The Housing Bubble

The Recordnet reports from California. “Nervous homeowners in foreclosure or experiencing sleepless nights over the prospect of losing their homes were among some three dozen Record readers who took advantage of a free two-hour call-in Thursday night to speak with financial experts. Tax expert Hank Klor fielded a call from a middle-aged woman who lives in a home she paid about $475,000 for and soon bought three more homes as investments with mortgages of at least $350,000 each.”

“She told Klor she already had lost two of the homes and the third investment home was in the process of being foreclosed. ‘She is losing sleep over this. Potentially, she could be on the hook for taxes of over $300,000 in income in a single year,’ Klor said, noting the income is derived from the forgiveness of debt.”

“‘She will have some huge income exposures because of the three foreclosures,’ he said. ‘This is an example of someone who got greedy and now it is coming back to haunt her.’”

“Loan providers will work with homeowners in trouble, longtime mortgage broker Frank Mandella said. He could not convince one caller, though, who said his son was a co-signer on a mortgage heading for foreclosure.”

“‘I don’t care what happens. I’m leaving town,’ the caller said.”

The Desert Sun. “Home sales in Indio slid 54 percent in August compared with the same month a year ago, a new report shows. The monthly figure was in line with double-digit sales volume declines the city experienced in May, June and July, when sales fell 33 percent, 55 percent and 45 percent, respectively, according to DataQuick.”

“Indio’s slowdown from a once red-hot pace set during 2004 and 2005 has prompted homebuilders such as Del Webb to offer tens of thousands of dollars in buyer discounts and incentives.”

“And with some 8,600 homes on the market across the valley by mid-September, according to the Desert Area MLS, sellers increasingly are warming to the idea of reducing prices to attract a shrinking pool of buyers, area real estate professionals said.”

“Despite home prices that are in some instances the lowest in years and a vast inventory, many buyers still seem to be trying to time the market, which is ‘more about being lucky as being good,’ said Emily DiSimone, president of the California Desert Association of Realtors.”

The Orange County Register, “We chatted with Tom Reimers, executive VP at land broker O’Donnell/Atkins from Irvin. Us: What’s the market for raw land in SoCal and Orange County today? What’s the outlook?”

“Tom: ‘In general, the residential raw land market is non-existent. Land values and deal flow for other types of product are more stable right now, but the credit/financing crunch is squeezing those values as well….Buyers are few and far between. Many that have available capital are waiting to try and time the bottom of the market. There is a perception of distress entering the land market 9 months to 12 months out.’”

“Us: How are prices? Tom: ‘It’s hard to say. With few to no buyers, it’s hard to say what land is worth. There are no transactions to set a benchmark. In some tertiary markets, the land is worthless from a residential development standpoint due to costs to develop being higher than the land value.’”

The Union Tribune. “It took him three tries, but Shukdev Tantod finally emerged as a winning bidder at the recent auction held in San Diego of new condominiums and townhomes built by D.R. Horton Inc.”

“Tantod was outbid twice before coming away with a two-bedroom unit at the La Boheme development in North Park. The 1,472-square-foot condo cost him his entire $365,000 budget.”

“He called it a fair price that was ‘possibly below market value. This is an investment,’ Tantod said.”

“A spokesman for auction company Real Estate Disposition Corp. declined to discuss how many units were sold. Real estate agent Steven Moran, whose clients purchased three units at the auction, said he thought some homes would return to the market. He said some people had paid too much.”

“‘I think they are overestimating how many they sold,’ he said. ‘Some have fallen out of escrow. There is a three-day buyer right of recision.’”

“Broker Ramsey Su said the condos and townhomes sold for an average of about 70 percent of the ‘previously valued-to’ price. Moran concurred. Su noted that each property had an unpublished reserve price, allowing the seller to withdraw it if the reserve wasn’t met.”

