax return.’ Interest rates came down to almost historic lows, he added. ‘All of that contributed to people who were supremely unqualified to buy a house,’ doing just that.”

“‘So many of these people applied for loans stating income they didn’t have. Banks look at it now and say, ‘How did you afford this’ ’? Hernandez said.”

“Area developers and mortgage lenders are creating programs and offering deals to help ease the suffering that has come with the nation’s housing market slump.”

“Fountain Square in downtown Elgin, a mixed-use building with condominiums ranging in price from $229,900 to $474,900, is giving home shoppers the chance to live there for six months free. No mortgage payments, real estate taxes and homeowner association fees for six months provide homeowners with a ‘financial cushion that gives you time to sell your existing home,’ according to sales manager Katie Lange.”

“‘It isn’t desperation,’ she said. ‘It’s just to give an incentive.’”

“A mortgage licensee based in Crystal Lake is mailing out fliers proclaiming, ‘If you can prove your income, we have a home ownership solution for you, regardless of your current credit situation.’”

“The company has teamed up with Advantage Financial Partners and JP Realty to make buying a home ‘fast and easy.’ This is possible, according to their advertisement, because a ‘large inventory of homes priced under market value’ are available this very moment.”

The Chicago Tribune from Illinois. “One local housing snapshot says Chicago-area sales continue to decline, as do the numbers of homes under contract.”

“Headrick-Wagner Consulting reports that in the 12-month period ending Oct. 1, the Chicago region averaged about 5,000 sales per month, down from about 6,300 the previous year. In the 2005 period, sales averaged 7,300 a month.”

“The report said there were 1,649 fewer homes under contract Oct. 1, compared to a year earlier, and about 4,300 fewer than two years earlier, generally considered the very end of the boom.”

Business Week reports on Illinois. “Chicago…has the second-highest housing inventory level in the country. Inventory has shot up 17.2% in the past year, to 82,839, even though the area did not experience the housing boom and speculation buying that led to a market correction in much of the country.”

“It may be that even in Chicago, buyers and sellers have become wary because of all the negative national news about real estate, suggests ZipRealty CEO Pat Lashinsky.”

The Des Moines Register from Iowa. “As some downtown Des Moines developers are shifting from condos to apartments, Hubbell Realty says it will spend nearly $6 million to turn the former Mitchell Transmission building into 31 condominiums.”

“Jarad Bernstein, a Hubbell spokesman, said the company knows the downtown market, it has condo and townhouse projects on Court and Grand avenues, and expects the West End Lofts to sell well.”

“‘Housing may not be selling as fast developers wish, but it’s not a soft market,’ Bernstein said.”

“Forty-eight condos and lofts were sold downtown from January to September, totaling $10.4 million, records from the Des Moines Area Association of Realtors show. For the same nine months a year ago, 69 downtown condos sold, totaling $12 million.”

“The average sale price of downtown housing climbed from $174,587 to $215,728 last year.”

“The Des Moines real estate group shows 352 townhouses and condos on the market, the same as a year ago. Downtown housing took 277 days to sell this year, compared with 161 days a year ago. The association said time on market is high because developers often list homes before construction is completed.”

“‘The downtown market has gotten a bit of a bad rap,’ said B.J. Knapp, an Iowa Realty agent. ‘It has more to do with the overall market slowing than with the downtown market. But it’s nothing catastrophic. This isn’t South Florida or Las Vegas.’”

The Detroit News from Michigan. “Thousands of Michigan real estate agents, some with decades of experience, are getting squeezed out of the business, casualties of one of the worst housing slumps in state history.”

“Michigan agents say a lack of home buyers for the glut of houses on the market is driving them from the business. Those who do manage to move a property are realizing lower commissions as a result of dampened real estate prices.”

“In the last year alone, the Michigan Association of Realtors has lost 10 percent of its membership, or about 3,500 agents. An untold number of agents have taken second jobs to weather the slump or have put their licenses in ‘escrow,’ basically not using them until the market turns around.”

“John Kurczak, now an agent in Sterling Heights, said his current job is one that’s only gotten harder as friends and even family members have fled the real estate business while he’s tried to hold on.”

