The Housing Bubble

The Bay Area Newsgroup reports from California. “Despite incomes of $150,000 and more, many homeowners in the East Bay are surprised to discover they are unable to refinance their homes. Increasingly, lenders are shunning homeowners who have burdened their houses with too much debt. At the same time, home values have plunged. So, the bottom line in today’s swift-moving credit markets: It isn’t so much what you make, but what you owe.”

“For the once-sizzling housing market, the proverbial seven fat years have ended. ‘The era of unlimited funds at very affordable prices for consumers is most certainly over,’ said Christopher George, president of San Ramon-based mortgage firm CMG Financial. ‘That period of time has closed.’”

“Farid Khan, a Tracy resident, pulls down $160,000 a year. He has tried to refinance his home in a quest to lower his mortgage payments. Even with a top-flight credit report, he apparently can forget about getting a new loan.”

“‘I’ve gone to about 10 lenders in three months,’ said Khan, a Mountain House resident who asked that his real name not be used. ‘They don’t have a loan for me. I have no choice but to sit around and keep making these mortgage payments.’”

“In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”

“Christopher Tassano has approached about 15 lenders to refinance his Martinez home, which he bought in 2005 for $385,000. The $2,200 monthly mortgage pinched his budget. Lenders assured him he could easily refinance in 2006. No such luck.”

“Values are an issue. He figures the house is worth no more than the purchase price. ‘I have tried about 15 times to get a new loan,’ said Tassano, who asked that his full name be kept private. ‘No one wants to talk to you now.’”

“Yet lenders continue to solicit Tassano’s business. ‘I get five or so letters a day in the mail offering a new loan,’ Tassano.”

“Realty insiders hope the Federal Reserve’s cut in interest rates could thaw the frozen mortgage market. ‘It’s not a magic bullet,’ said Jerry Stadtler, a realty agent and CEO of San Ramon-based Bay Area Funding. ‘But it gives us something positive to talk about.’”

The Sacramento Bee. “A car tire, an empty bottle of Wild Irish Rose and a handful of Bud Light cans litter the yard. Shoots of dried weeds stand 5 feet tall. The doors and windows are covered with plywood.”

“Sacramento County officials say, the downturn in the housing market is resulting in scores of vacant uncared-for homes blighting local neighborhoods.”

“Supervisor Roger Dickinson said not just poor neighborhoods are affected. ‘We are seeing foreclosures in neighborhoods that are considered middle class or upper middle class,’ Dickinson said.”

The Santa Cruz Sentinel. “Chavez Furniture, which opened its Main Street store as the Watsonville housing market took off in 2003, will close its doors by the first week in December.”

“Agustin Chavez, owner of the three-store chain, said keeping open the store — one of the largest retail spaces downtown — didn’t make sense given the state of the housing market and economy.”

“‘People are barely making mortgages; there’s not enough money for furniture,’ Chavez said. ‘I don’t blame the customers. Even myself, I wouldn’t go shopping for big-ticket things.’”

“A couple of blocks away on Brennan Street, Baker Bros. Furniture also has seen sales decline, said Debbie Baker. ‘People are losing their homes in foreclosures. They’re downsizing to renting a house or moving back [with] families. They don’t need a lot of furniture to put in a littler place,’ Baker said.”

“Chuck Berg, owner of Senate Furniture Galleries in Santa Cruz and Senate Furniture and Mattress in Soquel, said sales started slipping in the spring of 2006. ‘When people were refinancing, they were spending the extra money in our stores,’ said. ‘People felt they were worth more.’”

“Countywide, 308 homes have been in foreclosure to date this year, including nine added to the list last week, according to the Santa Cruz Record, a weekly business and legal newspaper that tracks property transactions. Last year there were 97 foreclosures by the beginning of October.”

“The number of people who have missed a mortgage payment in the county also has more than doubled to 649, and 163 owners have lost their properties to foreclosure, the Santa Cruz Record reports.”

The Bakersfield Californian. “Foreclosed homes, and those at risk of foreclosure, constitute a major portion of the homes for sale in Bakersfield, which could further pull down local home prices.”