“One-bedroom units at La Boheme recently have sold in the $270,000 to $280,000 range, said real estate analyst Peter Dennehy of The Sullivan Group. Standard two-bedroom units there recently have sold in the mid-to high $300,000s, he added.”

“Based on San Diego County’s job creation, wage increases and the growth of its high-tech businesses, it is not even among the top 70 best-performing regions, according to a report issued last month by the Milken Institute.”

“For San Diego County, it has been a steady downhill slide since 2002. Our region has gone from first place in 2002 to fifth in 2003, 16th in 2004 and 29th in 2005. Our latest ranking places us firmly between Hagerstown, Md., and Little Rock, Ark.”

“‘It’s not that the economy in San Diego is going south,’ said Perry Wong, a researcher at the Milken Institute. ‘It’s just that the momentum for creating jobs is gone. Job growth has been almost standing still.’”

“Alan Gin, an economist at the University of San Diego, said high housing prices make it harder for companies to attract employees.”

“‘The Milken study really shows the impact of our high cost of living,’ he said. ‘Look at the top 10 places on their list. Most of them are in Florida or the Carolinas, where home prices are much cheaper. Property prices have risen in most of those areas, but not to the extent they’ve risen here.’”

“It’s no accident that in 2002, when we were the ‘best performing’ locale, our real estate prices had not yet entered the stratosphere. Once they finally return to earth, maybe we can start working to regain that title.”

The Sacramento Bee. “Three-fourths of the nation’s foreclosure actions filed by lenders in August were in California, and the state has accounted for 40 percent of the nation’s decline in home sales since 2005. California, moreover, is the home of big-scale lenders, such as Countrywide, whose subprime mortgages have backfired.”

“That said, other segments of the economy are still ticking along fairly well, albeit with a slump in retail sales attributed to the decline of housing-related purchases and a sense of foreboding among consumers.”

“‘A dark mood is settling over the golden state as pessimism about California’s economic conditions hits its highest point since 2003,’ the Public Policy Institute of California says in its analysis. ‘Housing woes and the spectacle of this summer’s budget battle are taking their toll on residents’ economic outlook — and affecting everything from trust in government to approval ratings of state and federal leaders.’”

“Bill Watkins, who runs UC Santa Barbara’s Economic Forecast Project, puts it this way: ‘California is always on the bleeding edge.’ He and other economists are now wondering whether the implosion of the housing industry, another economic tsunami in California, will have a similar impact.”

From ABC 7. “Hundreds of would-be home buyers showed up at a property foreclosure auction hoping to get a good deal. Nearly 200 homes went up on the auction block.”

“More than 2,500 shoppers studied their pamphlets, trying to follow the auctioneer’s rapid discourse. The anxiety was heightened by buyers waiting outside, waiting to take anyone’s place.”

“Within 13 seconds, the price on a $1 million home jumped $50,000. 30 seconds later, it jumped another $100,000.”

“‘You hear him go over your range within minutes, you’re like ‘okay, why am I here?’ Because there were no deals,’ said Kevin Tapscott, prospective buyer.”

“The Mutoza family did are the proud new owners of a three-bedroom condo in Watsonville purchased for $290,000. ‘It’s below market. It needs some cleaning up inside, but it’s structurally sound and is quite presentable. So I think it will have good resale value ultimately,’ said Ginger Mutoza, home buyer.”

From Eye Out For You. “Bogart and Teresa Azurdia of Bakersfield bought their first home two years ago. But things changed when the couple fell on hard financial times and the couple tried to refinance. ‘I was after my dream for the family, for the kids and unfortunately that dream is kind of shattering now,’ said Bogart Azudia.”

“The Azurdia’s are hardly alone. Kern County has the fourth highest foreclosure rate in the state. During the first nine months of 2006, Kern County had 214 foreclosures. There was a total of 409 foreclosures for 2006.”

