The Housing Bubble

The Orange County Register reports from California. “Back when the state’s housing future was a legitimate debate, maybe two or three years ago, imagine if I had quoted some expert predicting that pricing would hit the ugliness of the mid-1990s while selling a house would be as difficult as it had been in nearly a quarter century. Folks close to the industry would scream, ‘Who is this doom-and-gloom quack?’”

“Well, in my hands I have just a projection. And the author is no less than the California Association of Realtors.”

“‘Buyers will have a wait-and-see attitude for some time,’ says CAR deputy economist Robert Kleinhenz.”

“California Association of Realtor chief economist Leslie Appleton-Young had a confession to make at the annual forecast lunch, or as she put it ‘an apology of sorts.’”

“Two years ago, amid a red-hot market, her forecast dismissed fears of a bursting California real estate bubble and called for only modest sales declines.”

“Two years later, the state’s seen a dramatic sales drop. In August 2005, the cyclical peak, sales ran at an annualized rate of 650,000 homes. By year end 2007, Appleton-Young foresees the sales rate under 300,000.”

“‘We’ve had a fundamental change in the mindset of the buyer,’ she says. ‘There is no reason (for a buyer) to act.’”

“‘This was more fun three years ago,’ Appleton-Young told the group as her forecast ended. ‘But we need to deal with reality.’”

The Union Tribune. “The 12,000 CAR delegates heard that the median price for existing single-family homes statewide will drop from an estimated $576,000 this year to $553,000 next year.”

“Still, the association said a drop in volume of 9 percent in existing single-family homes would be an improvement over this year’s projected drop of 23 percent.”

“‘It’s a moderation in the pace of decline, so from that perspective I guess it is positive, but we’re certainly getting to a relatively low level of sales,’ said Appleton-Young.”

The Daily News. “CAR President Colleen Badagliacco said tighter credit standards, affordability concerns and ‘a continued standoff between buyers and sellers’ will contribute to continued weakness in the market moving into next year.”

“James Joseph, owner of Century 21 Ambassador and Coldwell Banker Ambassador in Whittier and Century 21 Ambassador in Brea, said the predicted 4 percent drop in California’s median home price is not what he’s seeing.”

“‘Many of the homes I’m seeing now are selling for 15 to 30 percent less than before,’ he said.”

The San Francisco Chronicle. “‘2008 is going to be a rocky road,’ said Robert Kleinhenz, an economist for the trade group. He noted that the dismal sales projection ‘is one of the weakest numbers we’ve seen in a long time. It’s not clear we’re out of the woods where the credit crunch is concerned. We saw a slight impact in our August sales figures, but we’re seeing September sales with a much more dramatic impact.’”

“‘This is the weirdest downturn in the history of California,’ said GU Krueger, vice president at Irvine’s IHP Capital Partners, one of the largest U.S. investors in residential development. ‘Most previous downturns were driven by super-high interest rates or very weak economic fundamentals. This one is neither. It’s driven by prices getting ahead of incomes and by the drying up of financing that was making the run-up in pricing possible.’”

“Most economists agree a turnaround won’t come until the excess inventory of new homes is burned off, foreclosure sales peter out and prices decline to a level enticing to buyers.”

“‘It’s what happens the morning after the party is over,’ Krueger said. ‘We were overvalued, and now we’re depreciating - it will help with affordability, there’s no doubt about that.’”

The Press Democrat. “Stephen Levy, senior economist at the Center for Continuing Study of the California Economy, had a less optimistic outlook. He expects prices to drop between 10 percent and 15 percent overall and perhaps more in some markets.”

“The association forecast ‘conveys the wrong image to people about what’s going to happen in prices in their neighborhood from now on,’ Levy said. ‘It’s going to be more severe. I think that’s good. I think it’s better for us if we get through the correction faster,’ he said.”

“The problem in areas including Sonoma County is an oversupply of homes for sale. Prices have not come down enough to make homes much more affordable for many buyers, and tighter lending requirements present another hurdle.”

“‘Lenders are anticipating that property values will keep falling. So they’re adjusting their loan limits, their risk,’ said Kris Anderson, senior loan consultant for Allstate Mortgage Company in Santa Rosa.”

