The Housing Bubble

The Desert Sun reports from California.”Home sales across the Coachella Valley fell 25 percent in August compared with the same month last year, a new report shows. DataQuick reported the valley’s median price in August for resale houses rose to $420,000, an 8.2 percent increase from year-ago figures. Sales of higher-end homes likely played a part in that increasing median price, analysts said.”

“A notable exception was in the Coachella Valley’s new-home sector, where the median price fell nearly 5 percent to $380,000 amid heavy buyer incentives and discounting, DataQuick reported. There was a 36 percent drop in new-home sales volume in August compared with last year.”

“The median price paid per square foot has dropped for nearly every ZIP code in the valley, said Andrew LePage, analyst with DataQuick. The valley’s overall median price per square foot dropped 4.3 percent to $226, with cities such as Coachella and Desert Hot Springs experiencing 20 percent, 25 percent, 45 percent or greater declines in per-square-foot prices, DataQuick reported.”

“‘That could be reflecting two things: depreciation in at least some areas and price segments within the market as well as a shift toward a greater portion of sales in more expensive areas that probably tend to have larger homes,’ LePage said.”

“‘Much of the value of a house is concentrated in the first 1,200 square feet or so, given the kitchen, baths, etc., and typically larger houses will sell for a bit less on a per-square-foot basis,’ he said.”

“With 8,417 homes on the market valleywide in mid-August, according to the California Desert Association of Realtors, buyers had plenty of options and considerably more bargaining power than in years past, analysts said. That has put downward pressure on prices in many communities.”

“A home price comparison index released by Coldwell Banker last week showed…that a single-family home in Palm Desert, for example, costs $461,250 compared to $526,500 a year ago.”

“‘While the price of this average, middle-management home dropped about 12 percent compared to last year, buyers and sellers need to keep this in perspective,’ said Ron Gerlich, regional VP of Coldwell Banker Residential Brokerage’s desert region.”

“‘The current fluctuations in real estate and mortgage markets have temporarily made Palm Desert more affordable than last year, creating a window of opportunity for both first-time and vacation home buyers,’ Gerlich said.”

The Daily News. “Home sales plunged across the San Fernando and Santa Clarita valleys during August as lending sector turmoil continued to roil the markets, a trade association said.”

“Sales in the San Fernando Valley fell an annual 33.1 percent to 552 transactions, the lowest total for an August since record keeping began in 1984, said the Van Nuys-based Southland Regional Association of Realtors. That’s the third lowest sales total this year.”

“Subprime loans have all but disappeared and the Valley median price is so high that potential buyers don’t have access to Fannie Mae and Freddie Mac backed loans capped at $417,000, or the conforming limit. And credit standards have been tightened.”

“‘It’s killing sales in the lower end of the market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. Blake said that asking prices in some areas of the Valley are now 10 percent under what homes sold for a year ago.”

“During August the inventory built to a 10.4-month supply, the first time it broke into double digits since September 1995. The record is a 23-month supply in February 1993. That’s the amount of time it takes to deplete the inventory at the current sales pace.”

“In the Santa Clarita Valley, sales fell an annual 25.6 percent in August to 186 transactions, traditionally a busy month.”

“The median price of a single-family home, which peaked in April 2006 at $643,000, fell an annual 8.9 percent to $560,000 in August.”

The Orange County Register. “Real estate consultant Pat Veling’s math says Orange County’s supply of homes for sale hit what he called the ‘troubling’ nine-month level, a point that could trigger price drops and cause the inventory of listings to go up even further.”

“Veling tells us, ‘Back in the early 1990’s, when I was measuring inventory in the same way (using a 12-month absorption period), the inventory really began to climb — and quickly — once we hit the 9-month mark. I have told you before that it eventually peaked at 19.2 months in November of 1994. I have also said that I would become far more concerned about inventory levels depressing prices once we got to this 9-month benchmark. By my calculations, we hit that number (Monday.)’”

The Mercury News. “Pushed to exaggerate home values during Silicon Valley’s real estate run-up, appraisers say agents and homeowners are now pressuring them to prop up those values as prices decline.”