“One year later, the rate has skyrocketed. During the first nine months of 2007, there were 1,802 foreclosures. It’s projected Kern County will have close to 2,900 foreclosures by the end of 2007 says Gary Crabtree of Affiliated Appraisers.”

The Bakersfield Californian. “Some nights, Don Martin stands in the gutted third-floor offices of downtown Bakersfield’s Hay Building and admires the view.”

“He can imagine what the space might look like as a sleek urban loft. Martin plans to buy one of nine condo units slated to transform the historically commercial structure into 1612 City Lofts.”

“The airy loft concept, as well as the combination of retail and residential tenants in one building, may be commonplace in land-strapped West Coast cities like San Diego and San Francisco. But in Bakersfield, the idea that people will choose downtown condos over the suburban, single-family home remains untested.”

“‘That will be a real interesting, pioneering effort for Bakersfield,’ said Greg Petrini, a local builder. ‘The standard Bakersfield resident is not accustomed to flats.’”

“Success at the corner of 19th and Eye streets, where the Hay Building stands, could draw more people downtown and spur revitalization, city planners and boosters say.”

“Downtown housing projects are scarce, even though the city has permitted residential development in the core for the past 12 to 15 years, said Jim Eggert, Bakersfield’s assistant planning director. ‘We’ve always supported it,’ he said. ‘It’s just hard for private developers to feel like it’s worth doing.’”

“Final prices have yet to be set for the condos, but they will likely run from the high $100,000s to a little more than $300,000, and range in size from 700 to 1,360 square feet, Martin said. The price per square foot will be around $200, he said.”

“Gibson is confident Bakersfield has a pent-up demand for downtown, urban living options. Project’s backers Eric Jencks and Eydie Gibson plan for 1612 City Lofts to be move-in ready by February, even as the residential real estate market spirals downward.”

“‘If it was in the suburbs, I’d shut it down for a couple of years,’ Gibson said. ‘But when there’s every indication there’s no supply and you have a demand, there’s reason to go forward.’”

“For Barry Hayes, the architectural style, details and central location of 1612 City Lofts are all worth any added cost. Hayes has already put his name on a 1612 City Lofts interest list and prequalified for a home loan.”

“He likes the atmosphere in downtowns such as those in San Luis Obispo and Pasadena, and senses Bakersfield may be creeping toward a similar vibe. Buying now makes sense, he said. ‘I think we’re catching the cutting-edge crest of Bakersfield,’ Hayes said.”

“Hayes, who grew up in Bakersfield, left for college and returned, said his return makes him an exception among his social circle. ‘All of my hippest friends left,’ he said.”

The News Tribune reports from Washington. “Pierce County home prices dropped in September for the first time in years, as sales activity continued to ramp down. Sales activity also lagged, with 40.5 percent fewer homes sold in September compared to the same month last year. Puyallup saw one of the steepest decline in sales, a 50.5 percent drop, along with a median sales price decrease of 4.2 percent.”

“The price drop and sales slowdown accompany a growing array of incentives for buyers and their agents, including cars, discounted closing costs and furniture shopping sprees.”

“In the six months Chris Wlodarczyk shopped for his first home, he watched the market become one he says strongly favors buyers. Friday afternoon, he counted off the upgrades he landed on the Orting home he’s buying for $262,000: an outdoor hot tub, a fully landscaped yard, a Jacuzzi bathtub and all of his closing costs paid.”

“His advice for house hunters? ‘Be choosy,’ said Wlodarczyk. ‘If you look hard enough, you’ll find a house that’s worth more than you’ll pay for it.’”

“Shirley Patterson took her North End Tacoma condominium off the market this week after listing it in June. ‘You can tell it’s a buyer’s market; they’re very choosy when they come in,’ she said.”

“Patterson priced the 1,000-square-foot unit, with a view of Commencement Bay, at $309,000 and later discounted it by $10,000. ‘I’m somewhat discouraged, but I think I can compete when I do the upgrades. I have the view and they don’t,’ she said, referring to nearby condo projects.”