The Ventura County Star. “Jack Kyser, chief economist of the Los Angeles Economic Development Corp., thinks CAR’s projected median price is optimistic.”

“‘The housing market is going to remain in a mess for awhile,’ he said. ‘The housing market is definitely going through a painful recession that probably won’t go away until 2009.’”

“In September, there were 489 foreclosure filings in Ventura County, up 189 percent from 169 filings for the same month a year ago, RealtyTrac reported.”

“Robert Kleinhenz, a deputy chief economist at CAR, expects to see foreclosure activity climb to a record next year, when mortgage resets on subprime loans peak. ‘We expect in the next few months, we’re going to bear the brunt of the credit crunch,’ Kleinhenz said.”

The Mercury News. “Economist Stephen Levy said ‘we are now at the very beginning’ of a trend in which homeowners who can no longer afford the payments on their adjustable loans have to sell their homes or face foreclosure.”

“‘We’re going to have much more substantial price declines in selected markets,’ he said, ‘and that’s good because when prices fall we will find out there is an underlying demand’ for housing and new construction.”

“‘We need housing, to be attractive for jobs. And the prices simply got out of hand,’ Levy said.”

From CBS News. “In California, where developers have been racing to turn farmers’ fields into subdivisions, they’re now walking away, leaving houses partially built.”

“Those who have already moved in (are) wondering what will hit next.”

“‘I’m concerned that once the weather starts getting bad, there’s tile piled on the roof that could just fly off,’ homeowner Marius Gieske told CBS News correspondent John Blackstone.”

“Dunmore Homes had building projects in a dozen California communities from Bakersfield to Yuba City. Now it’s halted work everywhere, giving up on a fast-falling market.”

“‘We couldn’t sell a moving target,’ said John Slaughter, VP of construction and operations for Dunsmoor Homes. ‘What we wanted to do is stop.’”

“So developers are scrambling to get rid of houses they can’t sell. Many are turning to auctions. As Anderson Homes searches for the bottom, those who bought from the developer at the top feel betrayed.”

“Sherry and Percy Berquist, who paid $597,000 last year were shocked to see $335,000 set as the opening bid for an identical house to be auctioned. The developer may be able to absorb that loss. The Berquists can’t. ‘It’s gonna be very tough,’ said Sherry Berquist.”

“Across the street Amy Sturdevant paid $585,000 for a house. But now the developer has set $295,000 as the opening bid for similar houses down the street.”

“‘I feel like my parents’ grave has been robbed. This was an inheritance. I sit out here and I look at this…’ said Sturdevant.”

“Those like Sturdevant and the Berquists who bought at the peak may be the biggest victims of this housing bust said Financial Planner Patrick McGilvray.”

“‘That’s the real tragedy for the people who got in at the height of the market. They are going to tough it out,’ McGilvray said. ‘They are the ones who are going to carry the water so to speak for this debacle.’”

“If part of the reason for falling prices is overbuilding, it may not be over yet. While construction has slowed builders are still putting up new homes at a rate of more than one million this year.”

From ABC 30.com. “More than two dozen new valley homes will hit the auction block this weekend and some are not happy about it.”

“The slumping housing market has led the builder of a new Merced County subdivision to try a technique usually associated with foreclosed homes. The company is auctioning off more than a third of its available properties.”

“25 new homes in this Los Banos subdivision will be up for auction on Sunday. Low sales have led Anderson Homes to auction off 25 homes in this subdivision and another 34 in Manteca. The builder says the starting minimum bid of $215,000 for the Los Banos properties is about 40% off the retail price.”

“Some homeowners in this subdivision are worried about the impact it will have on their own property values. Maximo Aguilar Junior says he’s upset because he bought his home from the same builder two years ago for about $456,000.”

“‘Of course, we’re concerned about the price, we’re thinking it’s going to drop the price a lot,’ says Aguilar.”

“But Anderson Homes Chief Financial Officer says the auction could actually help get this subdivision back on track. ‘The auction doesn’t set the values, buyers do today so the auction will help us determine that, it will help us reduce the supply, so we feel in the long run that’s a good thing,’ says Craig Barton.”