“Both of his brothers got their real estate licenses within the last year. But after seeing Kurczak struggle, including a situation last winter in which Kurczak was dropped by a couple looking for a home after he took them on 70 private showings, both brothers have decided to wait to get in the business until the market.”

“Sandy Covert said she wishes she had done just that. Lured by tales of plump paychecks and the allure of a job that came with a business card and no uniform, Covert decided in November 2005 to ditch her merry-go-round of low-wage retail jobs for the world of Metro Detroit real estate.”

“But after thousands of dollars spent on preparation and six months working every angle of the market she could, Covert had sold only one home.”

“‘It was a complete embarrassment,’ Covert said of the dilapidated structure a few blocks from her own Dearborn flat that she sold for a mere $4,500. ‘That was all I could sell. I tried harder at this than anything before in my life and I couldn’t make it work.’”

“‘It’s not as if we’re not working hard,’ said Kurczak. ‘But you can’t make people buy houses, which is unfortunate. I’d be a very rich man if I sold everything there is to sell in Metro Detroit.’”

Some housing bubble news from Wall Street and Washington. MarketWatch, “The 13-month-long decline in home prices in 20 major U.S. cities accelerated in August, with prices dropping a record 0.7% in the month, according to the Case-Shiller price index. Prices were down 4.4% in the past year, the fastest decline in the seven-year history of the 20-city index. In the original 10-city index, prices have fallen 5% in the past year, the biggest decline since 1991.”

“‘The fall in home prices is showing no real signs of a slowdown or turnaround,’ said economist Robert Shiller.”

“Prices could fall much further. In a separate report, analysts at Goldman Sachs figured that prices in California are about 35% to 40% overvalued, compared with past relationships between home prices and income growth. The median sales price of a home in California was $589,000 in August, Goldman said, but should be around $375,000, they said.”

“In the Case-Shiller index, fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with a 10.1% decline, followed by Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in August.”

From Bloomberg. “The price measure from the Realtors group can be influenced by changes in the types of homes sold. Because the S&P/Case- Shiller index tracks the same home over time, economists say these more accurately reflect price trends.”

The New York Times. “UBS on Tuesday reported a net loss of 830 Swiss francs ($713 million) in the third quarter, its first quarterly loss in nearly five years, as troubles in the United States subprime mortgage market led to big writedowns and losses in its investment banking unit.”

“Switzerland-based UBS, Europe’s largest bank by assets, is just one of many large financial institutions to suffer the effects of the recent credit crunch, which sent values of many mortgage-related securities sharply lower. Marcel Rohner, who took over as UBS’s CEO earlier this year, called the results ‘unquestionably disappointing.’”

From The Age. “Rohner, who replaced Peter Wuffli four months ago after the in-house hedge fund Dillon Read Capital Management collapsed, aims to restore profit by slashing 1500 jobs and reducing risk-taking.”

“‘They didn’t have very good control over what was happening at their investment bank,’ said Mark Glazener, a fund manager at Rotterdam-based Robeco. ‘It’s still not very clear what is going on.’”

From Reuters. “UBS repeated warnings of further writedowns, but CEO Rohner declined to give any detailed forecasts. ‘The range of possible outcomes is widening,’ he said.”

“UBS’s Chief Financial Officer Marco Suter later told Reuters in an interview that any writedowns UBS may have to make on subprime-related exposures in the fourth quarter were ‘highly unlikely’ to be on the same scale as in the third quarter. ‘Nothing is inconceivable,’ Suter said when asked if fourth quarter writedowns could be as big as in the previous three months.”

“Bank of China, the country’s flagship foreign exchange lender, booked $322 million in provisions to account for its exposure to U.S. subprime mortgage-backed bonds.”

“The state-run lender reported on Aug 23 that it held $9.65 billion worth of U.S. subprime-related bonds and collateralized debt obligations, the largest exposure revealed by a Chinese bank.”

“In the first half of the year it booked subprime-related charges totaling about $153 million. To reflect the depreciation in fair value of the related subprime securities, the lender also set aside $321 million of reserves against the balance sheet.”

Dow Jones Newswires. “Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund’s operations, said a person involved with the effort.”

“Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party.”

“By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said.”

“Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse.”

“Treasury Secretary Henry Paulson said it’s too soon to call an end to the U.S. housing slump. ‘We haven’t hit the bottom yet in housing,’ Paulson said.”