The Herald Net from Washington. “Snohomish County’s housing boom is over. Builders are laying off workers, houses are staying on the market longer, and the overall number of permit applications has dropped by hundreds compared to last year.”

“‘Nearly every developer has or is contemplating layoffs, and it’s because of the slowdown in the market,’ said Mike Pattison of the Master Builders Association of King and Snohomish Counties.”

“That’s after what many call the largest building boom the county has ever seen, marked by bidding wars and rabid pre-sales of homes. During that boom, a 5,000-square-foot vacant lot went for as high as $247,000.”

“‘The housing peak is over,’ said Todd Britsch, president of Bothell-based New Home Trends, which tracks new construction. ‘These type of frenzies come around every 20 years.’”

“‘What we’re seeing is the natural cycle of the real estate markets,’ said Nathan Gorton, executive officer of the Snohomish County-Camano Association of Realtors. ‘We had the top three years ever in a row as far as sales go. All of a sudden sales are cooling off. Instead, we’ll have like the eighth-best year.’”

“Some builders are stuck with some of the leftover inventory because the number of buyers isn’t as high as it had been, Gorton said. Consequently, builders are ‘taking a deep breath,’ Gorton said.”

“Fewer vacant building lots are being bought, plummeting from 889 in the first three months of the year to 145 sales in July, August and September, said Toby Barnett of Barnett Associates Real Estate in Marysville.”

“Barclays is listing nearly 1,400 lots worth $74.3 million in Snohomish County, according to the company’s Web site.”

The Register Guard from Oregon. “In the first six months of last year, 334 Lane County homes were being foreclosed on. Fast forward to this year, when that number almost doubled, to 584, in the same time period, according to RealtyTrac.”

“Foreclosures in Lane County increased 92.3 percent in July and August compared with a year ago. Statewide, they rose 52 percent in the same time, according to RealtyTrac.”

“Berri Leslie, manager of the mortgage lending section of the state Division of Finance & Corporate Securities, suggests that Lane County’s biggest problem may be what most would consider a strength, high home values.”

“The Eugene-Springfield area’s rapid rise in real estate prices from 2002 through 2006 may have forced some buyers into the subprime market, she says. ‘If it costs more to get into a home, folks might have to rely on nontraditional (mortgage) products to afford it,’ Leslie says. ‘So there can be a lot more risks.’”

“Todd Williams, legislative committee chairman for the Oregon Association of Mortgage Professionals, says it makes sense that Lane County may have priced itself into its current situation.”

“‘It has become what we call an unaffordable market,’ Williams says, explaining that the area’s median income is not sufficient to afford a median-priced home.”

“‘When you have that situation and you have people who want to become homeowners, for the mortgage industry, it becomes incumbent on them to come up with some sort of products,’ Williams says.”

“Ren Nelson, a mortgage broker (in) Eugene, says she’s working with a client who has owned her home for 18 months. The home’s value has increased and the woman now has about 35 percent equity in her property.”

“But Nelson’s client financed the home a few years ago through another broker, taking a subprime, adjustable-rate mortgage. Because of a series of financial setbacks…the woman has been late on six of her monthly payments.”

“Now, despite her high equity, the damage to her credit makes it unlikely she’ll be able to refinance to avoid the interest rate increases on her adjustable loan. ‘The lenders are looking at her and seeing too much risk and exposure,’ Nelson says. ‘They’re saying, ‘We don’t want to do the loan,’ but she’s got all this equity. So the rules of loans and underwriting have completely changed.’”

“‘To be real candid about this gal … my vision is that she’s going to have to sell the house, because I’m not going to be able to refinance her,’ Nelson said.”

“Robert Broten, a loan officer at Pacific Home Funding in Eugene, says that when local home prices were increasing 20 percent or more per year, many homebuyers who couldn’t come up with down payments were able to get loans for the full value of their homes, or more.”

