The Housing Bubble

It’s Friday desk clearing time for this blogger. “The number of planned new single-family homes in St. Lucie County, Port St. Lucie and Fort Pierce decreased 65 percent between January and August compared with the same months of last year. ‘These numbers are indicative of what needed to happen,’ said William Pittenger, chief real estate economist for Seacoast National Bank. During the boom that started 2004 and lasted into 2006, Pittenger said builders of new homes outpaced demand by 25 percent to 40 percent.”

“‘They forgot a fundamental economic principal that for every home built there needs to be an owner or a tenant,’ Pittenger said. ‘This really had to come. And it’s only bad news if you are a builder or in an allied industry.’”

“Three luxury condos in the historic Armstrong-Quinlan House remain up for grabs after a live auction Thursday fetched only $880,000 in bids, about half the amount its sellers had hoped. Because the offers failed to meet the bank’s minimum reserve, the highest bidders for three of the four units walked away empty-handed.”

“Susan Spielman, of Bloomington, paced in her sneakers, wavering between excitement and terror. She placed the highest bid on the mansion’s only finished unit, a lavish three-bedroom, 2,200-square-foot condominium. She bid $370,000. The developers had recently asked $750,000.”

“‘I get good deals at the grocery stores on coupons,’ said Spielman, who said it was her first auction. ‘I know I got a good deal here, but I’m shaking.’”

“‘If homebuilding doesn’t drop 25 percent from where it is now, the Texas home market could slow down for a longer period than we would like,’ said Dr. Mark Dotzour, an economist with Texas A&M’s Real Estate Center. ‘The inventory of unsold homes is rising all over the state,’ he said in the report.”

“In the D-FW area, single-family home starts were down almost 40 percent at the end of June compared with a year earlier. Even so, more than 13,000 homes were under construction. About 11,000 unsold new homes were on the market in D-FW at the end of the second quarter, a seven-month supply.”

“No one has been more swept up in the euphoria of the overheated housing market of the last few years than cable television networks. As home values soared, so did the number of real estate programs.”

“But what happens to all of these house-flipping shows now that the real estate market seems to be tanking? ‘The television equivalent of ‘location, location, location’ is ‘timing, timing, timing,’ TV historian Tim Brooks said. ‘Now that the bust has come, now that the wave has passed, some of these shows might be in trouble.’”

“Housing prices in Moose Jaw have jumped 32 per cent over last year’s comparable values. Out-of-province buyers are paying more for homes. ‘They have money to spend. They have just sold their high-priced homes in Alberta or B.C. and have lots of cash,’ said Merv Rayner, president of the Moose Jaw Real Estate Board.”

“New Zealand’s biggest housing market is in the grip of a slowdown. Barfoot & Thompson said the average house sale price fell more than $14,000 last month, the number of unsold homes was rising, people were slower to buy and the number of sales was declining.”

“‘The Reserve Bank will be relieved to see the housing market finally slowing because it has been a significant source of inflation, directly through higher construction costs and indirectly in terms of the wealth impact on consumption,’ Goldman Sachs JBWere economist Shamubeel Eaqub said.”

“A slump in the holiday homes market on Spain’s sun-rich coasts could add to the pressure on Britain’s rattled mortgage industry, which has lent billions of pounds to fund the retirement dreams of UK homeowners.”

“Some fear a vicious circle if Britain’s property market turns nasty, with a surge in second home sales feeding the property glut that is taking hold in Spain.”

“‘It has the potential to feed back on itself as people look to raise money by first selling their second homes, further depressing prices in places like Spain and making it harder to sell,’ Tim Drayson, senior international economist at ABN AMRO told Reuters.”

“The cost of renting a house in England and Wales is cheaper than the cost of buying it with a mortgage, say market analysts Hometrack. Private rents in 2006 were two-thirds the cost of a 100% mortgage on a two- or three-bedroom house, for a young household on average incomes.”

“Professor Steve Wilcox of York University, who carried out the analysis, said that in many areas, people who were unable to buy a house could still afford to rent in the private sector. ‘Not too long ago, there was little difference between the costs of buying and renting,’ he said. ‘But while house prices tripled in the years since 1994, private sector rents only increased in line with earnings.’”