“Michelle Ritchey and her family live just a few blocks away from the Teal Landing Neighborhood in Los Banos. But they’re hoping to trade up and cash in when many of these homes hit the auction block in San Jose this weekend.”

“‘Our home, we just had it appraised, and it was $259,900 so we said, well, these are starting off at $215,000, we could use a little less and for more room,’ says Ritchey.”

A report from the Arizona Republic. “Median home prices have dropped in more than half of all metropolitan Phoenix’s ZIP codes, according to a Republic analysis of new- and used-home sales from the data-research firm Information Market. Hardest hit were newer Valley fringe communities from Pinal County to Peoria and even some closer in, where home builders reduced prices.”

“Several of the newer suburbs farther out such as Queen Creek, Surprise and Avondale posted double-digit drops in median home prices.”

“Kathy and Dennis Rowedder are trying to sell their north Phoenix home in the 85050 ZIP code. The couple recently closed on a new house in Peoria and got a $30,000 concession on it because they haven’t yet sold their existing home.”

“So far, the couple have lowered their price $40,000 to $360,000.”

“‘I thought when we listed it at the beginning of August it was priced really well. I buried a statue of St. Joseph in our front yard for luck,’ Kathy Rowedder said. ‘But after we lowered our price, I went out and dug it up, cleaned it off and brought it back in the house.’”

“Overall home prices in 85050 have fallen almost 24 percent this year, the biggest drop of any Valley neighborhood. But several new, less expensive homes recently went up in the area, which pulled down the overall price. The median new-home price in 85050 dropped 60 percent this year to $298,271.”

“‘The bad time to buy a home was two years ago; now sellers are motivated, and there are plenty of houses to choose from,’ said Steve Walsh, president of Scottsdale-based Scout Mortgage. ‘Buyers just need to be careful and not get into loans they don’t understand that could cost them a lot more in a few years.’”

“Based on the record 55,000-plus homes for sale across metropolitan Phoenix, Brett Barry of Realty Executives estimates there is a 12 to 14 month supply of homes on the market.”

“‘That means homeowners have a 1-in-12 chance to sell their home in a month,’ Barry said. ‘Those odds aren’t good in Vegas, and they aren’t good for the housing market.’”

“The drop in home prices is bad news for homeowners who bought at the peak and are now finding their homes are worth less than what they paid. Market watchers say those people should price to sell now if they have to because prices are likely to continue to drop.”

“‘We are going to have to go through this pain to get back to a healthy market,’ said. ‘Sellers tell me their bottom line on a sales price, and I tell them to forget it because we haven’t seen the bottom of the market yet.’”

From KTAR in Arizona. “As homebuilders ratchet up sales incentives in the current depressed market, some housing experts are questioning their methods.”

“Free landscaping and kitchen upgrades used to be the norm. Now, one builder is offering a Lexus. Arizona State University’s Tony Sanders said that distorts the actual sales price.”

“‘It’s almost like giving away toasters to open a savings account,’ said Sanders. ‘We want to see the real rate, we want to see the real prices. And I think most educated consumers will get by that very quickly.’”

“Tim Wilson of Wachovia goes further. He said the sales contract and appraisal should be adjusted to determine the accurate value of the properly. ‘That should be documented in the contract, and the appraisal should be adjusted to determine the accurate value of the property,’ said Wilson.”

“John Foltz, president of Realty Executives, agreed, saying incentives worth tens of thousands could distort market values.”

“‘To my mind, it’s kind of an artificial way to sell a home for less money, but not have the public records show it was sold for less money,’ Foltz said. ‘I understand why it’s done — to sort of support neighborhood values and so on. On the other hand, prices are what they are and transparency’s a good idea. So, it’s not something I’m really in favor of, but I know it does happen.’”

From Builder Online on Nevada. “According to RealtyTrac…foreclosure rates are up 99 percent from September 2006 and Nevada continues to hold the nation’s highest rate of foreclosures.”

“For September, Nevada is reporting one foreclosure for every 185 households and 5,504 foreclosure filings, which is up 187 percent from September 2006. The executive director of the Southern Nevada Home Builders Association, Irene Porter, says certain factors are being ignored in Nevada’s nine-month reign atop the nation’s foreclosure list.”