“People ‘are trying to refinance to get their butts out of trouble, and the values aren’t there,’ said Mike Terry, who appraises homes in San Mateo County.”

“It’s not as easy now that the market has stopped in its tracks. But some real estate and mortgage agents are asking anyway, as homeowners become desperate to sell homes or refinance loans taken out in the past year or two.”

“Greg Walker of Almaden Appraisals said he was recently called by an agent who asked him if he could ‘get the same value’ on a house in Monterey County as it was appraised for six months ago.”

“The owners had done a cash-back refinance, paid off some credit card bills and were stuck with an $800,000 loan on a house now worth $750,000, he said. ‘You look at it, and there’s no way. The value was there six months ago but it’s not there now.’”

“‘What a lot of them do is what I call dialing for dollars,’ said Jim Manning, a semiretired appraiser with 32 years in the business who lives in Half Moon Bay. ‘They get on the phone and start dialing appraisers, asking, ‘Who can come up with this value,’ and ‘We don’t want it if you can’t.’”

“‘Most of us old-timers have thrown up our hands in the air,’ Manning said. ‘We’ve seen this industry nose dive.’”

Inside Bay Area. “Homeowners in an upscale subdivision where 34 new homes will be sold at auction are seeking some kind of compensation from the developer.”

“Anderson Homes plans to auction off the vacant homes or properties under construction in the Paseo West subdivision in Manteca as a way to stir up interest among homebuyers and fill the empty homes quickly, said Craig Barton, chief financial officer for the Lodi-based developer.”

“On Friday night, frustrations reached their boiling point, as Barton met with the homeowners in an emotional three-hour meeting. Following the meeting, Paseo West homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.”

“‘We’re asking for something that would narrow the gap and make the blow less devastating,’ Paseo West resident Dave Cantrell said.”

“‘Will it solve everything? No. But, at least it’s not a slap in the face,’ said resident Joseph Leon. ‘We know we can’t stop them, but it’s a way for Anderson Homes to say, ‘This is not typically what we will do. We’re in this with you, and we want to stay a family.’”

“They are concerned that the auction will undercut property values by hundreds of thousands of dollars and that the current tight credit situation will mean only investors will participate in the auction.”

“‘If that happens, then they’ll most likely turn it into a rental community,’ Cantrell said, adding that the homes yards and features would be very basic, unlike those of the current owners.”

“Minimum bids start at $285,000 for a four bedroom, two bath home in the Manteca project, about 40 percent below previous asking prices in the subdivision. That home’s asking price is normally $460,850.”

“Still, homeowners in Paseo West, who acknowledge that the market is down right now, maintain that auction prices will disproportionately affect their property values.”

“Paseo West homeowners also chide Anderson Homes for overbuilding. Anderson Homes built too many homes at the Manteca site and in Los Banos when the housing market was strong. But as the market got cold, buyership slowly declined, Barton said.”

“‘At what cost do we have to pay for their poor business plan,’ Cantrell said, adding that in his background as a subdivision developer others did not extend themselves that way.”

“‘When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.”

The Gazette reports from Colorado. “The local housing market remained mired in one of its worst slumps in years during September, as home construction plunged, prices sagged and foreclosures continued at a record clip. The number of single-family homebuilding permits issued last month in El Paso County fell to its lowest level in nearly 16 years, according to the Pikes Peak Regional Building Department.”

“Also, the median price of homes — mostly resales — that sold in September fell when compared with the same month a year ago, the Pikes Peak Association of Realtors said. It was the second straight month prices have fallen.”

“And with another batch of foreclosures in September, the number of loans in default for the first nine months of 2007 has surpassed the total for 2006, according to the El Paso County Public Trustee’s Office.”

“George Hess, head of Vantage Homes and board president of the Housing and Building Association of Colorado Springs, said there are plenty of homebuyers. But many want to negotiate prices because they know it’s a buyers’ market.”

“Some of his competition includes the homes he built five and six years ago that are now for sale. There’s nothing wrong with them, he said, but some buyers don’t want to pay more for a new home when they can get a better price on a Vantage Home that’s still like new.”