“Others took loans that had low payments in the beginning but then rocketed upward, or had a big balloon payment.”

“‘I think a lot of them went into it thinking, ‘These (adjustable rates and other unfavorable loan terms) are temporary issues, and I’m going to fix them later,’ Broten says. ‘I think it got to a point where people…just didn’t have the financial plan, or the understanding of their financial situation, to afford a home.’”

The mail Tribune from Oregon. “Well-positioned real estate observers say the impact of failed subprime mortgage loans and the residual effects will have to work their way through the pipeline before the Jackson County market regains its footing.”

“For the three-month period of July through September 2006, there were 106 default notices sent out. For the same three months this year, there were 212, including 77 in September, said Lacey King, who tracks Jackson County defaults.”

“‘Most of them were in the $150,000 to $175,000 range. That shows there were a lot of people in the lower end of the scale getting loans when they shouldn’t have been lent the money. Looking at the real market value, I don’t think they put a lot down,’ King said.”

“The picture becomes clearer when King rattles off interest rates on the failed loans: 8.75 percent, 9.85 percent, 9.9 percent and 14 percent.”

“‘That’s a clear indicator of a subprime loan when you see rates like that,’ said Mike Sickels, CEO of People’s Bank of Commerce in Medford.”

“The woes of homeowners have created a growth industry for people like Brian Hilden. Hilden runs a company that helps distressed sellers unload their homes before they’re lost to foreclosure.”

“‘I sit with a lot of people who have really bad loans, many of them first-time home buyers,’ Hilden said. ‘A lot of brokers got pushy in the height of bubble. I think they were guilty of downplaying the seriousness of variable rates. There were people who got caught up in the frenzy of buying investment property, and about half of the people I’m dealing with were investors.’”

“Although Jackson County sales activity declined the second half of 2005, prices continued rising and inched up for several months before drifting downward. The median sales price for single-family residences in the county’s urban areas was $288,900 in January 2006. By last month, the median sales price declined 12.6 percent to $252,500.”

“‘There’s always a lag time,’ said Roy Wright, a Medford appraiser. ‘Volume will drop for a year or year and a half, and then the market will react. If you look at where the prices were in September 2005, they were 23 percent above September 2004 even though the sales rate was dropping.’”

“The inventory of residences available, from condos to rural properties, is near 3,000. In-migration by equity-rich homeowners from other states may be slowing as the markets they move from go ice cold.”

“Just as builders barged past the market’s stop signs, some mortgage brokers feeding the Wall Street investor frenzy continued to loan money even when it made little sense.”

“‘Definitely some people should stand up and say I am a part of what brought this on,’ said Colin Mullane, a member of the Statistics Committee of the Rogue Valley Association of Realtors. ‘As responsible adults when we hear rates that are too good to be true we should question it. If you go to Washington Mutual or People’s Bank and they quote you one rate and then you go to Fly-by-Night dot-com and they say they can save you $400 a month, you’re not going to be a responsible adult if you’re not questioning that.’”

“According to figures compiled by LandAmerica Lawyers Title, nearly a third of the county’s 40,679 single-family residences are not occupied by their owners, meaning that if investors bought near the top of the market and are wanting their money out, they’re likely going to take a hit.”

“Adjustable-rate mortgages taken on by many investors and first-time buyers during the latter stages of the boom will kick up to higher market rates. It may force more foreclosures in the short-term, Mullane admits, but it will be good for the overall market.”

“‘That needs to be flushed from the marketplace,’ he said.”

The Boston Globe reports from Massachusetts. “The section of the South Shore centered around Plymouth continues to experience a big drop-off in home sales and prices. Figures compiled by the Warren Group show that home sales throughout Plymouth County are down 10 percent so far this year, compared to the same period in 2006, while prices have fallen nearly 7 percent.”