“Vacant houses continue to burn throughout Muncie, with a Tuesday-night blaze along South Liberty Street requiring every Muncie firefighter on duty to respond. ‘We have a lot of vacant houses, and it is obviously a concern,’ said Fire Chief Al Richards.”

“Tom Cherry, who lives down the street, said the entire block was filled with vacant houses. ‘I don’t know who owns them,’ said Cherry. ‘They ought to tear them all down.’”

“Morgan Stanley follows UBS AG, Merrill Lynch & Co. and others in eliminating jobs after record U.S. home foreclosures sapped demand for bonds backed by mortgages. Wall Street firms, which make money by packaging loans into bonds and selling them to investors, bought mortgage companies in recent years to obtain more loans, a trend that is now reversing.”

“‘Everyone who has any mortgage business is cutting back,” said Benjamin Wallace, who helps manage $750 million, including shares of Morgan Stanley. ‘There are fewer mortgages coming through the pipeline for everyone.’”

“The number of Americans signing contracts to buy previously owned homes dropped to the lowest level on record in August, the National Association of Realtors’ said.”

“‘The industry has experienced a fundamental paradigm shift that will require banks to rethink product offerings and capital structures and to provide greater transparency to investors in securities backed by pools of mortgages,’ Bruce Witherell, global co-head of the residential mortgage business, said in the company’s statement.”

The Desert Sun reports from California. “Uncertainty surrounds Escena, the much-touted 1,400-home project that is the first golf course development built in Palm Springs in two decades. Home-building giant Lennar Corp. has stopped pouring foundations for new homes at the upscale gated development south of Vista Chino. ‘They shut down their sales offices and are not finishing construction on the clubhouse. It is 95 percent done. They are not going to finish it,’ Councilman Chris Mills said. ‘The market drives everything.’”

“Dozens of homes from about 1,900 to 3,000 square feet along the golf course and in courtyards stand empty and ready for occupancy, but buyers have not materialized as envisioned. It’s a far cry from three or four years ago, when buyers sat on waiting lists for new homes in many valley developments.”

“Mills said city staff told him that Lennar has refunded deposits that were taken from prospective homebuyers. ‘You don’t want people out there,’ he said, because Lennar would be responsible for maintaining the project.”

The Orange County Register. “New stats…for the 22 business days through Sept. 21 show an O.C. median selling price of $590,000. If that held for the full month, that would be the lowest since April ‘05.”

“In addition, that price would mark a 8.1% drop from August, the biggest one-month drop in DataQuick’s 20-year history of O.C. buying patterns. And the 6.3% decline from a year ago would be the biggest year-to-year drop since Dec. ‘95.”

The Voice of San Diego. “As the number of San Diegans facing foreclosure rises meteorically month after month, landlords and property managers are bracing for an influx of former homeowners now looking for a place to rent.”

“In August, the number of foreclosure filings jumped by 80 percent from July, and by nearly 250 percent from August 2006, according to RealtyTrac.”

“Gabe del Rio, director of homeownership for nonprofit Community HousingWorks, said he and other housing counselors tell prospective tenants with a foreclosure on their record to draft a letter of explanation to the landlord or property manager.”

“‘They’re really going to need to explain that they’ve gone through a situation recently, and why and how that is not a good reflection of their ability to pay rent,’ he said. ‘It could be something like, ‘My mortgage was $2,500 a month and then it adjusted to $3,500. I was not late before it adjusted. And this rental amount is $1,200.’”

“Industry experts said the trend has yet to hit in full force. ‘It hasn’t hit in great numbers yet,’ said Robert Pinnegar, the apartment association chief. ‘The speculation out there is that the wave of foreclosures is largely investor properties. The next wave, that’s what everybody’s watching.’”

The Business Journal. “Standard Pacific Corp. will merge its South Bay operations into its East Bay office, its Northern California regional President Douglas C. Krah said today. Of 75 people working in the South Bay, Irvine-based Standard Pacific laid off about 25 people. The South Bay office has been open about a decade.”

“At the same time, the company is merging its Central Valley operations into its Sacramento office. About 10 of 35 people in the Central Valley lost their jobs in that transition.”

“‘This is clearly a cyclical correction, and we are not shocked. But we never know the magnitude of a correction or the duration. It will get better when people start buying again, as obvious as that sounds,’ Krah said.”"