“‘You have too much supply and not enough demand,’ Hess said. ‘The impacts are obvious. It’s going to take a while for this credit crisis to be fixed.’”

The Rocky Mountain News from Colorado. “More than 19,000 foreclosures have been filed in the seven-county Denver area in the first nine months of the year, only about 300 shy of the record set for all of 2006.”

“There were 19,120 foreclosures in the first three quarters of the year, marking a 37 percent jump from the 14,001 filed through September of last year, county public trustee offices said Monday. A record 19,425 foreclosures were filed in 2006.”

“Denver showed the largest number of foreclosures at 5,375 in the first three quarters, and the biggest percentage increase from the same period last year, at 50.6 percent.”

“One of the hardest hit areas in Denver has been the northeast neighborhoods of Montbello and Green Valley Ranch. It’s estimated that 72 percent of the home sales in those neighborhoods are either foreclosures or short sales, where the lender accepts less than the mortgage payment.”

“‘I hope people understand these are just not statistics or numbers on a page,’ added said Zachary Urban of Brothers Redevelopment, a nonprofit group that administers the Colorado Foreclosure Hotline. ‘If you look at the neighborhood consequences, the 19,000 homes are directly impacting houses on each side, as well as across the street.’”

“About the only beneficiaries are first-time home buyers who can get deals, he said.”

The Arizona Daily Star. “As the number of foreclosures continues to rise in Tucson, the local real estate community is becoming increasingly interested in a foreclosure alternative: the short sale.”

“The downturn in the real estate market, coupled with increases in mortgage delinquencies, is making short-selling look like an attractive option for sellers in some cases, said Larry Pollman, a real estate broker who represents sellers in short-sale transactions. Pollman’s company, HomeWay Realty, has seen a surge of short-sale listings within the past eight months, he said.”

“‘They’re in vogue now,’ he said. “When the market goes down, they become in vogue.’”

“‘Lenders traditionally were hard-nosed, and they wouldn’t want to talk to you if you can’t pay,’ said said Fred Brodsky, director of the Brodsky School of Real Estate. ‘But now they’re beginning to see the light. Banks don’t want to be in the business of owning houses.’”

“Lenders also often require sellers to ‘qualify’ for a short sale by providing detailed financial information and documents to demonstrate hardship, Brodsky said.”

“One seller who recently tried holding her own auction to combat a stubborn market ended up disappointed with the outcome. Alison Torba planned to auction off a duplex and a single-family home on Sept. 30. The starting prices were $149,500 for the duplex and $79,500 for the house. Previously, they had been listed at $265,000 and $138,000.”

“A buyer ended up snapping up the single-family home before the auction at $132,000. The duplex was sold at the auction for $200,000. Torba said she ended up about breaking even. ‘I’m disappointed, but I’m OK,’ she said.”

The Tucson Citizen from Arizona. “Pima County homeowners in the next few years could be stuck with property tax bills that reflect the inflated housing values of a runaway real estate market that no longer exists.”

“Residential valuations by county assessors in Arizona lag a year to 18 months behind what homeowners see on tax bills mailed every September.”

“‘Our budget is built on a house of cards,’ Supervisor Ann Day said recently. ‘Our growth was based on an inflated housing market that no longer exists.’”

“The scenario for homeowners is property tax bills in the coming two years reflecting values the market no longer supports, said Bill Staples, Pima County assessor.”

“For example, a home that might sell for $240,000 this year that has an assessed value of $200,000 might sell for only $210,000 next year. But the homeowner’s property tax next year would be based on the $200,000 assessment from this year.”

The Las Vegas Business Press from Nevada. “The Nevada Supreme Court recently ruled that owners of condo-conversions, or apartments transformed into condominiums and sold as residential units, can sue builders for faulty construction on renovated parts of the homes.”

“Many of the valley’s older apartment buildings were quickly outfitted with new furnishings and upgraded features, making them appealing as condos to home buyers or to investors looking to cash in quickly during the now-busted housing boom.”