“Kimberly Allard-Moccia, former president of the Plymouth and South Shore Association of Realtors, said the soft market, while troubling to owners watching their home values fall, is actually a good thing for the overall market.”

“‘The region experienced unprecedented growth,’ said Allard-Moccia in Braintree. ‘It wasn’t healthy from 2001 to 2005, when buyers were getting into homes that didn’t meet their needs.’”

“‘I tell sellers, ‘This is not rocket science. You have to be realistic in your price,’ said Peter Ruffini, president of the Plymouth and South Shore Association of Realtors. ‘If you’re not, you are setting yourself up for failure.’”

“Already, said Georgia Taft Pye, of the Duxbury firm Buyer Brokers of the South Shore, ’sellers are getting more realistic.’ And that, she added, has really benefited buyers who ‘really can pick and choose.’”

“Developers are going forward with several major projects now on the drawing boards. In neighboring Kingston, town planner Thomas Bott said he has not seen a big slowdown in development. ‘I keep hearing people tell me it’s awful out there. On the other hand, I just received an application for an 80-unit subdivision,’ he said.”

“Of all of the players in the South Shore and Plymouth real estate market, first-time buyers have the biggest advantage, brokers in the region say. ‘With no house to sell, they are in the catbird seat,’ said Pye. ‘Everyone else has to sell their house first, and you are just waiting for the domino piece to set everything in motion.’”

“The foreclosure crisis (is) sweeping the north side of Lawrence, a crisis that is…shaking a local economy only beginning to recover from the real estate crash of the 1990s, when so many abandoned buildings burned that Lawrence became known as New England’s ‘arson capital.’”

“‘I thought nothing could be as bad as the ’90s,’ said Mary Marra, executive director of a nonprofit developer of affordable housing. ‘But I’m beginning to question that.’”

“Lawrence’s north side is one of many communities that were flooded in the late stages of the boom with subprime mortgages. Many succumbed to the lure of easy money, and bought homes beyond their modest incomes. Now, pick any street and chances are you’ll find homeowners in foreclosure, or desperately trying to sell before it’s too late.”

“At Ebenezer Christian Church, Pastor Victor Jarvis said, church members approach him and whisper, ‘I’m losing my house. Please pray for me so I’m able to sell it.’”

“Ana Luna is executive director of Arlington Community Trabajando, a north Lawrence neighborhood group. She shook her head as she recently drove past empty homes, slapped with tags that indicate lenders, unable to sell foreclosed properties, have sealed them up and shut off utilities. ‘You think of all the people who need a place to live, and these buildings are just sitting there,’ she said.”

“Altagracia Portorreal remembers her next-door neighbor sobbing at the front door. After a year of working 12-hour days to pay her mortgage, the neighbor was giving up. She sent the keys to the bank, packed up, and abandoned the three-decker on Walnut Street.”

“An estimated $1 billion in subprime mortgages flooded this one section of Lawrence from 2003 to 2006, according to First American LoanPerformance. The amount of subprime loans nearly quadrupled during the peak of the housing market in 2005, to an estimated $300 million from less than $80 million in 2002.”

“‘It was so exciting for the city to see people buying homes and investing, and neighborhoods becoming economically stable,’ said Andrea Ryan, housing manager in Lawrence’s Community Development Department. ‘Now we know it wasn’t all real.’”

“‘For Sale’ signs now sprout everywhere, often several to a street. Properties frequently are being sold for less than what the delinquent homeowner owes on the mortgage, a so-called short sale. Bob Ciccarelli, a real estate broker, said he has 19 listings in Lawrence. Eighteen are short sales. One of these properties, bought last year for more than $300,000, is now listed at $180,000.”

“‘Even decreasing the prices,’ Ciccarelli said, ‘they’re still not selling.’”

“Two years ago, Diane Jones bought her Danvers apartment when it was turned into a condominium. Today, Jones shakes her head when asked how those good intentions went awry. ‘I trusted people,’ she said, explaining that she didn’t shop around for a mortgage, didn’t read all of the mortgage documents, and didn’t understand how bad things could get.”