“The fallout from the U.S. subprime market has cost the world’s biggest securities firms and banks more than $30 billion in bad loans and trading losses in the third quarter.”

“The U.S. administration is studying what went wrong, with an emphasis on the role of credit-rating companies and accounting rules related to structured investment vehicles, Paulson said.” “‘We need to shed light on it and make the policy adjustments so this doesn’t happen again,’ Paulson said.”

From Business Week. “After three decades of stability, the national rate of homeownership suddenly began rising in the mid-1990s, going from 64% in 1994 to 69% in 2004.”

“But new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by looser mortgage-lending practices rather than demographic factors such as more households of home-buying age.”

“In an Oct. 23 e-mail to BusinessWeek, Goldman Sachs chief U.S. economist Jan Hatzius wrote: ‘The key issue is the potential for a vicious cycle’ in which falling homeownership hurts housing prices and forces more defaults, causing ownership to decline even more. That’s because falling prices make it more difficult for holders of certain types of mortgages to refinance and hang on to their homes.”

“Added Hatzius: ‘What the Atlanta Fed paper does is illustrate how important changes in access to credit can be in this cycle.’”

“One warning sign: The rate of homeownership has already begun to drop. It was 68.2% in the second quarter of 2007, down a full percentage point from its peak. The third-quarter number was scheduled for release on Oct. 26.”

“Many analysts have pointed to easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy macroeconomic analysis, the authors conclude that the availability of new mortgage options accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31%.”

“Although the paper cites lowered downpayment requirements as the biggest factor in raising ownership, co-author Carlos Garriga of the St. Louis Fed says a forthcoming paper will attribute more of the effect to ‘teaser’ loans with low introductory payments that appeal to young and lower-income buyers.”

“Nevertheless, the homeownership rate could fall well below the level it reached in 2004, at least temporarily, because the mortgage market is in such turmoil.”

“In a recent report, Goldman’s Hatzius wrote: ‘Given the current number of U.S. households of 110 million, the change in the homeownership rate over the past two years has already subtracted almost 500,000 from the underlying demand for new homes.’”

“Looks like there’s more bust left in the housing bust.”

From USA Today. “In hindsight, it’s not hard to see why so many home buyers got burned in the subprime mortgage meltdown. They might not have fully grasped the risks they were taking. Or perhaps they refused to believe housing prices could actually fall, or were desperate to keep up with others and achieve the goal of homeownership.”

“But what explains Stanley O’Neal? He was CEO of Merrill Lynch as it lost a staggering $8 billion on mortgage-backed investment products.”

“Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September.”

“They borrow in the bond market and lend the money to their members. Federal Home Loan Bank obligations, when combined with the $1.5 trillion debt and $4.7 trillion in bond guarantees of Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, are 46 percent more than the $5.04 trillion of Treasury debt held by the public.”

The Financial Times. “Angelo Mozilo, CEO of Countrywide Financial, on Monday strongly criticised the US government’s response to the collapse of the subprime lending market, saying there had been ‘zero’ effort to tackle the crisis.”

“‘In terms of tangible effort from the federal government…there has been no programme, no federal effort, no legislative assistance – zero,’ he said.”

“‘First-time buyers cannot buy a home now. Only the wealthy and privileged can afford to buy homes,’ he said.”

“Mr Mozilo blamed the subprime crisis on ‘easy, low-cost money’ that drove up house prices and ‘exotic loans and diminished underwriting standards.’”

“‘People stretched themselves,’ he said, though he implied that the blame for the crisis should be shared. ‘It takes a village to do this. As long as [house] values keep falling, the subprime situation will get worse.’”

The Associated Press. “Alan Greenspan issued bearish comments about the U.S. housing industry Monday, saying that ‘prices of homes will continue to go down’ until housing inventory starts to shrink.”

“The former Federal Reserve Board chairman, speaking at an investment conference in Bermuda, said ‘we’re nowhere near’ the point where inventories of new homes are set to drop, noting that home builders continue to discount new homes and add other inducements in a bid to cut their inventory.”

“‘We’ve got a way to go, and I’m not sure where that leaves’ the housing industry in the next year, he said.”

“Former Federal Reserve Chairman Alan Greenspan said on Monday securitized assets backed by subprime loans were unlikely to become a problem in the future because markets have lost their enthusiasm for them.”