“But many condos were rushed onto the market, resulting in massive amounts of defective renovation work, according to allegations in Westpark Owners’ Association v. Westpark Associates LLC and Oxbow Construction LLC, the case that led to the recent ruling.”

“Nancy Quon, an attorney who has represented homeowners in defect lawsuits, was blunt about the conditions of some valley condo-conversions. ‘They can be horrible. If you buy them when they are 10 years old, right about the time you buy them, they are falling apart,’ she said.”

The Review Journal from Las Vegas. “Nevada’s economy slumped again in July, with the value of taxable goods and services purchased by consumers down 2.6 percent over the same month a year ago.” Several major taxable sales categories reported lower taxable sales than in July 2006, according to a report released Monday by the Department of Taxation. The July report continues a trend of declines that began in April.”

“‘Nevada continues to feel the effects of the slow housing market and decline in automobile sales, a trend exhibited over the past several months,’ Gov. Jim Gibbons said in comments accompanying the report.”

“Eleven of 17 Nevada counties showed a decrease in taxable sales for July 2007 compared to July 2006: Carson City, Churchill, Clark, Douglas, Esmeralda, Humboldt, Lander, Lincoln, Nye, Pershing and Washoe.”

The Reno Gazette Journal from Nevada. “Observers pointed to the downturn in the housing market as a key weight dragging down taxable sales, the construction sector, continued to fall in the greater Reno-Sparks area.”

“‘It’s a drag, clearly. It’s pretty much the same story,’ state economist Jim Shabi said. ‘If housing’s not moving and prices are down, people are not refinancing and not getting additional money to spend. People either don’t have the money to spend or are being more cautious.’”

The Sierra Sun. “Got big plans to sell your home? Now might not be the best time to put it on the market.” “The slide in real estate sales and price levels continues through most of Lake Tahoe and Truckee, marked particularly by the drop in sales volume and median home prices in Tahoe City.”

“According to a report from Chase International comparing the first six months of this year to the same period in 2006, the median home price in Truckee dropped 13 percent to $645,000. Meanwhile, volume and units sold rose modestly by 4 and 14 percent respectively.”

“Generally, real estate prices peaked in the first part of 2006 and then have declined over the past year. Throughout the Tahoe Basin, sales volume declined by 8 percent compared to this time last year.”

“Tahoe City took the biggest hit in the first half of this year. Amplifying the national trend, single-family home sales dropped by nearly 40 percent.”

“The median sales price in Tahoe City was down this year to $679,000 from $885,000, according to mid-year reports from Chase International, a 23 percent drop.”

“Agents say the current market looks good for buyers.”

“‘Of course I’m a real estate agent, I’m always optimistic,’ Curtis said. ‘I think it’s a great time to buy…I think any buyer can rest assured they’re getting very good value if they’re buying a home right now. It’s not an investment that’s looked at to flip very quickly, but a solid, long-term investment. I’m telling everyone this is the new normal.’”

Some housing bubble news from Wall Street and Washington. CNN Money, “The meltdown in the mortgage market in August dried up the supply of buyers for homeowners looking to sell their homes, as an industry group report showed the lowest level of homes under contract on record. The National Association of Realtors’ pending home sales index fell to a record low of 85.5 from an upwardly revised 91.4 reading in July.”

“That broke the previous low of 89.8 in September 2001. The index fell 21.5 percent from year-earlier levels, the biggest 12-month drop ever recorded, as the one-month decline of 6.5 percent was third biggest drop on record, trailing only July of this year and the September 2001 period. The trade group started the index in 2001.”

“‘Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments, said Lawrence Yun, NAR senior economist. ‘The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.’”

“‘The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked,’ Yun said. ‘The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions. Therefore, sales activity in late fall will better reflect market fundamentals.’”

“The PHSI in the West was down 27.1 percent below a year ago. In the Midwest, the index fell 18.0 percent lower than August 2006. The index in the Northeast was 18.3 percent below a year ago. In the South, the index dropped 21.3 percent below August 2006.”