“Nearly a quarter of Bakersfield homes listed for sale in September were ‘distressed,’ meaning they were offered by sellers acting under duress, according to a preliminary copy of The Crabtree Report, authored and released Tuesday by local appraiser Gary Crabtree.”

“‘That figure is pretty stunning,” said John Burns, an Irvine-based new construction consultant with clients in Bakersfield. ‘It tells you that it’s a buyer’s market, and you’re going to have some distressed sellers here pretty reluctantly lowering prices.’”

“September’s distressed listings increased from August, when one in 5.6 homes for sale were distressed, the report states. Last year’s tally of distressed properties was not included in the report. They were likely negligible…Crabtree said.”

“The median price of a distressed sale last month was $228,000 — $42,000 less than the $270,000 median price of standard transactions, Crabtree wrote.”

“‘Buyers are looking for desperate sellers,’ said said Raju Jassar, the broker and owner of Real Estate Professionals of Bakersfield. ‘And they know that some builders, and a lot of banks, have inventory they need to liquidate immediately.’”

“Bakersfield’s market difficulties stem mainly from rapid new home construction and a prevalence of subprime loans, which were especially popular in affordable parts of the state, said Leslie Appleton-Young, chief economist with the California Association of Realtors.”

“The Inland Empire, Riverside, San Bernardino and Sacramento also are being hit hard by foreclosures, she said. ‘The areas that went up fastest (in price appreciation) are going down hardest,’ Appleton-Young said.”

“Sen. Dean Florez is asking the Kern County Board of Supervisors to form a specialized real estate fraud-fighting unit within the District Attorney’s office.”

“At least 14 California counties have similar programs, which are authorized under a 10-year-old state law, the release states. ‘Good for him,’ Bakersfield appraiser Gary Crabtree said.”

“Kern County’s foreclosure rate has jumped 190 percent since last year, making the county fourth in the state for foreclosures, according to Florez’s release. Questionable transactions may be compounding the state’s housing problems, the release states.”

“‘The best defense against a full-scale meltdown of the housing market is to make sure individual homebuyers know as much as they can about lending practices and about resources available to those under threat of foreclosure,’ Florez said in the release.”

From KGET.com. “Foreclosures, fraud, and a slumping real estate market was the focus of a 17 News In Depth Forum Sunday night. With foreclosures at record levels in Bakersfield, home prices falling, and inventories on the rise, the consensus among our panelists was ‘it’s a buyer’s market.’”

“‘Right now we’re seeing sellers willing to participate to assist buyers to get into their homes,’ said Beth Cheatwood, Medallion Mortgage branch manager.”

“‘The buyers are seeking the best possible price, and now the sellers are having to think like the buyers,’ said Jon Busby, Bakersfield Premiere Realty.”

“We pointed out the soaring appreciation rates have far out-paced income levels in the Bakersfield market, so is it really a buyer’s market?” “‘Some sellers are more motivated than others,’ Busby said.”

The Star Tribune reports from Minnesota. “Banks are foreclosing on three condominium projects in downtown Minneapolis, adding to the growing list of canceled or postponed condo developments. Each of the three projects being foreclosed on has its own set of issues, but the deteriorating condo market appears to be the common backdrop.”

“Minnwest Bank M.V. is in the midst of foreclosing on one completed and another proposed condo project. The Minnesota bank recently was the high bidder at a sheriff’s sale of Mill Trace Condominiums, a 50-unit project that was developed by Niles Schulz of Dolphin Development.”

“Schulz said the problems are due to sluggish sales, with only 16 units sold so far. ‘We think we’ve corrected that problem,’ he said, with the installation of a new sales team.”

“Mary Bujold, president of (a) Minneapolis multifamily housing consultant, said she does not believe that foreclosures will become a widespread problem with area condo developments. Unit owners in developments that are foreclosed typically aren’t affected much unless they want to sell their units quickly, she said.”

“That’s because foreclosures usually result when developers have failed to sell enough units to repay their construction loans. ‘Obviously, it’s going to be more difficult to obtain financing [to buy a unit] if there are a lot of other unsold units in the building,” she said.”