“‘Markets have made the decision that subprime securitization is much too risky, so problem solved,’ Greenspan told a conference.”

NBC 2 reports from Florida. “The NBC2 Investigators looked into the real estate market slump and uncovered one thing sellers could do to turn the market around. Although the buyers are there, some home prices are at 2002 levels. Many buyers are waiting for the prices to drop. ‘What we have are lurkers. Lurking on the sidelines,’ said Lee County Realtor Brett Ellis”

“Ellis agrees with his high-profile competitor Denny Grimes. ‘We don’t have a demand problem. We have a supply problem,’ said Grimes.”

“There are 15,000 homes and 9,000 condos listed for sale in Lee County. Thousands of them are priced out of the current real estate market and are putting a downward pressure on prices.”

“‘We tell them here’s where the market is- if you’re not prepared to bring your property to the market, we can’t help you. Because nobody is going to be able to sell your property for more than it’s worth, especially in today’s market,’ said Ellis.”

“The NBC2 investigators discovered realtors are telling clients to drop their prices to a reasonable level. ‘We’re seeing people coming in crying uncle, waving the white flag, saying we’re not going to get what we thought. We’ve got to get serious to move this thing,’ said Grimes.”

“Jenny Marinescu and her husband just bought in a gated community. The house had been on the market at one point for $370,000. They paid $245,000 not wanting to look a gift horse in the mouth.”

“‘Unless you’re psychic, it’s the only way to predict when the market will bottom and what it will do. You just have to look back at history. If you do your research just a little bit, you’ll see that now is a good time to buy,’ said Marinescu.”

The Herald Tribune. “After eight months of legislative wrangling over property tax reform, the uncertainty of the process itself is taking a toll on an already depressed real estate market.”

“‘There are a number of Northeastern baby boomers who are literally waiting to see what we do with tax reform,’ said Kelly Ann Ayer, an agent in Venice. ‘It certainly has kept people on the fence, without question.’”

“Fence-sitting, in fact, has helped freeze an already stagnant market. In September, Realtors sold just 8,688 single-family homes statewide, down 37 percent from a year ago and the lowest since the Florida Association of Realtors started keeping a statewide record in 1993, when 9,300 homes sold.”

“Sarasota home builder Lee Wetherington, who has downsized his own home-building company to wait out the current slowdown in sales, said that reduced property values are going to prove more important in limiting taxes on non-homesteaded buyers than is the proposed 10 percent cap.”

“‘Over the next five to seven years, you are not going to see that much appreciation in property,’ Wetherington said. ‘I suspect you are going to continue to see valuations decrease. I think most homeowners will have the ammunition to go to the tax assessors and say, ‘This is what my new tax base should be.’”

The News Press. “First Home Builders in Fort Myers, which two years ago was on top of the world as Lee County’s biggest residential contractor with almost 1,200 employees, is down to about 50 today following its layoff of 200 workers.”

“The move was done in response to the current sluggish real estate market, said Ray Casas, spokesman for Red Bank, N.J.-based Hovnanian Enterprises, which acquired the assets of First Home in August 2005.”

“‘We will see ya all Monday morning for business as the ‘new normal,’ First Home president Fred Hermann told employees in an e-mail. ‘If asked by anyone…assure everyone we are not closing our doors…just ‘right sizing.’ Thank you for helping us all get through the day.’”

“The layoffs come as the low-end home sector, First Home’s specialty, is in dire straits in Lee County with a huge inventory of vacant houses caused by waves of speculation and failed loans.”

“There were 1,220 foreclosures filed in the county in September, 915 of them for single-family houses. That’s more than five times the 237 from a year earlier. Meanwhile, the number of building permits issued fell to 121 from 698 in the same time period.”

“‘It’s going to be like going through some quicksand for a couple years’ for low-end builders, said Naples-based real estate consultant Michael Timmerman.”

“The median price of a single-family home in Lee County has fallen to $231,600 in September, the latest month available, down 28 percent from an all-time high of $322,300 in December 2005, according to the Florida Association of Realtors.”

“Besides a slow market, First Home has been beset over the past year by numerous lawsuits by people alleging fraud in the terms under which they bought homes from the company with little money down, some of them through a program by real estate firm D’Alessandro & Woodyard, which brought in investors to purchase the houses.”