From MarketWatch. “‘This is still absolutely awful, confirming that the existing homes market is now in freefall,’ wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. ‘This is consistent with existing-home sales falling to just 5 million or so,” down 10% from the latest level and 30% from the peak.’”

From Reuters. “Westpac Banking, the fourth-biggest Australian bank, will buy the brand and distribution business of Rams Home Loans Group, swooping onto assets of the lender, which struggled to refinance its debt after the U.S. subprime mortgage crisis.”

“‘Rams looks like a business in run-down, it doesn’t have much of a future at all,’ said Rob Patterson, managing director of Argo Investments. ‘I’m surprised they couldn’t cut a better deal elsewhere, but it’s symptomatic of the times in credit markets.’”

The Australian. “The sad saga of RAMS can partly be blamed on the global credit markets turmoil, which hit the market soon after it floated. Rising defaults among sub-prime lenders in the US turned investors away from residential-backed mortgage securities, the key source of cheap funding for non-bank players.”

“But the brutal reality is RAMS was always a volatile business, regardless of the credit markets. It funds long-term mortgages with short-term funding and is not required to retain capital.”

“For RAMS shareholders, unless a white knight comes along and makes a better offer, they are left with a $14.5 billion loan book, $6.1 billion of which needs refinancing by next February, and $138 million of corporate debt.”

“Quite simply, once shareholders vote on the deal, RAMS will be nothing more than a closed mortgage book that is in run-off mode, with $138 million of corporate debt. This is not a good outcome for RAMS shareholders but it is possibly the company’s only option, given current conditions in credit markets.”

“Shareholders have little choice but to accept the offer, because the company is unable to confirm with any certainty that it can fund the business. And if it can’t do that, the business is worth virtually nothing.”

“It’s now clear that RAMS Home Loans Group’s business model was built on quicksand rather than solid ground, but there has been no real sense of the gravity of the company’s position in its recent warnings to the ASX. Investors might now give consideration as to whether they have grounds for a class action.”

“RAMS was listed only nine weeks ago, after raising $695 million from the public. Founder John Kinghorn retained a 20 per cent stake, so RAMS initially had a market capitalisation of $880 million.”

“On August 14, less than three weeks after listing, RAMS issued a warning that it was being affected by the drying up of liquidity on global debt markets, due to the sub-prime mortgage crisis in the US, but at that stage was continuing to “successfully place” its short-term debt in the XCP market in the US.

From Bloomberg. “Spanish property loan delinquencies may increase as much as 15-fold by the end of 2008 as interest rates rise, Moody’s Investors Service said in a report.”

“Loan-payment arrears by developers and builders may reach 5.5 percent of total property loans from the current 0.37 percent, according to the New York-based ratings company. The increase would mark a ’soft landing’ for Spain’s 12-year property boom, Moody’s said in a report.”

“Spanish builders constructed 750,000 houses and apartments last year, more than France and Germany combined, while annual demand runs about 60 percent of that, according to the Finance Ministry.”

“Moody’s said a ‘hard landing,’ in which loan defaults by developers and builders exceeds 5.5 percent and house prices plunge 20 percent, is a ‘remote’ possibility.”

“Policymakers in Europe and the U.S. have criticized ratings firms for their response to the credit market slump earlier this year.”

“‘We have no concern at all about the strength of the Spanish financial system,’ Deputy Finance Minister David Vegara said at a press conference today in response to the report. ‘I’m not sure what it contributes talking in abstracts,’ Vegara said about today’s Moody’s report. ‘Ratings agencies should take particular care with their communications after what happened in August.’”

“The prices of existing houses and apartments in Madrid fell to 4,277 euros ($6,796) a square meter in the three months to the end of September, a 0.9 percent decline from the previous quarter, according to a) property Web site. In Barcelona, the average asking price fell 0.5 percent to 4,802 euros, said the Web site.”

“Japan’s financial regulator is investigating the exposure of the country’s financial firms to the U.S. subprime mortgage market to gauge the risks facing the world’s second-largest economy.”