“Bujold said it’s likely that the soft market will cause more developments to be put on hold. That already has happened, with some projects canceled altogether and others redrawn to eliminate or reduce the number of residential units planned.”

The Star Phoenix from Canada. “Saskatoon’s real estate market is showing signs of stability after an $11,000 drop in the average price of a home from August to September.”

“As homeowners put their properties up for sale in preparation for a move to a new home or condo, people looking to buy have a larger inventory of houses to choose from, easing the rush to purchase and lowering prices, said Harry Janzen, executive officer of the Saskatoon Region Association of Realtors.”

“September’s average price was 49 per cent higher than what was seen in September 2006, rising to $242,091 from $162,116 last year, Janzen said.”

“‘With more listings available, people can go about their business in what we would call more of a normal fashion.’ he said. ‘Right now we’re hoping, and we’re always hoping, that a levelling in the marketplace will take place and that’s certainly what seems to be happening.’”

“Sales in the rural residential sector saw a 28 per cent drop to 63 sales from 87 in 2006. While the average rural residential selling price reached $209,494 in September, up 51 per cent from $138,550 in the same month last year, Janzen isn’t sure why sales are off outside of the city.”

“‘We’re not quite sure why that is, outside of the fact that there’s a little less demand for the rural residential and certainly demand for city residential property remains high,’ he said.”

“‘From an industry perspective we’re happy to see that the average sale price isn’t going that much higher because it will certainly allow us to create a stability in the marketplace and not have to worry about some of the sustainability issues that might accompany a steady increase in the market,’ he said.”

The Calgary Sun from Canada. “Calgary house prices sank $10,000 last month, the fourth decline in a row as inventory jumped and sales slumped, according to statistics.”

“The median price of homes fell to $420,500 last month, down from $430,000 in August, said the Calgary Real Estate Board. Yet, despite the falling prices, CREB president Ron Stanners said city home prices are still higher now than they were last year at this time.”

“‘The market place is very good right now, but it has slowed down over the last three or four months,’ said Stanners. ‘It’s beginning to move more towards a buyers’ market but even still, sellers are still getting much more today than they were this time last year.’”

“The number of single-family homes on the market jumped 5.15%, but sales slipped 19.03% in September from August, CREB figures say.”

“The pattern was identical in the condominium market, where more supply and fewer sales also resulted in more affordable prices. The number of condos going up for sale in September increased 10.88% over August, while there was a 12.66% decrease in units sold.”

The Canadian Press. “There’s still plenty of room for ‘exotic’ mortgages to grow safely in Canada’s real estate sector, despite the U.S. subprime meltdown, says a senior economist.”

“The U.S. is in a mortgage crisis because of an overuse of atypical mortgage products, many sold to subprime, or high-risk, borrowers, Benjamin Tal of CIBC World Markets said Monday in a report. Exotic mortgages include those with low introductory interest rates, interest-only payments, and amortizations periods of up to 40 years.”

“‘It’s true that the surge in exotic mortgages since 2004 created an artificial demand in the housing market south of the border, and was primarily behind the current mess in the subprime space. A sharp deterioration in underwriting standards in those years and extremely easy ways of passing on the risks were the main catalysts there,’ said Tal, noting neither of the two latter factors is an issue in Canada.”

“Borrowers with poor credit histories hold 20 per cent of the U.S. mortgage market, whereas subprime borrowers represent only five per cent of the market here. That means there is still space for unusual products to evolve without the market imploding here, Tal says.”

“Tal wrote his report in response to recent comments by Bank of Canada governor David Dodge, who said certain mortgage products, such as loans with long amortizations, have overheated the real estate market. ‘And who can blame him, given the experience south of the border?’ Tal wrote in his report, which he called ‘Dodging Innovation.’”

“‘Not only are mortgage innovations important to a normally functioning market, but their role in Canada should, in fact, grow over time. Those new products are largely about serving under-served populations through more effective market segmentation and niche marketing,’ Tal wrote.”

“Alternative lenders in Canada include companies like Home Trust, operated by Home Capital Group Inc., which targets low-income applicants who are still often rejected by banks, such as new immigrants without a credit history, and the self-employed.”