“‘It’s bad but it is not as huge a number as it appears to be because you have to take into consideration the amount of housing we’ve built in the last few years,’ Porter told BUILDER Online. ‘It is part of the nationwide problem we have as a result of [bad] mortgages and investor buying. A good number of [Nevada's] foreclosures are related to the investor buy.’”

The Daily Herald from Utah. “Wasatch Front Realtors are basking in the bright spot. That’s because the state is a market unto itself.”

“‘We didn’t participate in the housing boom when the rest of the country was, we never do,’ said Jim Bringhurst, president of the Utah Association of Realtors.”

“Instead, the state created its own mini-boom on the back of a blistering economy and new move-ins from more expensive areas like California, Nevada and Arizona.”

“‘They want to sell on the high side and come here and get a better quality of life,’ Bringhurst said. ‘Our houses are a bargain compared to the markets they’re coming from.’”

“Utah’s market will slow down, but because it’s not dependent on the rest of the nation, a softer landing is more likely.”

“That landing may be premature, though, says Bringhurst, because Utah homeowners are paying attention to national trends instead of local trends, such as low unemployment, low interest rates and a lack of a speculative market.”

The Deseret News from Utah. “The uncertainty surrounding Utah’s topsy-turvy housing market is revealed in the responses to a recent Deseret Morning News/KSL TV survey conducted by Dan Jones and Associates.”

“‘Right now it is definitely ‘change time.’ I personally believe (the market) is going to get back to the days we had back in the ’80s and ’90s a little bit,’ explained Dave Seiler, an area Realtor.”

“He described circumstances in which home prices have been artificially inflated due to out-of-state investors and speculators flocking to Utah, triggering a steep increase in property values for a short time — followed thereafter by a sharp decline.”

“But Kelly Matthews, economist for Wells Fargo, sees Utah’s current home market as more stable than other states that saw rapid appreciation and are currently experiencing a literal reversal of fortune. ‘Our Utah situation has not deteriorated nearly as much as some of the other places,’ Matthews said.”

“Matthews said new home construction fell 20 percent during the period August 2006 to August 2007, while selling prices for homes increased in the double digits for the same period.”

“‘Most of the adjustment thus far has been made in a reduction in construction (of new homes) rather than any cut in pricing,’ Matthews said.”

“Back in the trenches, Seiler says the evidence is clear.”

“‘When you look at how many investors were in our market two years ago — even versus last year — the problem is that some of them had done well,’ resulting in a number of houses being rehabbed and ‘flipped’ for a nice profit, he said.”

“‘Everybody had gone to classes, and all these investment seminars were on every corner with signs saying ‘Investor needs apprentice.’ Everywhere you went around, people were thinking they were going to make big money in real estate. If you look at the investors who bought last, they’re hurting right now,’ he added.”

“He said currently there is a high volume of high-end properties that are not selling, creating a glut of homes in the Utah market.”

“‘So you get all these (late) investors in there who now own properties that are sitting vacant, and they’re having to start doing whatever they can because it’s starting to eat their profits away if they had any,’ Seiler said.”

“Seiler is concerned Utah may find itself in similar situations to other states that are experiencing serious housing price corrections.”

“‘Right now the buyers are sitting on their hands doing nothing,’ he said. ‘Those interested in purchasing homes already have the sense the market is changing. Many prospective buyers have recognized prices are falling and they could get more for their money if they are patient.’”

“‘Everywhere you turn around, you’re seeing ‘price reduced’ signs going up,’ Seiler said — adding that a number of homes are selling for less than the asking price, which also drives down prices overall.”

“Pointing to his own market analysis, Matthews said affordability fell significantly from February 2005 to February 2007, meaning home prices increased more than prospective buyers’ ability to qualify for loans to purchase them. He predicts a 7 percent drop in the average Wasatch Front home price by mid-2008, which he says will increase affordability, thereby strengthening the overall market.”

“‘If people can’t qualify for loans and the homes aren’t selling, at some point (builders and sellers) are going to have to lower their prices,’ Matthews said.”