“‘We’ve been checking to see if the risk has spread and to what extent firms are exposed to securitised products related to the subprime market,’ said Japan’s financial services minister, Yoshimi Watanabe, at a regular news conference. ‘If we do find any problem, we plan to deal with it quickly,’ he said.”

“‘We have to see whether the U.S. economy achieves a soft landing,’ Japanese Economics Minister Hiroko Ota told a separate news conference.”

“Mitsubishi UFJ Financial Group Inc, Japan’s largest bank, said last month its investments in subprime-related products were a potential risk to earnings. MUFG exposure to subprime-related investments was 280 billion yen ($2.4 billion) as of July, the latest figures it has made available showed.”

“In August, the bank said it wrote down the value of some investments related to subprime products by 5 billion yen.”

“U.S. insurer Prudential Financial Inc said its retirement unit had filed suit against units of State Street Corp seeking restitution for funds sold by State Street that suffered heavy losses.”

“The insurer said in a filing with the U.S. Securities and Exchange Commission that results for the latest quarter would include a pretax charge of about $80 million to reflect payments to clients who suffered losses from the funds.”

“Without notifying Prudential or its retirement plan participants, State Street made ‘undisclosed, highly-leveraged investments in mortgage-related financial instruments,’ Prudential charged in its suit.”

“‘The recent market conditions and lack of liquidity were unprecedented, said State Street spokeswoman Arlene Roberts said in a statement. ‘An unfortunate result … is that some funds lost value.’”

“In its suit, Prudential said State Street had invested in a ‘relatively new’ synthetic index whose returns were linked to 20 subprime U.S. mortgage pools.”

“Former Federal Reserve Chairman Alan Greenspan said there will be ’some rethinking’ of collateralized debt obligations after demand for them helped fuel a bubble in the U.S. subprime mortgage market.”

“‘People always say it’s the subprime market that created this crisis,’ Greenspan told investors. ‘It’s the subprime asset-backed market’ which did, he said. ‘As a consequence of that, there’s going to be some rethinking about collateralized debt obligations.’”

“‘The Wall Street firms were under real pressure to supply asset-backed securities, and the Wall Street firms were pressing the lenders to give them more raw material,’ Greenspan said today. ‘Credit standards just went straight down, and applications for subprime mortgages soared. The consequences of that are evident.’”

“The market for CDOs is already shrinking. Worldwide issuance of CDOs fell to $17.3 billion in September, about a quarter of the monthly average for the past 12 months, according to data from JPMorgan Chase.”

“‘The pricing which in too many cases has been, by some model derivation, four times removed from actual market prices, just doesn’t work,’ Greenspan said.”

The Associated Press. “Former Federal Reserve chairman Alan Greenspan defended the U.S. subprime mortgage market, arguing the repackaging and sale to investors of risky home loans, not the loans themselves, was to blame for the current global credit crisis.”

“‘We are not through with this yet,’ he added, suggesting there could still be what he termed an ‘Act II,’ in which falling house prices feed into slower consumer spending.”

“Greenspan also implicitly criticized the role of ratings agencies in the crisis. ‘The problem was that people took that as a triple-A because ratings agencies said so,’ he said. Yet when they tried to sell the products they ran into difficulties, which shook confidence.”

“‘What we saw was a 180 degree swing from euphoria to fear and what we’ve learned over the generations is that fear is a very formidable challenge,’ Greenspan said.”

“Greenspan defended the role of central banks and market regulators, claiming they do not have the resources to deal with criminal or illegal acts.”

“‘We are not skilled enough in these areas and we shouldn’t be expected to,’ he said. ‘It should be with the states’ attorney general and, frankly, it should be beefed up a considerable amount from where it is at this stage,’ he said.”

The News Press reports from Florida. “The number of permits issued for single-family homes in Cape Coral sank to 29 in September — by far the lowest in memory, according to statistics released Monday. Unincorporated Lee County, which also handles permitting for the town of Fort Myers Beach and the city of Bonita Springs, issued 76 permits, up from 63 in August. In September 2006, 458 permits were issued.”