From CBS 5.com. “On Thursday we visited a San Jose home that had recently been foreclosed on. After residents moved out, gangs moved in, taking over the vacant property.”

“Neighbor Diane Ludwig says she was scared, watching all the activity. ‘Drinking, parties and other things. I don’t want to mention too much,’ said Ludwig.”

“And at another foreclosed home we found more evidence of squatters– two blankets. A window to a bedroom was shattered. Both homes are in east San Jose. That’s the area with the most homes in various stages of foreclosure in the city. There are also high numbers of foreclosures in south San Jose and downtown.”

“Real estate agent Mark Detar of Intero thinks the squatter problem is only beginning. ‘With an increase in foreclosures, you’re going to see things like this,’ Detar said.”

Inside Bay Area. “Despite an initial setback, outraged homeowners in the upscale Paseo West subdivision plan to continue their informal protest against a developer planning to auction off 34 brand-new homes.”

“Anderson Homes plans to stir up homebuyer interest with the Oct. 13 auction of vacant or under-construction homes in the Manteca subdivision, said Craig Barton, chief financial officer for the Lodi-based developer.”

“Following a meeting last Friday with Barton, homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.”

“On Wednesday, homeowner Dave Cantrell, the de facto leader of the protest, received a response. In a letter via e-mail, Anderson Homes president Larry W. Anderson said he was ‘perplexed’ by the rebate request.”

“‘In nearly 25 years of building homes, I have not asked a homeowner to pay more for a house when the value increased,’ he wrote. ‘Housing is cyclical and values will fluctuate as history tells us. Housing has been hit especially hard this cycle due to the financial market crisis and large number of foreclosures.’”

“‘In a nutshell, they blew us off,’ Cantrell said. ‘The way they talked around it; it’s somewhat insulting.’”

“On Thursday, Cantrell says he sent a short reply to Anderson simply saying, ‘Not acceptable.’ ‘At this point, they’re not being part of the community,’ he said. ‘They’re acting like a corporation and not looking back.’”

“The consensus from homeowners is 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, and would rent out the homes.”

“Though the best-case scenario would be no auction at all, getting some sort of rebate would be a token of good will, homeowners said. Or, as Joseph Leon put it, it wouldn’t help, but ‘at least it wouldn’t be a slap in the face.’”

The Recordnet. “A minimum auction bid of $265,000 will be required for most of the homes in the Paseo West project in Manteca, which Anderson Homes said runs about 60 percent of the ‘reduced asking price.’”

“The financial repercussions of homes sold at prices far below what current residents paid could damage families in the neighborhood beyond repair, said Manteca construction contractor Randy Brown, the newest resident of Paseo West.”

“He got the keys on his $440,000 house in mid-August, two weeks before finding out about the planned auction. The minimum bid on an auction house such as his is $285,000. ‘To put this in the shortest term possible, this sucks,’ he said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody’s Investors Service. The average rate of ’serious loan delinquencies’ in the securities has been higher than 2006 bonds, Moody’s analysts Ariel Weil and Amita Shrivastava wrote. Serious loan delinquencies are those 60 days or more past due, including properties in foreclosure or already foreclosed upon.”

“‘It is shocking what you see,’ said Kyle Bass a hedge fund that reported a 400 percent return on its bet the U.S. housing market would fall. ‘Anything securitized in 2007 has got to have the worst collateral performance of any trust I’ve seen in my life.’”

“Data in the Moody’s report suggests that accelerating delinquencies from 2007 bonds are likely to eclipse 2006.”

“Many of the loans that investors shunned in 2006 were able to be successfully securitized in 2007 because of the limited availability of new loans to purchase, according to Andrew Chow, who manages about $7 billion in asset-backed bonds and mortgage securities.”

“‘It’s not surprising that the performance of that type of loan is in fact even worse than the average of 2006 because these are the loans that were rejected from those deals,’ Chow said.”

The Financial Times. “A high proportion of the worst-performing loans from 2006 originated in California, Moody’s said. It identified falling house prices as a contributor to the overall poor performance of the 2006 vintage, and California has been particularly hard hit by house price depreciation.”