Hi Ben — Often I only have a chance to check HBB late at night. Unfortunately the Bits Bucket sometimes gets really clogged up (on busy days) and the page doesn’t render correctly (Firefox). So I was going to throw out the idea of lunchtime Bits Bucket. Also, it’d be nice for us west coast people to have a fresh place to make comments later in the day.

Cassie

I don’t know if we’ll do this everyday or often, but here goes-Ben

Some housing bubble news from Wall Street and Washington. Bloomberg, “Countrywide Financial Corp., the largest U.S. mortgage company, said late payments at its servicing unit rose, foreclosures doubled and new loans fell 44 percent as housing sales slowed. Overdue loans as a percentage of unpaid principal increased to 5.85 percent in September from 4.04 percent a year earlier, the company said. Foreclosures climbed to 1.27 percent from 0.51 percent.”

“Total employment fell by more than 4,900, with most of the reduction among staff that handles new loans, said a report by Credit Suisse Group.”

Dow Jones Newswire. “Countrywide President David Sambol said the drop in lending volumes ‘is reflective of current market conditions and more restrictive underwriting.’”

“Countrywide also continued to cut its loan pipeline, which should lessen the stress on its near-term funding needs. It had $42 billion of in-process loans as of the end of last month, a drop of 35% from a year earlier and of 19% from the previous month.”

The Associated Press. “With rising delinquencies among subprime mortgages, Countrywide has nearly abandoned that type of loan completely. Subprime originations fell to $255 million in September, from $3.1 billion during September 2006.”

“Funding of adjustable-rate mortgages was drastically reduced as well. Countrywide originated $3.8 billion in adjustable-rate mortgages in September, down from $15.8 billion last year.”

“U.S. home foreclosures doubled in September from a year earlier as subprime borrowers struggled to make payments on adjustable-rate mortgages, RealtyTrac Inc. said.”

“There were 223,538 foreclosure filings last month, including default and auction notices and bank repossessions. California had the most with 51,259 and Florida was second with 33,354. The national foreclosure rate was one for every 557 households, RealtyTrac said.”

“As many as half of the 450,000 subprime borrowers whose mortgages will re-set through November may lose their homes because they can’t afford the higher payments, according to a report by Credit Suisse Group.”

“‘The truth of the matter is that borrowers are going into default as soon as they hit their adjustments,’ said RealtyTrac VP Rick Sharga.”

“Foreclosures on loans made in 2005 may ’start to wind down’ at the end of the year, while loans made in the first half of 2006 will probably lead to additional foreclosures in the middle of 2008, Sharga said. ‘This wave ends in December, and another wave starts in May,’ he said.”

“Prices in 20 U.S. metropolitan areas fell 3.9 percent in the 12 months through July, the most on record, according to the S&P/Case-Shiller home-price index.”

From Reuters. “Downey Financial Corp said it expects a third-quarter operating loss of about $23 million, or 84 cents a share, as it increased allowances for loan losses due to loan delinquencies and losses from foreclosures in a continued weak housing market.”

“The savings and loan holding company said in the quarter it posted an about $82 million pretax provision for credit losses, which boosted the allowance for loan losses to about $144 million.”

“Downey said the housing market issues, disruption in the secondary mortgage markets, hurt its borrowers and the value of their loan collateral in the quarter. The single family loan delinquencies and losses from foreclosures rose significantly during the third quarter, CEO Daniel Rosenthal said.”

“Goldman Sachs Group Inc., the world’s biggest securities firm, said its holdings backed by pools of bonds and loans dropped 53 percent in the third quarter, the second consecutive decline amid a global credit contraction.”

“The ‘fair value’ of retained interests in collateralized debt obligations and loan obligations was $1.77 billion at the end of August, down from $3.79 billion three months earlier, the firm said in a regulatory filing.”

“‘There was nothing in the mortgage space that didn’t decline in value,’ David Viniar, Goldman’s chief financial officer, said in an interview after the Sept. 20 earnings report. ‘Anything we had was down.’”

“Beazer Homes USA Inc., the homebuilder under investigation by the Securities and Exchange Commission, will restate earnings going back to 1999 after an internal probe found its mortgage unit violated federal regulations.”