“But as her adjustable-rate mortgage approached reset in June, eventually boosting her monthly payments by more than $450 to nearly $2,000, she knew she was in trouble and might even lose her home.”

“To pay for her $228,000 condo, Jones took two mortgages. The first, with an initial interest rate of 6.99 percent, charged interest only for the first two years. After 24 months, Jones not only started repaying principal but found her rate jumping to 9.99 percent. That resulted in a 43 percent increase in those monthly payments, which jumped to $1,520 from $1,063, an amount that exceeded what she had previously paid for both mortgages.”

“Worse, a provision in the mortgage allows rate changes of up to one percentage point every six months to a maximum rate of 12.99 percent.”

“The second loan is a fixed-rate 11.25 percent mortgage with monthly payments of $443 that comes due with a lump-sum payment in 2020.”

“She sat down with Karen Busanovich, a certified financial planner in Woburn. Delays in the consolidation process, however, damaged her credit rating, which dropped to the 400s from the 600s. Scores under 600 are considered high risk.”

“When she contacted various refinancing programs, Jones found her credit was no longer good enough to qualify. Her lender wasn’t interested in negotiating because she had been managing to scrape together her monthly payments.”

“A quick review of income and expenses showed that Jones was spending about $1,000 a month more than she was bringing in. Even if Jones trimmed her bare-bones budget by dumping the cable TV at $66 a month, she would still be in the red.’

“Jones was faced with unpleasant choices. Busanovich said she could get a second job, sell the condo, or get the lender to renegotiate. Or she could let the lender foreclose. ‘At some point, you have to decide if you really want to be a homeowner,’ Busanovich said.”

Lancaster Online from Pennsylvania. “The summer collapse of the subprime lending market, which sent shock waves through the mortgage industry, is now affecting customers who want to purchase or build costlier homes.”

“So-called ‘jumbo’ mortgages, defined as loans that exceed $417,000, traditionally have slightly higher interest rates than conventional mortgages, but now that gap is even bigger.”

“Mark Pontz, a VP of Arlington Capital Mortgage in Lancaster, said about 25 percent of the loans there are of the jumbo variety. Typically, the interest rate for a 30-year jumbo loan is maybe a quarter of a percentage point higher than for a conventional loan of that length, Pontz said.”

“But with the lending crisis this summer, ‘that jumped, in some cases, to more than 1 percent,’ he said.”

“‘Everybody freaked out’ when the default rate escalated, and the jumbo mortgage market took a hit because those loans carry risk, too, Pontz said.”

“One woman, who asked not to be identified, said she and her husband, who are building a home in Manheim Township, went to get a jumbo loan and were stunned at the 8-plus percent interest rate one lender offered. ‘We were thinking 6-ish,’ she said. ‘It really made us pause.’”

The Long Island Business News from New York. “If the national economy stumbles into a recession it could very well start right here. Overstocked with overpriced homes and suffering equally from chronic brain drain and dwindling job creation, Long Island may become the poster child for all that has suddenly gone wrong with the U.S. economy.”

“Housing stocks on the Island stand at 15 months, or 50 percent higher than the national average, with prices well off their 2006 peak. And while home prices set records in other parts of the country, as much as five times annual household income, in some places, few spots can match Long Island, where prices reached nine times annual household income in some parts of Nassau County.”

“Most homebuyers can’t afford those prices. In fact, only about 10 percent of Nassau residents and 15 percent of Suffolk residents can afford to purchase the home they live in. ‘Our housing has not only become unaffordable, but it has moved away from affordable by a very large amount,’ said Pearl Kamer, chief economist at the Long Island Association.”

“Thanks to the glut of home-equity loans and adjustable-rate mortgages, many Long Islanders can’t afford to sell their homes, either.”