The Associated Press. “Investment bank Merrill Lynch & Co. said Friday credit and mortgage woes will lead to it post a third-quarter loss…after taking roughly $5 billion in writedowns. The bulk of the losses will come from marking down the value of collateralized debt obligations and subprime mortgages.”

“Rising delinquencies and defaults among mortgages, especially subprime loans, has led to the near disappearance of investors willing to buy the loans. Without an investor market, the value of the loans decreases.”

The Dow Jones Newswires. “Merrill noted it ’significantly reduced’ its exposure to those products during the quarter.”

“Citigroup Inc. and UBS AG said on Monday they would record multi- billion dollar write-downs for the quarter.”

“Earlier Friday, Washington Mutual Inc. said it expects to set aside $975 million on a pretax basis in the third quarter to cover potential future loan losses and record a $150 million write-down on mortgage loans it planned to sell because of the summer’s credit crunch.”

“Washington Mutual said the additional reserves ‘reflects ongoing weakness in the housing market, primarily as it affects subprime and home equity loans, as well as growth in the company’s loan portfolio.”

“The mortgage write-down is due to loans Washington Mutual planned to sell that instead were moved to the company’s investment portfolio due to the credit- market seizure that essentially dried up demand for mortgage-related securities.”

“The third quarter’s results also will include nearly $150 million in pretax trading losses and pretax impairment losses of about $110 million on investment- grade mortgage-backed securities that are available for sale.”

“Washington Mutual has cut its lending staff 28 percent since the end of 2005, the company said in a presentation Sept. 10 in New York. The lender fired about 1,000 people last month as it closed two divisions.”

“‘You’re going to find a lot of companies having to come clean with these assets on their balance sheets,’ said Terry Wakefield, a mortgage-industry consultant. ‘There’s still somewhere between $75 billion and $150 billion of write-offs that have not yet occurred, and they’re going to surface as the quarterly earnings process unfolds.’”

The Independent. “Irish banks face taking a €1bn bad loans hit between this year and 2009 as a slowing domestic property market leads to rising defaults among mortgage holders and commercial property and development borrowers, according to Swiss investment banking giant UBS.”

“‘In our (stress) test, we assume that Irish house prices fall 5pc a year for the next three years and grow 2pc in 2010, and the number of home movers falls by 32pc over the next three years,’ UBS said. ‘If we assume that 20pc of the Irish mortgage market has an LTV of greater than 85pc, it implies €25bn of at-risk loans on the banks’ balance sheets.’”

“Barratt Developments Plc and Taylor Wimpey Plc fell in London trading after ABN Amro cut its recommendation on U.K. homebuilders, citing a deteriorating outlook for the market.”

“The tighter credit market, which forced mortgage lender Northern Rock Plc to seek emergency funding, has further sapped the confidence of home seekers, the London-based analyst said. House prices are likely to be flat during 2008 and 2009, and they may even fall, said ABN’s William Jones.”

The Evening Times. “Banks are raising their rates in response to the interbank lending rate, or Libor rate, hitting a six-year high after the crisis in the US sub-prime market.”

“‘In the past month we have seen a move away from what the Bank of England does with its interest rates being the be-all and end-all of what happens on the mortgage market,’ said Louise Cuming, head of mortgages at moneysuper market.com. ‘It now has a mind of its own. All lenders are looking at their bottom line and its costing them more to borrow money and that is going to be passed on to the consumer.’”

The Sydney Morning Herald. “Calls for greater regulation of non-bank lending have increased after 50,000 RAMS home-loan customers were hit with a second interest rate rise in six weeks.”

“The struggling RAMS was thrown a lifeline when Australia’s fourth-largest bank, Westpac, agreed to buy the troubled non-bank lender’s branches. Despite the rescue package, the non-bank lender this week raised rates on its full-documentation and low-documentation variable loans.”

From MarketWatch. “The U.S. attorney in Brooklyn has started a criminal investigation into a pair of hedge funds run by Bear Stearns Cos. that had positions in mortgage-backed securities and subsequently collapsed last summer, The Wall Street Journal reported.”

The Wall Street Journal. “A court victory by a shareholder of Countrywide Financial Corp. promises to fuel further public debate over the mortgage lender’s executive compensation just as it is struggling to regain investor confidence.”