“Employees violated U.S. Department of Housing and Urban Development rules related to the agency’s down payment assistance program, Beazer said. Beazer shares fell to a seven- year low this year as the SEC and the FBI started investigations of its accounting and lending practices.”

“‘They’re not going to fight. They can’t win,’ said Peter Henning, a law professor at Wayne State University Law School in Detroit. ‘You admit your accounting is wrong and there were problems in your loan documentation, there’s nothing to fight about.’”

“The FBI opened a potential fraud probe of Beazer after the Charlotte Observer reported in March it sold homes to low-income buyers who couldn’t afford them. The loans were based on the assumption the buyer’s income would rise, a practice restricted by the Federal Housing Administration.”

“The company’s FHA-insured mortgage origination business may have violated ’standard representations made to mortgage purchasers,’ according to the statement today.”

“HUD ended the down payment program this month after saying it led to higher prices and more foreclosures for home buyers.”

“The program let nonprofit organizations including AmeriDream Inc. fund down payments for low- and middle-income home buyers and be reimbursed by the sellers of the homes. It was used by more than 100,000 consumers last year and accounted for a third of all Federal Housing Administration loans.”

“Sellers sometimes try to recover the cost of the fee they pay nonprofits by raising the price of the house an average of 3 percent, a 2005 study by Congress’s nonpartisan Government Accountability Office found. The higher prices helped to double the rate of foreclosures on homes paid for with FHA-backed assistance, agency audits found.”

“Beazer issued preliminary financial results for the fourth quarter and said home closings fell 39 percent to 3,940. New orders plunged 52 percent to 990 homes as the cancellation rate surged to 68 percent due ‘in large part to the pronounced tightening in the mortgage markets in August and September.’”

“In August, the company’s credit rating was cut by Moody’s Investors Service on concern the housing recovery won’t occur before 2009.”

From Forbes. “Moody’s Investors Service lowered its corporate family ratings on homebuilders Centex Corp, Lennar Corp, and Pulte Homes Inc to ‘Ba1′ with a negative outlook.”

“Moody’s said it sees no sector recovery beginning before 2009 at the earliest, due to elevated new and existing housing inventory levels, disruptions in the mortgage market, thus prolonging the companies’ underperformance on key financial metrics against prior expectations.”

“Existing home sales this year probably will fall to a five-year low, worse than forecast, signaling the U.S. housing market is far from hitting bottom. New-home sales may decline 24 percent to a 10-year low of 804,000 and existing home sales will fall 11 percent, the National Association of Realtors said in a news release.”

“It was the 10th time this year the Chicago-based group lowered some part of its monthly housing and economic forecast.”

“The decline in new home sales forecast for 2007 by the Realtors is 37 percent down from the record of 1.28 million sales in 2005. That would exceed the 25 percent three-year drop that ended in 1991, the last housing recession.”

“Housing starts in 2007 probably will tumble 24 percent, on the heels of a 13 percent drop last year, the real estate trade group said. ‘A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,’ Lawrence Yun, an NAR economist, said in the report.”

“The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent below last year as housing market woes persist.”

“Despite the bleaker outlook, the group maintains an optimistic message. Its senior economist, Lawrence Yun, noted in a statement that…2007’s home sales will be the fifth-highest on record.”

“‘The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains,’ Yun said.”

The Wall Street Journal. “An analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.”

“The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans.”

“Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.”

“The Journal’s findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography.”

“The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish.”

“‘We had an aggressive home-mortgage industry trying to get people into homes they couldn’t afford at a time when home prices were very high. It turned out to be a house of cards,’ says Karl Case, an economics professor at Wellesley College. ‘We’re in the early stages of the cleanup.’”

“Kristine McMahon has a six-figure income as a mortgage broker and lives in a four-bedroom home in East Hampton, N.Y., valued at more than $2.7 million. Yet Ms. McMahon, who works for Manhattan Mortgage, chose a subprime loan for herself when she refinanced last year to turn some of her home equity into cash.”

“Ms. McMahon says that at the time of the refinancing, a conventional lender would not allow her to take out as much cash during the refinancing as her subprime lender, New Century Financial Corp., which is now operating under bankruptcy-court protection.”