The Staten Island Advance from New York. “A recent spike in foreclosure filings on Staten Island is helping self-storage facilities here thrive like never before, according to those who manage them. Many of the Island’s 11 self-storage facilities are near capacity.”

“Thousands of units are filled with furniture, appliances and decorations owned by people whose mortgages are in default.”

“The borough had 1,582 foreclosure filings from July 2006 through July of this year, according to a recently released state Senate report. And in August, there were 240 foreclosure filings in the borough, up 4 percent from 230 in July. Percentage-wise, the borough ranks second in foreclosures among the state’s counties.”

“‘A lot of people are having a hard time,’ said Jesus Sanchez, manager at Victory Self Storage in Travis, which is currently renting more than 90 percent of its 439 units. ‘You’ve got people losing their jobs, they can’t afford to pay their mortgage anymore. Once they get (forced from their homes), they don’t want to lose their stuff.’”

What do you see in your local housing market this weekend? Legal actions? “The Massachusetts attorney general’s office has sued Fremont Investment and Loan, once the state’s second-largest subprime lender, accusing it of using predatory lending practices to sell loans to some borrowers who eventually lost their homes or had to file bankruptcy.”

“Fremont customers identified in the lawsuit include a single mother in Dorchester who earned $1,800 a month and financed her first home purchase with a Fremont mortgage that had a $7,000 monthly payment.”

Failed development? “The Portland, a 43-unit upscale condominium project slated for Minneapolis’ Mill District, is the latest casualty of the withering condo market.”

“In a recent letter to residents in the area, Brighton Development Corp. said it was canceling the project. The letter cited the retrenchment in the credit markets, which has triggered ’sudden and dramatic changes’ in residential development.”

Flipper resentment? “It Is a sleepy Loch Ness-side village that has long been a magnet for tourists from south of the border. But now there are fears that spiralling house prices inflated by incomers buying second homes in the area could have sparked anti-English resentment at Fort Augustus.”

“After anti-English graffiti was daubed on the walls of a former loch-keeper’s cottage, the picture-postcard location is now at the centre of a police investigation. The offensive slogans, including ‘English Out,’ were painted in white on the cottage beside the Caledonian Canal.”

“One woman said emotions were running high as it was understood the cottage had been sold to English people rather than locals who were finding it increasingly hard to get a foot on the property ladder.”

“But yesterday British Waterways, which is also selling a further three cottages along the banks of the canal, claimed the property had not yet been sold and remained on the market.”

Housing bubble related news? “Fallout from the implosion of the residential-housing market will dampen what has been a white-hot commercial real-estate market, Valley economist Elliott Pollack told a group of commercial brokers and developers.”

“The commercial-office market is getting hit first. It has begun to experience fallout from the subprime crisis as mortgage brokerages, title companies and financial-services firms downsize or close up shop, said Pollack, who was the keynote speaker at the Society of Industrial and Office Realtors’ Southwest chapter at the Arizona Country Club in Phoenix.”

“‘We need half the mortgage brokers that we have,’ he said. ‘That’s how much excess capacity there is in that business. Half of them are going to go away. Sublease space is going to be a problem.’”

“Watchers of the housing industry might have a new economic indicator to weigh: the number of would-be flippers inquiring about ways to insure vacant homes. State Farm Insurance Cos. has long offered standard homeowner and landlord policies for people renting out vacation homes.”

“But the cooling of the real estate market has generated more inquiries from consumers who bought properties as investments, thinking they could turn around and sell them for a profit, but who now find residences sitting vacant because of the recent credit crisis.”

“‘The vacant endorsement measure is suitable “for people who have to sit on that extra property, but don’t want the hassle of renters,’ State Farm spokesman Jeff McCollum said. ‘I can tell you, anecdotally, that we’re getting more interest in this product lately in all the areas you’d expect — Florida, Phoenix, Denver, heavy vacation areas.’”

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