“Angelo Mozilo, the lender’s chairman and CEO, has opposed a push by some shareholders for an advisory vote on compensation, also has argued that companies need to pay whatever it takes to attract the best talent. ‘If anybody makes a billion dollars, that’s America,’ he said in an interview earlier this year. ‘That’s terrific.’”

From Reuters. “Brookfield Homes Corp on Friday said net new orders for the third quarter fell more than 50 percent to 130 units, on continued weakness in home buyers’ confidence and high inventories levels.”

From CNN Money. “Brookfield had lower than anticipated net new orders in the third quarter, and now anticipates approximately 1,000 home closings for 2007. The decline in third quarter net new orders arose primarily in the Southland and San Diego/Riverside markets where…the demand was impacted by job losses and tighter lending standards.”

“In accordance with SFAS 144 ‘Accounting for the Impairment or Disposal of Long-Lived Assets,’ the company regularly reviews its housing and land assets for recoverability. With market conditions having deteriorated further in recent months, in particular, in the Central Valley and Inland Empire of California, the company has continued to lower its expectation of future revenues on its projects.”

“As a result, the company anticipates impairment charges and write-downs on its housing and land inventory for the three months ended September 30, 2007 in the range of $40 million to $50 million.”

The Palm Beach Post. “Troubled homebuilder Standard Pacific made headlines last month with its push to sell 200 homes in 10 days in Southern California. To lure buyers, it dangled free plasma TVs and cut-rate mortgages.”

“While Standard Pacific didn’t advertise its ‘Mission: Possible’ promotion in Palm Beach County, it did unload a chunk of vacant land here last week for 20 percent less than it paid at the height of the housing boom. Standard Pacific didn’t include a TV, but it did give the buyer a mortgage.”

“When D.R. Horton Inc., the second- biggest U.S. homebuilder, couldn’t sell the one-bedroom condominium in San Diego it listed for $349,800, the property was auctioned as a last resort for 37 percent less.”

“D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They’re selling homes at any price they can get.”

“‘It’s desperation time and some companies may not make it,’ said Alex Barron, an industry analyst. ‘At this point in the housing cycle, if you have too much debt, it’s hard to get out from under it.’”

“Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said.”

“‘They are all losing money,’ Burns said. ‘They’ll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn’t make their costs.’”

“During Hovnanian’s ‘Deal of the Century’ promotion last month, the company sold a 2,900-square foot five-bedroom, three- bathroom house in Royal Palm Beach, Florida, for $525,000, said Kathy Bell, who bought a house with the same floor plan down the street for $575,000 in March 2006.”

“‘It really stinks,’ said Bell, who lives in Hovnanian’s development in Royal Palm Beach, Florida. ‘We were here in the beginning and we didn’t get any deals. It’s very upsetting.’”

“‘We might discount a home 20 percent if the profit margin was 30 percent, but we haven’t discounted any properties 40 percent, which some homebuilders are doing to raise cash,’ said WCI Communities Inc. Chief Financial Officer Jim Dietz.”

“D.R. Horton overcame qualms about its image with the Sept. 29 auction of 56 unsold San Diego condominiums. ‘I ran the numbers and the condos sold for between 68 cents and 74 cents on the dollar based on the original asking prices,’ said said Steven Moran, an agent with Century 21 Award in San Diego, who attended with 11 clients.”

“A condo with an enclosed balcony and an indoor parking spot was originally listed at $349,800 and sold for $220,000, Moran said. D.R. Horton also threw in a washer-dryer and $2,500 toward closing costs, Moran said.”

The New York Times reports on Maryland. “Colorful banners, draped across buildings like giant flags, urge people driving through Baltimore’s rebuilt downtown neighborhoods to move into the new condos and apartments inside. ‘Sophisticated Urban Living W/Garage and Gated Off-Street Parking’ one sign declares in the long campaign to gentrify the central city.”

“Until recently, the ballyhoo was not much needed. But now, the banners are the most visible evidence of the incipient damage to this major American city from the turmoil in the national economy.”

“As home sales dry up, tax revenues fade, foreclosures have surged, hiring is down and a new caution is inhibiting activity.”

“‘I don’t see a recession mentality,’ said Atwood Collins III, executive VP of the M&T Bank Corporation, who complains that the national media are amplifying the bad news. ‘But you would have to be deaf, dumb and blind not to be a little infected by what is being said.’”