“Ms. McMahon chose a subprime loan that carried a fixed-rate of 6.45% for the first two years before turning into an adjustable rate. She plans to sell the house before the higher adjustable rates kick in.”

“Last September, Darla Ball purchased a $460,000 home in Las Vegas using an adjustable-rate subprime loan with an initial rate of 8.2%. At the time, she says, she expected to refinance before her interest rate resets to 14% next year, which will raise her monthly payments to $8,000 from $3,700.”

“But in the past year, she says, prices of comparable homes in her subdivision have fallen to $310,000, which means she would not qualify for a new $460,000 mortgage, unless home values go back up to that level, an unlikely scenario.”

“She says she has stopped paying her mortgage and is trying to negotiate with her lender. ‘I’m going to lose my home anyway,’ she says, ’so why pay?’”

The Palm Beach Post reports from Florida. “The housing market in Palm Beach County and the Treasure Coast has turned ‘brutal’ and is getting worse, a veteran mortgage broker said Tuesday. ‘I’ve seen some tough times, but I’ve never seen anything like this,’ William Davis told members of the Economic Forum of Palm Beach County.”

“Davis, a Palm Beach County native who has been a banker and mortgage broker for 37 years, said this slowdown has proven more painful than even the crunch of the early 1980s, when mortgage rates topped 18 percent.”

“He blamed a combination of factors. A speculative bubble that peaked in late 2005 artificially inflated prices. The subprime mortgage meltdown of recent months has made it tougher for borrowers to land loans. And homes remain priced above what the typical family can afford.”

“‘It’ll make you sicker than West Palm water if I tell you how many homes are for sale,’ Davis said.”

“There were 33,708 houses and condos listed for sale in Palm Beach County in August, according to Illustrated Properties.’It’s pretty bad,’ said llustrated Properties President Chappy Adams. ‘We’ve got a 40-month supply of homes, which has got to be an all-time high. For the foreseeable future, prices are going to keep coming down a bit.’”

“Davis, former president of the Palm Beach County chapter of the Florida Association of Mortgage Brokers, expects the downturn to deepen into 2008. On the foreclosures that follow negative amortization loans: ‘We called them neutron bombs, because the people would go away, and the buildings would stay.’”

“On the housing hangover: ‘We had a three-year fraternity party, and it’s going to take more than a month of Sundays to clean up the mess.’”

The St Petersburg Times. “Bucking earlier predictions that the housing market might have struck bottom, local home sales just keep sinking further. You would have to reach back at least five years in the Tampa Bay area to find monthly sales of existing homes as weak as September’s.”

“Realtors reported Wednesday that 1,823 single-family homes and condos sold last month in Pinellas, Pasco and Hillsborough counties. That’s 39 percent below the 2,972 homes that sold in September 2006 and 58 percent below the September peak of 4,329 homes in 2005.”

“Worst hit on the price front was Pasco. Many of its neighborhoods suffer from a surplus of unsold investment homes. Pasco’s median single-family home sale price plummeted 21 percent the past year, from $209,000 to $164,900.”

“‘The homes that are selling are the ones where the owners … say, ‘I gotta go,’ said Rodney Jackson, a Pasco Realtor and home investor.”

“Jackson’s personal tale of woe is typical. He bought five Pasco investment homes near the top of the market. Even after he slashed prices below what he paid, only a trickle of prospects showed up to look at the houses.”

“He’s resorted to a short sale to avoid foreclosure on a new 2,450-square-foot house he bought last year in Land O’Lakes’ Dupree Lakes neighborhood for $354,000. The bank agreed to a sale price of $257,000 and will forgive the rest of Jackson’s mortgage debt.”

“‘You can beat yourself up, but who knew they were overpaying for a house? Who knew it was going to stop?’ Jackson said.”

“‘There were subdivisions that were so heavy with investors that when they threw these homes on the market, they have become disaster areas,’ said the president of the Greater Tampa Association of Realtors, Carlos Fuentes. ‘It’s quite disturbing.’”