“‘Limit mortgage innovation in Canada, and you shut out those fast-growing segments of the population from the housing market,’ Tal wrote.”

“But Vince Gaetano, a senior consultant with MonsterMortgage.ca…pointed to teaser products, such as CIBC’s ‘better than prime mortgage,’ which offers a introductory rate of 1.01 per cent below CIBC prime (now 5.24 per cent) for the first nine months and a low 0.25 per cent below CIBC Prime rate after than for a five-year term. Overall, that works out to 5.88 per cent interest on a five-year term, which is a discount of only 0.37 per cent below prime.”

“‘That marketing ability to entice people with teaser products makes the banks more money,’ Gaetano said. ‘There’s an associated cost with these exotic products that is cost-prohibitive.’”

“And while Tal has dismissed suggestions by Dodge that amortization periods of more than 25 years, reflected in 40 to 50 per cent of new mortgages taken out in the last year, are a major driver of inflation in the Canadian real estate market, Gaetano agrees with Dodge, noting the average mortgage extended by MonsterMortgage.ca has jumped from $250,000 to $315,000 in two years.”

“‘It pushes people into brackets where probably, they shouldn’t be,’ Gaetano said. ‘They’re just extending themselves to as much as they can afford. There seems to be a lot of people over-buying. They’re saying: let’s skip the starter.’”

“As for longer amortization periods, the 40-year-amortization has been available less than a year, Nick Kyprianou, chief operating officer of Home Capital Group, said they are creating ‘better affordability.’”

“‘They added a little more legs to the market,’ Kyprianou said. ‘People who couldn’t get into the housing market now can,’ he said, adding owning a home results in forced savings.”

Some housing bubble news from Wall Street and Washington. The New York Times. “Deutsche Bank finally put a number on its losses from the home-lending crisis, saying today that it expected to write down $3.1 billion in loans and mortgage-backed assets. Early on, Deutsche Bank appeared to be a rare beneficiary of the subprime mess. It had profited by selling mortgage loans with derivative contracts that appreciated as the American housing market slumped.”

“The first inkling of trouble came last month, when the bank’s CEO, Josef Ackermann, appeared on German television, acknowledging that the country’s banks had erred by expanding pell-mell into financial products that later proved risky.”

“Deutsche Bank said today that it would write down 700 million euros in the value of its leveraged loan portfolio and 1.5 billion euros on the value of assets, including mortgage-backed securities.”

From Newsday. “Federal prosecutors and the FBI have opened an investigation into whether criminal misconduct was involved in the collapse of Melville-based American Home Mortgage, according to several sources familiar with the situation.”

“The investigation…has been going on for several weeks, is looking into whether various federal criminal statutes have been violated that resulted in the company’s bankruptcy, the sources said. Among the statutes are conspiracy, securities, mail and wire fraud, and money laundering, the sources said.”

“American Home Mortgage, once one of the nation’s 10 largest mortgage lenders, collapsed at the beginning of August, filing for bankruptcy on Aug. 6, and laying off most of its 7,000 employees, including 1,400 on Long Island.”

“Stressing that the investigation is just in its initial stages, and that no charges have been brought, the sources said investigators are beginning to put together a picture of how American Home Mortgage operated, whether all documentation behind mortgages was legitimate, and whether the company began to cut corners as the mortgage market began to collapse.”

“Given the hundreds of millions of dollars lost in the company’s collapse, a conviction for fraud could led to prison sentences of 10 years or more under federal sentencing guidelines.”

From Inman News. “Mortgage and subprime lenders have announced nearly 70,000 layoffs in the first three quarters of 2007, according to outplacement consulting firm Challenger, Gray & Christmas Inc.”

“‘The heaviest job cutting has occurred over the last two months as the bottom suddenly fell out from the mortgage and subprime markets,’ said CEO John Challenger. ‘The dominos are likely to keep toppling as home values fall and foreclosures continue to climb.’”

“The 51,851 layoffs in mortgage lending reported in August and September represented 82 percent of announced job cuts in the financial industry during the period.”