The Gazette. “Maryland luxury homebuilders are adjusting to the housing slump by marketing less expensive models that still offer the upscale cachet that affluent buyers seek.”

“In acknowledging the obvious, John Lavery, Mid-Atlantic’s VP for sales and marketing sounded a hopeful note. ‘The market is still in a slump — there is no doubt,’ he said. ‘But we think we’re at the bottom of it.’”

“Luxury homebuilders are uncertain of the future. ‘I think everybody across the industry doesn’t know what to think,’ said Thomas West, VP for Greentree Homes, which has added ‘affordably priced houses’ at its Tuscarora Creek community in Frederick. ‘Everything now is a negotiated deal. People seem very interested in buying a home, but there is no urgency if they already live in this area. They may have a home to sell.’”

The Virginia Pilot. “The message embedded in Old Dominion University’s latest State of the Region report is clear: Don’t expect the slowing Hampton Roads economy to rebound soon.”

“Moreover, the document painted a bleak outlook for parts of the Hampton Roads housing market. The boom in housing prices is over, and prices ‘already are stagnating in response to increasing amounts of inventory,’ it said.”

“The sector of Hampton Roads’ housing market that will encounter particular difficulty, it said, is condominiums.”

“‘Substantial amounts of new inventory are still under construction and have yet to hit the market,’ the report said. ‘Some investors who purchased condominium units with the intent of ‘flipping’ them…now find they cannot make a sale without significant price reductions.’”

“Another source of heartburn in the housing market has been the sharp rise in foreclosures among higher-risk borrowers who used sub-prime mortgages to buy homes. ‘Sub-prime delinquency rates in Hampton Roads almost doubled between December 2005 and December 2006,’ it said.”

The State Journal from West Virginia. “During the past few years, it seemed as though every apple orchard in the Eastern Panhandle entered autumn decorated in one of two ways: with shiny, red fruit dangling from tree limbs or bright surveyor’s tape showing where the next batch of new houses would spring up.”

“But this autumn, the bumper crop of new houses appears to have stopped.”

“A glut of homes available on the market, coupled with a nationwide panic over mortgage-lending practices, has slowed the once hyperactive housing market in Jefferson, Berkeley and Morgan counties to a crawl and left homebuilders scrambling to find buyers.”

“‘We’ve had some builders go out of business here because we overbuilt and the houses were just overpriced,’ said Marc Savitt, president-elect of the National Association of Mortgage Brokers and president of The Mortgage Center, a Martinsburg-based mortgage lender.”

“The Eastern Panhandle is not alone. According to real estate and homebuilder associations from throughout the state, the market is slowing down a bit, especially in counties that have seen housing prices skyrocket in recent years.”

“‘Part of the reason for that is because interest rates went up, and it’s also because we have had an awful lot of building, so the supply is up,’ said Chris Ilardi, secretary of the North Central West Virginia Home Builders Association.”

“‘It’s the concurrence from our members that it is slowing down all over the state,’ Ilardi said. ‘In the Eastern Panhandle, they are really hurting. The average time on the market there is exceeding one year. So when it stopped, it just stopped, like someone turned off the faucet.’”

“‘Some of the larger national lenders came into West Virginia, and they brought in their own mortgage brokers and title agents,’ said Savitt. ‘They offered customers discounts but required them to use the in-house broker and appraisers. And the discounts were simply shifted to other parts of the mortgage so the buyer still ended up paying the same price.”

“‘Now we are seeing a lot of those people coming in, trying to refinance, and what they are finding is that when it was appraised it wasn’t worth as much as what the appraiser told them, he said.”

“As a result, a number of those properties are in foreclosure. In fact, a recent survey by the Mortgage Bankers Association showed more than one out of four of those loans are considered delinquent, and the state has the one of the highest delinquency rates in the country for subprime adjustable rate mortgages.”

“‘The prices have dropped, and that’s the bad news. But it’s also good news because affordability is back,’ Savitt said. ‘Houses are becoming reasonably priced again, and that may enable people who were priced out of a home to now afford one.’”

“Savitt said a couple recently came to his office to talk with him about buying a home. They had come in last year hoping to buy a house that caught their eye. But at that time the prices simply were too high. They couldn’t afford the loan.”