“Many of the purchasers refused or were unable to close on the houses when they were completed, often because falling prices had made the deals infeasible.”

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

The Miami Herald. “The saga of Nicky Hilton’s would-be South Beach hotel continues, with its bankrupt owners set to auction off the Ocean Drive property under court order.”

“After a failed condo conversion, the combined Breakwater and Edison property will be sold to the highest bidder under the supervision of a federal bankruptcy judge. Construction has stopped midway through completion of a rooftop penthouse, and a lawyer close to the case expects debts to far exceed what the hotel can command on the real estate market.”

“The bankruptcy-court auction marks a dramatic turn of events for a property that only a year ago won favorable mentions by David Letterman and from writers in People and Vanity Fair magazines.”

“‘It’s such an awesome piece of property,’ said Michael Ehrenstein, a lawyer for co-owner Jonas Mimoun. ‘But it’s been so thoroughly mismanaged.’”

“Hilton signed a licensing deal with developer Robert Falor to brand the two properties the Nicky O. She was promoted as the guiding force in designing the condo-hotel, and her tabloid cachet brought waves of publicity to the project.”

“But the partnership dissolved into litigation, just one in a string of disputes involving Falor’s once formidable portfolio of condo-hotel projects.”

“Construction stopped at the Breakwater and Edison this summer; Miami Beach declared the tarp-draped hotel abandoned on Sept. 17 and issued a stop-work order at the construction site.”

“Though construction crews have already done about $5 million in work converting the rooms into condominium units, broker Christian Charr expects a buyer would probably opt just to operate the property as a traditional hotel.”

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The Los Angeles Business Journal reports from California. “California’s housing market, suffering from a slump in single-family home and condominium sales, will ’stay tough for quite some time,’ KB Home CEO Jeffrey Mezger said, Bloomberg News reports. ‘I think it’s going to take quite some time for the inventory to clear,’ said Mezger, whose Los Angeles-based company is the fifth largest U.S. homebuilder by sales.”

From CNBC. “The CEO of U.S. home builder KB Home said home prices in California could fall another 10 percent to 15 percent in the next 18 months.”

“CEO Jeffrey Mezger was speaking on a panel with Countrywide Financial CEO Angelo Mozilo and California State Treasurer Bill Lockyer. Lockyer said they all expected about 10 percent or more.”

“Mezger saw a 10 percent to 15 percent drop, Lockyer told Reuters after the panel ended, which Mezger later confirmed.”

“‘The others were all 10, maybe 10 plus. The north side of 10,’ Lockyer added. ‘I’m probably the least able to forecast, but that seemed like a reasonable trend.’

The Orange County Business Journal. “Orange County’s growth will be stunted by the downturn in the area’s real estate market, economists from the UCLA Anderson School of Management said on Monday.”

“‘We’re floating dangerously close to a recession,’ economist Ryan Ratcliff said.”

“As for the housing sector, speakers at the event expect to see home prices fall by nearly 15%, and for sales to remain slow until at least 2009.”

“‘It will seem like a recession (here) if you are related to residential real estate,’ said Mark Schniepp, director of the economic forecast.”

The LA Times. “Attention, you picky buyers who think you have all the time in the world to house hunt before you ink an offer. Listen up: Agents are mad as hell and aren’t going to take you anymore.”

“And sellers, those of you who don’t believe that your palace won’t fetch what the shack up the street sold for a year ago, you aren’t making any agent’s short list of whom to call back today.”

“Walter Sanford, a top-producing realty sales agent for more than 20 years and today a sales-coaching guru, is brutally blunt on the topic. In a down market like this, he tells agents, dump the buyers and spend your time and budget cultivating more listings of motivated sellers and only motivated sellers. It’s a way for agents to avoid financial ruin.”

“Sellers too, at least the unrealistic ones, are getting the same tough-love treatment. ‘You can’t waste time with cement-head sellers,’ is how Sanford puts it.”

“Lonnie Maples, who has been selling real estate for 29 years in inventory-saturated Riverside, had a listing appointment with a seller whose property had been in the MLS for more than a year. The owner had made several price reductions from it’s original $1,095,000, and he was now ready to list at $895,000.”