Investors Business Daily. “The credit crunch slammed housing activity as pending sales of existing homes fell a surprising 6.5% in August to a record low, the National Association of Realtors said Tuesday.”

“That latest decline suggests sales of previously owned homes will keep dropping from August’s five-year low. Tight lending standards and a lack of affordability make it hard to sell homes, analysts said. ‘We’re not seeing a bottom in home sales on the immediate horizon,’ said Scott Brown, chief economist at Raymond James.”

“A lack of affordability will make it difficult to whittle away a 10-month inventory of unsold dwellings, an 18-year high.”

“‘I think you’re going to continue to see worse numbers,’ said Bob Moulton, president of the Americana Mortgage Group. ‘Buyers are still expecting prices to come down, and they’re going to wait until they think they’ve bottomed out.’”

From Bloomberg. “‘The existing homes market is now in freefall,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. ‘The downside from here is still substantial.’”

“So far, the Fed’s half-point rate cut has failed to lower mortgage rates and boost demand. Average 30- year, fixed-rate mortgage rates ended last week at 6.42 percent, compared with an average 6.3 percent the prior week, according to Freddie Mac.”

“Buyers have been further constrained by the tighter lending standards and the shutdown of mortgage lenders such as American Home Mortgage Investment Corp. in early August that closed off access to credit.”

“‘Fewer contracts were being written because of mortgage- availability issues,’ said Lawrence Yun, a senior economist at the real estate agents group. ‘More than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments’ from lenders.”

“‘There is still no bottom in sight,’ said Joshua Shapiro, chief U.S. economist at a New York forecasting firm. ‘Sales will continue to fall until there is a greater price capitulation by sellers. It still appears that we have not reached market-clearing prices to reduce the inventories of unsold existing homes.’”

From Reuters. “The audacious rise in the Dow industrials to a record will do little to prevent the millions of new ‘For Sale’ signs likely to dot U.S. lawns soon.”

“‘I don’t think the worst is over,’ said Robert Arnott, chairman of Research Affiliates LLC, an investment management firm. ‘We are coming off the greatest lending bubble — not housing bubble! — in U.S. history. We will feel its impact for a very long time.’”

“Millions with subprime mortgages, which go to borrowers with checkered credit histories, are faced with negative equity in their homes that could make it increasingly unlikely they will qualify for new mortgages in an environment of tighter lending standards.”

“At current home prices, about $693 billion in ARMs are ‘already under water,’ according to Stephanie Pomboy, financial economist at MacroMavens.”

“That’s frightening news for banks that already have absorbed losses on their balance sheets due to delinquent subprime borrowers. The losses so far amount to about 10 percent of the forecast of $100 billion in losses.”

“‘The disturbing number here isn’t 10 percent … but the $100 billion,’ Pomboy said.”

“With nearly $700 billion in ARMs in negative equity facing interest-rate resets, ‘depending on how much lenders can ultimately recover, this implies (bank) losses will be more like $210 billion to $346 billion,’ she said. ‘And that’s assuming the situation doesn’t get worse.’”

“In July, Federal Reserve Chairman Ben Bernanke had estimated the losses at $100 billion at the most. But it appears Bernanke had underestimated those figures and their effects on the consumer.”

“‘With the reset wave about to gather intensity and ‘For Sale’ signs dotting the lawns of 5.1 million homes across the country, the credit hit parade has only just begun,’ Pomboy added.”

The Wall Street Journal . “For Countrywide Financial Corp., this time it’s personal. At least that’s what a top executive says. Having suffered a barrage of negative headlines while battling to shore up its finances and shrink its work force of 60,000 by as much as 20%, the nation’s largest home-mortgage lender is launching a PR blitz aimed at repairing its reputation.”

“For the demoralized employees who remain, the new campaign means wristbands with the phrase ‘Protect Our House’ and pep talks promising to keep ‘amply’ rewarding the most successful among them amid a struggle with the sharp drop in mortgage lending as defaults soar and house prices decline.”