“There were 45 permits issued by the Cape in July, and city spokeswoman Connie Barron said at the time that a search of records back through 1995 didn’t turn up any month that slow. Numbers that low likely would have been in the early 1990s when the city had only a quarter of its current population of about 170,000, she said.”

“‘I think the Cape will bounce back, but the numbers in general will stay low’ because of a huge inventory of unsold houses — about 15,000 countywide, more than four times what it was before the market started deteriorating,’ said Jamie Pirrello, president of Fort Myers-based Vision Homes USA.”

The Herald Tribune. “Florida is going to struggle with its housing market for the rest of this year and part of next but, barring an unforeseen disaster like a major hurricane or other catastrophe, the Sunshine State’s economy should not sag into recession, an up-and-coming economist from the University of Central Florida is predicting.”

“‘After enduring a substantial deceleration caused by the slowing housing sector and the financial repercussions of the subprime meltdown and credit crunch, the economy will begin to accelerate slowly in 2008,’ said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.”

“Some sectors, such as construction, will take longer to recover. For example, Snaith is predicting that this year and next will be a difficult time for sellers. He said it is akin to the run-up in housing in 2004-05, which created problems for buyers because of spiraling prices.”

“Snaith used the term ‘market karma’ to describe sellers and buyers apparently changing places, but he does not expect the housing market to crash. ‘If you are waiting until this occurs to buy, you will spend the rest of your life as a renter,’ he said.”

The Associated Press. “Sherrill Zenie said all she wanted was a piece of the American Dream, but what she got was ‘a kick in the rear.’”

“Zenie is one of a legion of a relatively new type of homeowner, a ‘flipper,’ who sought fast money by rapidly buying and selling homes to capture a profit on each as prices soared. Speculators who bought multiple homes like Zenie were once a boon to the U.S. economy when they pushed home prices to record levels over a five-year period. Now their unsold homes are the bane of a sickly housing market.”

“‘Nobody is looking, either to rent or to buy,’ says Sherrill Zenie, of Delray Beach, Florida, who is stuck with two unsold condominiums there after profitably selling two others.”

“She owns the condos outright, as well as her own home, part of a vacation home in Vermont. But taxes, maintenance and a home equity credit line cost over $2,000 a month for the two condos alone, a stretch for Zenie, who is out of work on disability.”

“‘I wanted to follow the American Dream,’ she says. ‘I wanted to be an entrepreneur and make some money — not a killing, but some money. Instead, I got a kick in the rear.’”

“Her husband has found a job in another state to help pay the bills. ‘Am I panicking? I would be hysterical if my husband weren’t in Mississippi working.’”

“‘People were buying a condo in Florida, or five condos in Florida before they even broke ground, and before they even had the condo half-way built they would sell them for hundreds of thousands of dollars in profits,’ notes Jim Gillespie, CEO at Coldwell Banker Real Estate.”

“‘The big lesson is that even during hot times, if you’re going to invest in real estate or stocks or bonds, gold or silver, or anything, and you try to time the market and invest with the intent of flipping in a very short period of time, eventually you are going to get burned,’ Gillespie said.”

“Andrea Wolkenberg in White Plains, New York, says the speculative fever was too hard to resist for many. ‘I think you get stars in your eyes, when the mortgage industry is throwing money at you.’”

“She has just rented out two Florida investment units she has long been unable to sell, and took on a third roommate in New York to ease the burden. ‘The condos have really been bleeding me.’”

“Wolkenberg bought the units after making about $200,000 on a Florida preconstruction property. ‘That was September 2005 and I’m still sitting with them. The market tanked hard and fast,’ she says. ‘If the rentals work out, I will consider myself one of the lucky ones. It will make holding on until this market turns possible. Long-term, I could come out OK.’”

“The mention of speculators spurs a flurry of cliches by industry experts: there’s no free lunch, trees don’t grow to the sky, not having a place to sit down when the music stops.”

“‘Sometimes they’re vilified but they shouldn’t be,’ says Barry Habib, CEO of a real estate market information service. ‘That’s the American way. They go back to the Gold Rush.’”

“Speculators ‘add jet fuel’ both on the way up and on the way down, he said. ‘Nobody was saying ‘hey, the speculators were bad’ on the way up, when people were selling their homes and making lots more money.’”