“‘I knew it wouldn’t sell for even that,’ Maples says. ‘That house, in this market…$750,000 was more like it. I declined the listing because I didn’t want to waste my time and money.’”

“And then there are those who say they never walk away from a potential listing. Anthony Marguleas, broker in Pacific Palisades, says he and his agents never turn down listings. Period.”

“The onus, he says, is on the agent to educate the client. ‘If all the comps show a house is worth $1 million and the seller wants $2 million for it, it’s the agent’s job to explain to him why that’s not possible. We won’t give up. We show the seller market analysis, comps of recent sales; we show him what else is currently on the market. It’s our job to not let him make a mistake.’”

“As for agents who sideline buyers if the buyers don’t want to commit, Marguleas says that behavior is just plain ‘lazy.’”

“‘It’s actually more than lazy; it’s insulting,’ he says. ‘Buying a home is the largest investment of someone’s life, and an agent doesn’t have the patience or time to show them homes anymore? That’s not right.’”

“A salesman at Irvine mortgage brokerage Sunwest Lending Group said everyone at the brokerage took pains to carefully explain to borrowers the risks as well as the benefits of option ARMs.”

“The salesman acknowledged many borrowers at all income levels are attracted to the option ARM because they have let their personal spending get so out of control that the low payment is the only one they can afford.”

“‘Newport Beach, where everyone is driving a Mercedes and the homes start at $1 million, is like an old western movie set,’ he said, describing the finances of many wealthy homeowners as precarious. ‘It’s all just a front, with stilts holding it up.’”

The Daily News. “Sales of single-family houses in the San Fernando Valley plunged an annual 55.5 percent to a record low 362 transactions in September.”

“In the third quarter, there were 854 home foreclosures in the Greater San Fernando Valley, from Burbank to Calabasas.”

“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., credits the high end with propping up the median. ‘High-end homes have been selling, and people at that end of the market don’t have to worry about funding.’”

“Andrew LePage, an analyst at DataQuick, said jumbo loan originations fell by 50 percent in Southern California from August to September.”

The Sacramento Bee. “The nation’s housing crisis has hit Sacramento’s economy like a sledgehammer, prompting a city government hiring freeze this month and an urgent examination into how millions can be trimmed from the budget.”

“‘We were hoping for a soft landing from the housing market problems, but it didn’t turn out that way,’ Russell Fehr, the city’s finance director, said on Sunday. ‘We have a widening gap that will grow and grow if we don’t do something about it.’”

“Sacramento’s financial picture has worsened rapidly, to the extent that city officials said they had not foreseen.”

“Home foreclosures have escalated at an astonishing pace in Sacramento. There have been far fewer sales of both new and existing residences than were anticipated in the city’s budget, according to the report. Development activity in the city will be 60 percent less than prior years, the report states.”

“‘Current staffing and service levels are not sustainable, given the current weakness in revenue growth,’ the report finds.”

The Modesto Bee. “The valley’s housing woes have triggered an employment collapse in some industries closely tied to the market. Mortgage companies and title insurance firms are closing branch offices and shedding employees by the dozens. Some real estate agents have walked away from the business.”

“For real estate agents in particular, he said, times are extremely tough. ‘A lot are going hungry,’ said Terry Harwell, division president of Alliance Title Co. in Stanislaus County.”

“Oscar Dominguez was one of them. The former agent for PMZ Real Estate got into the business in 2005. Dominguez thought it would free up more time to spend with his family, but instead found himself racing around to houses on the weekends and putting in 60-hour weeks. Then the slowdown hit.”

“‘My timing couldn’t have been worse,’ said Dominguez, who sold two houses during his tenure and now is training to become an electrician at Modesto Junior College.”

“‘It was tough. I was fortunate enough,’ Dominguez said. ‘There’s some agents who didn’t even sell two houses, like I did. Even established agents right now are struggling.’”

“Realtors are stymied by sellers who refuse to lower their prices, Dominguez said. Most people can’t or won’t accept less than what their house was valued at a few years ago, he said, meaning only the very best houses at the very lowest prices will sell. And those are few and far between.”

“‘Just about all of my co-workers are struggling and will tell you it’s a tough market,’ he said. ‘The buyers have all the strength. They can basically just name their price.’”