“Excerpts from executive managing director Drew Gissinger III’s motivational speech to key Countrywide employees: ‘Let’s call it like it is, as I mentioned earlier, it’s gotten to the point where our integrity is being attacked. NOW IT’S PERSONAL! The FUD campaign is now questioning our — yours and mine — ethics, morals, and business practices. And, WE’RE NOT GOING TO TAKE IT!’”

“‘It’s gotten to the point where our integrity is being attacked. NOW IT’S PERSONAL!’ says the transcript of a talk made last week by Mr. Gissinger. ‘… And, WE’RE NOT GOING TO TAKE IT!’”

“It says that employees are expected to sign a pledge to ‘demonstrate their commitment to our efforts,’ and Rick Simon, a Countrywide spokesman says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber.”

“To counter criticism that its lending practices are to blame for a surge in foreclosures, Countrywide plans to emphasize its ‘mission’ of helping Americans become homeowners, the transcript says. ‘I want employees to look down at their wristbands and remember our fundamental mission to help customers achieve the American Dream, and to help them withstand those malicious outward attacks and to motivate them to continue on our journey with unwavering conviction,’ the transcript quotes Mr. Gissinger as saying.”

“The combative tone reflects the blunt-spoken style of Angelo Mozilo, Countrywide’s chairman and chief executive, who helped to found the company in 1969. ‘We’re demonized something fierce,’ Mr. Mozilo said in an interview two weeks ago.”

“Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: ‘I’ve made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.’”

NBC 4 reports from Virginia. “With bank foreclosures hitting record levels nationwide, banks have begun turning to extremes to unload properties. News4’s Michael Flynn reported that with hundreds of homes hitting the auction block, there could be great deals available throughout the Washington metro region. A single company organized the sale of about 300 foreclosed properties in an auction that will take place this weekend.”

“Real estate agent Carolyn Capalbo said that buyers are getting deep discounts from what people were paying for homes within the last few years.”

“‘I think they’ll save quite a bit and be pleasantly surprised,’ said Capalbo. ‘Just a few years ago the previous owner paid about $450,000. At auction, real estate agents expect it’ll go for about $100,000 less.’”

“Thomas Pring, who lives near a home that is soon to be auctioned, said he knows the sale does not bode well for the value of his property. ‘I’m really sad because we paid more than what they’re offering now,’ he said.”

The Examiner. “About 250 Washington-area houses will hit the auction block in October as the nation’s largest real estate auction firm that deals with foreclosures makes its first D.C. stop in five years.”

“‘It’s not unusual at these auctions to see houses selling at 20 percent below what the house was listed at on the regular market,’ company spokeswoman Crystal Wright said. ‘But people should understand too that nobody is giving property away.’”

“‘You do have an opportunity for a bargain,’ said Jill Landsman, spokeswoman for the Northern Virginia Association of Realtors. ‘But you have to recognize that the previous owner of the property was a delinquent owner, so there is a problematic background there.’”

“Many of the properties listed entered foreclosure last year during the early stages of the subprime mortgage meltdown, but lenders often try to sell the homes through real estate agents for about a year before handing them off to auction firms.”

USA Today on North Carolina. “For the past decade, Chapel Hill, N.C., has been attracting more Americans in search of an attractive and affordable place to start a business, raise a family or retire.”

“Yet until around mid-August, home sales had slowed and prices had declined, as in many parts of the nation. This year is the first since 2002 in which home sales in Chapel Hill have dropped.”

“‘A lot of people are deciding to make life changes, and this area is so diverse and popular,’ says Kim Dawson, president of the Greater Chapel Hill Association of Realtors. ‘But they can’t move here until they can sell their home in California, Florida or New York.’”

The Charlotte Observer from North Carolina. “‘Realty Place,’ said the blue-and-yellow signs. ‘Your Home Superstore.’ It was 2002, the middle of the subprime mortgage boom. A young real estate agency was fishing for customers in an unlikely place.”

“It targeted people with modest incomes and ragged credit, many of whom had been shunned by other companies.”

“But an Observer investigation shows Realty Place worked closely with the builders it had vowed to beat up. The company funneled buyers into low-priced starter-home developments, many of which are now plagued by foreclosures.”