The Bradenton Herald. “The property taxes on Johann Haeussler’s River Club home dropped about $900 this year, but he’s looking for more relief.”

“‘It doesn’t make sense to us. Our taxes were raised two years in a row, even though property values went down,’ Haeussler said. ‘We questioned that the property appraiser’s theory is based on actual sales because no one in this neighborhood could sell their homes.’”

“‘Houses in this area have depreciated considerably in the past 12 to 18 months, as evidenced by the prices that they’re on the market for,’ said Heritage Harbour resident Edward Viltz. ‘I don’t think the current tax assessment is indicative of the environment as it is today.’”

“The reason things don’t make sense might be because assessed values - values for 2006 - haven’t caught up to the sluggish housing market. Even through the first nine months of this year there’s only been a 3 percent to 6 percent devaluation around the county, according to Dale Friedley, a Manatee County Property Appraiser tax analyst.”

“Property Appraiser Charles Hackney expects values to correct themselves somewhat next year, but it won’t be enough to offset the increases of 2004 and 2005.”

“‘A huge correction has to be made,’ Hackney said. ‘Until excess properties are absorbed, we’ll have a problem with the values. Logic tells you we need to have a 20 percent correction to undo what was done during those two years, but does that mean values will go down 20 percent next year? I don’t think so.’”

The Palm Beach Post. “The monthly real estate numbers are out and both the number of homes sold and the median price of homes continue to fall. But inventory is still the story.”

“In Palm Beach County, the number of homes for sale last month rose to a three-year supply at the current pace of sales. A total of 24,428 homes were listed in the MLS.”

“‘With inventory levels at three years, you have to offer the best home at the most aggressive price if you even want to get your home shown,’ said mortgage broker Jim Sahnger. ‘Granite countertops and stainless steel appliances, once thought of as upgrades, are now merely the price of admission.’”

“Yes, it’s a buyers’ market — but, for the most part, buyers aren’t buying.”

“In Palm Beach County, 568 buyers bought single-family homes last month, a 13 percent drop from 655 sales a year ago, according to a Florida Association of Realtors report. August marked the 20th straight month of declining home sales in Palm Beach County, FAR reports show.”

“Single-family home sales in the Treasure Coast fell 26 percent — twice the rate of Palm Beach.”

“In Palm Beach County, the median price of a single-family home dropped 5 percent, falling to $366,200 in August, from $386,000 in August 2006, FAR said. In the Treasure Coast, the decline in median price was more pronounced at 15 percent. The median price fell to $214,200 in August, from $251,900 in the same month of 2006, FAR said.”

“Finally, an answer for why a developer won’t return about $10′million in deposits to buyers of the unbuilt Palladio Terrace condo: Merco Group says it doesn’t have to return the money!”

“Merco Group has been a virtual stone wall when it comes to explaining why it is keeping money from its prospective buyers, even though the company canceled plans for the luxury West Palm Beach condo in January. Buyers have begged, cried and sued to get their money back, mostly to no avail.”

“But in a recent court filing, Merco says that state law allows it to keep deposits for ‘construction and development,’ Merco emphasized.”

“Greg Coleman, a West Palm Beach attorney representing aggrieved Palladio buyers…said Merco thinks it can use deposits for soft costs associated with planning a condo, such as architects and engineers.”

“Big mistake, Coleman said. ‘The law says the money can be used when the construction of improvements has begun. A lot full of dirt is not an improvement. And they can’t have done any improvements because they never obtained building permits,’ he said.”

“Coleman recently added some muscle to a lawsuit he filed on behalf of Andrew Greenberg and Michael Catalano, two Palladio Terrace buyers still owed $99,700 in deposit money. In addition to a charge of conversion, Coleman just amended his complaint to include civil theft, which carries a possible award of triple damages, plus interest and attorneys fees.”

“Coleman said he can’t wait for the day when the case goes to trial and he can show jurors a giant photo of the dirt pile that’s supposed to be the gleaming Palladio Terrace. “

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