The News Journal. “Foreclosure activity in Volusia County nearly doubled in volume last month and ran five times higher than a year ago. A mortgage broker and a real estate agent said they see no signs of recovery in either county. They expect conditions to worsen as lenders tighten terms for new mortgages and readjust the rates for existing ones.”

“In September, there were 1,028 court filings related to foreclosures in Volusia County, according to Realty Trac. That was double the 579 in August and 190 in September 2006.”

“Frank Cardarelli, an agent who specializes in homes that have been repossessed by banks, said Countrywide and other major lenders have alerted foreclosure specialists twice in the past six months to brace for big increases in bank-owned homes in 2008 and continuing into 2009.”

“‘They’re telling us to invest in more software and staff to keep up,’ said Cardarelli, who handles real estate for about 15 banks.”

The Sun Sentinel. “UCF graduate Karissa Huffmire and her husband wait for someone to buy their home, which has been on the market for four months. They need more space for their growing family.”

“In Central Florida, existing-home sales have plummeted 40 percent in the past year, according to the Orlando Regional Realtor Association. In turn, prices have dropped 2 percent.”

“‘It’s housing-market karma,’ says Sean Snaith, director of UCF’s Institute for Economic Competitiveness.”

“The Huffmires installed new wood floors, tile and carpeting and slashed the price by $30,000, but they have yet to generate interest.”

“‘We’re incredibly frustrated because we’re not even having showings,’ said Huffmire. ‘Nobody is even looking for houses.’”

From CBS 4. “Since 2005, home buyers in Miami-Dade and Broward counties have signed so-called ‘exotic’ mortgages at twice the rate of borrowers in the rest of the country, according to a report done by CBS4 news partner The Miami Herald.”

“These mortgages included loans with low so-called ‘teaser’ rates which can skyrocket within three years to as high as 16 percent.”

“‘This year went from 12-hundred a mnth to 1450 a month or afraid to lose home,’ Marie Fleurimont who is afraid of losing her home told CBS4’s Ileana Varela.”

“During the real estate boom, as home prices rose much faster than incomes, buyers were forced to take on huge debt to get purchase a home they wanted to upgrade into.”

“For example, a home in Miami Shores that sold for $250,000 five years ago skyrocketed to $500,000. To appreciate how this affects a borrower, consider a $400,000 mortgage at 7 percent, which carries a monthly payment of $2,661. When that loan resets, a typical new rate might be 11 percent , and the new payment: $3,809. That’s doesn’t even include taxes and insurance.”

The Herald Tribune. “Stung by continued malaise in the region’s residential market, a Michigan-based developer is scrapping plans for a luxury, high-rise condominium tower in downtown Sarasota.”

“In place of the planned One Palm condos, Triton Cos. joins a growing list of developers hoping to capitalize on a perceived need for additional hotel rooms.”

“‘The reasons behind this are fairly obvious: Residential units downtown aren’t selling, and it continues to be a very difficult market,’ said Brent Virkus, Triton’s chief executive.”

“As Florida’s housing boom stalled, One Palm became among more than a dozen conceived downtown condo towers to suffer from a lack of required unit pre-sales.”

“Elsewhere throughout the city, projects like Washington Lofts; Valencia, Premiere, CityPointe, and the Grande Sarasotan have all had designs recast.”

“At the same time, well-conceived urban projects such as Sarasota Bayside, Pineapple Square downtown, Atrium on Ringling and Benderson Development’s expansion of the 13-story Bank of America building also are well beyond their original construction start dates.”

“‘The market is dead, and it’s going to be a long time before it rebounds, especially for condos, because they traditionally take longer to sell,’ said Louise Guido, owner of a Sarasota brokerage firm that has sold units in the 13-story Rivo on Ringling residential tower.”

“In all, more than 5,000 new hotel rooms — equal to the existing number of rooms in all of Sarasota County — have been proposed for Southwest Florida. Even developers agree only a fraction of what is proposed will be completed. The last new hotel to open in Sarasota was the 95-room Hotel Indigo, in September 2006.”

“Virkus believes his site and design will be superior. ‘It’ll have a lot of eye candy, and be a fun place to go, with meeting space and a restaurant,’ Virkus said. ‘The residential market is tough now, non-existent. There are a lot of units downtown on the market.’”

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