“This year, things are different. The couple told Savitt they had found another home they liked, one that was the same model style and in the same development as the home they fell in love with in 2006. But this time around, they could afford to buy.”

“‘It was the same style house, but it cost $40,000 less,’ he said. ‘Real estate around here has gone crazy, but now it’s going to a more affordable level and becoming more normal.’”

The Sun News from South Carolina. “Real estate sales are still falling from last year’s levels, but the number of condominiums on the market has dropped, a decline officials say comes because buyers are likely pulling units off the market.”

“Homes are selling at the same pace they did in 2004, but down 19 percent from last year, according to the MLS.”

“Condo sales have dropped 38 percent from last year, and are selling at the same pace they did in 2003.”

“‘Well, it’s not getting worse. I don’t look for numbers to start turning around for probably another year,’ said Tom Maeser, president of the Fortune Academy of Real Estate. ‘People need to hang tight. Sellers need to get realistic in pricing, and buyers have to realize they can’t wait forever for good deals. There are definitely good deals out there.’”

“It will take at least 15 months to sell the current supply of homes on the market at today’s sales pace and 23 months for condos, Maeser said.”

“Falling condo inventory is a good sign for the correcting market. There are 8,975 units on the market compared to 10,493 last year.”

“Rachel Broadhurst, president of Century 21 Broadhurst, said this is likely due to condo sellers deciding to wait to sell or choosing to rent out properties. ‘We encourage people to do that sometimes,’ she said.”

“But single-family home inventory is up 20 percent to 6,344 homes from 5,291 last year.”

“Broker Mirela Monte said what happens on the oceanfront affects the rest of the area, and home prices inland are dropping as well but not as drastically as the oceanfront. When oceanfront prices skyrocketed in 2005, so did inland home prices.”

“Monte wants real estate agents to talk realistically about the market to their clients. After a sales frenzy and skyrocketing prices in 2005, Monte calls what happened in 2006 ‘the paralysis period,’ where listings grew but there were few or no sales.”

“What follows she says is always ‘the big plummet,’ where sales happen at unbelievably low prices, well below established comparable sales. The plummet has happened on the oceanfront and is starting inland, but won’t be as drastic there, Monte said.”

“‘Our third quarter statistics are dismal at best: only 9 percent of available condos have sold in the past quarter, only 18 percent of the homes and 5 percent of the lots available have sold in our area during the past three months,’ she said.”

“July, August and September are normally hot sales months on the Strand, she said. ‘These disheartening figures may signal a more severe trend yet,’ Monte said.”

“Economist Mark Vitner of Wachovia said price declines are painful but necessary. ‘A lot of people were priced out of the market and prices need to correct,’ Vitner said.”

“The growing number of foreclosures will also lower prices because banks will be more willing to discount homes than investors who’ve lost money, Vitner said.”

“Real estate slowdowns are as predictable as the rising sun. We know they will return, but unlike the sun, we just don’t know when. We are in the midst of one. A National Association of Realtors index, which tracks pending sales of homes, fell to its lowest level ever.”

“That report is only the latest that has shown a soft real estate market. The news is similar locally, with double-digit drops in area condo and single-family sales. Sellers are lowering prices. The coast saw the biggest gains during the boom and is experiencing the largest drops.”

“Some believe reporting such facts is the media’s way of harping on the negative. I didn’t notice that kind of complaining when the media was penning positive headlines, even though everyone in the know understood such rapid market expansion could not be sustained.”

“Many of those who unwisely jumped into the market without first preparing themselves are hurting. ‘It was just plain easy to get anybody approved,’ said Eunice Harris of New Genesis Mortgage in Conway. ‘For the last three years, just about anybody who wanted a house could get a house.’ Harris turned down several people who weren’t ready for the responsibility.”

“‘You want to see people get into homes; you do not want people to get into a home they can’t afford,’ Harris said.”

“The hundreds of mortgage companies Harris was able to place a mortgage with in recent years are dwindling by the day. She closed a loan with one company on a Friday only to get an e-mail on Monday saying they were shutting their doors.”

“‘It’s a mess, isn’t it?’ Harris said of the market, which can mean only one thing: ‘This is a good time to buy,’ she said.”

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