“The company collected millions of dollars in bonuses from builders in exchange for finding buyers for their homes. In more than 50 interviews with Realty Place customers, the Observer found no one who was aware of the bonuses. Failing to tell a customer about a bonus violates state regulations.”

“The payments also raise questions about the company’s presentation of itself as a buyer’s agency.”

“‘It’s supposed to be like your mother helping you out on a real estate transaction,’ said Jon Boyd, president of the National Association of Exclusive Buyer Agents. ‘The idea that your mother would take a kickback in your transaction, well, that’s not appropriate.’”

“The company also aimed to convince people that owning was cheaper than renting. An ad distributed at a Concord apartment complex showed a $126,000 home with the slogan, ‘Compare $643 To rent!’”

“The number wasn’t real. The projected monthly payment actually was about $1,000.”

“How did Realty Place justify ‘$643′ in the Concord ad? The company claimed it was an ‘effective monthly payment,’ reflecting adjustments including a projected deduction on federal income taxes.”

“Kenneth Porter, a Charlotte accountant, was paid by Performance Realty to calculate actual tax savings for hundreds of customers. Not once, Porter said, did anyone come close to saving $221 a month, the amount reflected in the Concord ad. ‘No way,’ said Porter. ‘That’s pie in the sky.’ Few saved more than $100 a month, he said. Some saved nothing.”

“Customers flocked to Realty Place. On some Saturdays, the lines of hopeful people stretched back into the malls. ‘We had folks that were ready to write up contracts before they ever saw anything,’ said former agent John McQueen.”

The Times News from North Carolina. “It took three weeks for Mark and Rhonda Evans to get an acceptable offer on their house on Dickey Mill Road in northeast Alamance County in September, 2005.”

“Two years later — and not even a mile away — their house has been on the market three weeks with ‘just a few nibbles,’ Rhonda Evans said.”

“‘It’s the same agent, the same company,’ Rhonda Evans said. But the outcome this time is different. ‘The whole mortgage fallout, that has just affected everything,’ she said.”

“June Larson, owner of Re/Max Diamond Realty in Mebane, said she is still seeing lots of people moving to Alamance County from the northeast and Florida for central North Carolina’s lower cost of living and calmer weather. A lot of these people are slowed by the housing markets they are leaving because most people can’t keep a house in Florida and put a down payment on a house in Burlington at the same time.”

“This is the kind of drag that brings all these housing markets together. The Evanses don’t even want to leave their neighborhood. They just want to downsize. They have a contract of the house two doors down, contingent on selling the house they live in.” “But that can’t happen until someone gets freed up enough to buy it.”

“Builders are still building,adding houses to the market and, potentially, lowering prices, but some are cutting back. Eddie Boswell, owner of Boswell Construction, said his sales have fallen off and he is holding off on building new houses until his current inventory sells off.”

“‘I don’t know if it’s the finance crunch or what, but there are a lot of houses, I can tell you that,’ Boswell said.”

“Custom builders are scaling back, Boswell said, but tract builders are still getting building permits. ‘Which is kind of a telltale of who’s speculating,’ Boswell said.”

“Craig Morrison, Cimarron’s president, said…sales have definitely slowed. ‘In a normal market, we would be selling more product that we are, but this is not a normal market,’ Morrison said.”

“Morrison said sales are slower than they were last year, again because newcomers have to sell their homes in other markets.”

“Foreclosures are also adding homes to the market. One Web site selling foreclosed homes had 165 listed in Burlington alone. According to the Alamance County Office of the Register of Deeds, 937 notices of foreclosure have been filed this year so far. In 2006 there were 1,043 and 756 a year before.”

“Larson said people thought they were getting bargains from out-of-state lenders offering lower interest rates. In the end many got hit with higher-than-expected closing costs because the lenders didn’t know enough about local tax and insurance rates.”

“Larson said she thought lenders were going to stop making loans for 100 percent of a home’s value, which is how many people got under so much debt. Larson said she saw people take loans for 100 percent of the home’s value at 14 percent interest.”

“‘What are the odds he will stay there and build credit?’ Larson asked.”

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