The Housing Bubble

The Record Searchlight reports from California. “Here’s another sign of a stagnant real estate market: Some developers in town are taking their homes off the market and turning them into rentals. Two weeks ago, East Oak Estates in south Redding announced this would be the last weekend some of its homes would be for sale. They were going to start leasing them out.”

“But East Oak developer Karen Margrave said buyers waiting for some colossal closeout sale will be sorely disappointed. She has no plans to sell her homes at below what she paid, nor she says will other builders. So they’re getting into the rental business while waiting it out.”

“Some homes in East Oak Estates already have been reduced as much as $57,000.”

“‘We have sold homes recently, though it’s much slower than we’d like to see. We know prices are going to go back up, and we believe they will start rising again next spring,’ Margrave said in an e-mail.”

“Margrave added that other builders like Palomar Builders Inc. already have moved their inventory into rentals and will hold them until the market turns.”

“Brad Garbutt, who’s been selling real estate in Shasta County for years, said it’s unusual for developers to rent back their homes. ‘I don’t recall any developer on a large scale doing something like that,’ Garbutt of Real Estate Professionals GMAC said. ‘Developers usually can’t do that. They can’t stop everything because the bills keep coming.’”

“Glen Jones of Greater Shasta Homeplaces in Redding agreed that it’s strange to see a builder get into the rental business. ‘I have never seen it before, but we have never had this situation,’ Jones said.”

The San Fernando Valley Business Journal. “Oh what a difference a year makes. One year ago, housing sales were booming. One year later, sales are at their worst in 16 years. Depending on who you talk to, borrowers, Wall Street, banks and the Federal Reserve receive their share of blame.”

“Yet mortgage brokers are the group getting the largest portion of bad press. Many brokers are fighting back, blaming the banks and mortgage companies that package the loans and establish broker fees.”

“‘The bottom line is that banks definitely allowed people to over-leverage themselves, and now they are in a period where they have to correct the market,’ said Bill Knox, senior loan officer at Bristol Home Loans in Sherman Oaks.”

“Knox, whose sales have been 40 percent in subprime loans, said the majority of lenders are conscientious about explaining convoluted loans to clients – even though loan documents average, he said, between 15 and 100 pages.”

“‘You go over the main information,’ Knox said. ‘You try to explain it to them until you are blue in the face.’”

“One of Knox’s clients read a mortgage contract all day, he said. ‘The next day she came in and signed everything. And then a year later, she calls to say she didn’t understand any of it.’”

The Mercury News. “Increasingly, as homeowners fall behind on their loan payments or lack enough equity in their homes to sell them for more than their mortgage balances, they are contacting their mortgage lenders for possible help.”

“In the beginning, his calls were transferred repeatedly and often dropped, he said. With persistence, he reached the lenders’ correct departments and told his story. He and his wife, Grace, were both diagnosed with cancer at different times in the past four years. Both had to quit working during their treatments.”

“‘I believed what they said about calling your bank ahead of time, because they don’t want your house,’ said Chavez, who first called his lenders for help in August. ‘I didn’t get that response at all. They told me they had no programs to deal with that type of thing.’”

“In response to a call Wednesday by NACA for a boycott of Countrywide because, according to the group, the company ‘refuses to restructure loans to what homeowners can afford,’ the lender issued a statement Thursday.”

“Chavez now is back at work in quality control for a tea manufacturer, following about eight months of treatment for lymphoma. His wife was treated for sarcoma for a year and went back to work as a teacher in 2005.”

“Their household income is about $90,000. But they’ve nearly maxed out their $120,000 home equity line of credit, and because they can only afford the minimum payment option on their adjustable-rate loan, the principle balance on their first mortgage is growing rather than shrinking with every payment they make.”

“‘They were nice about it,’ Chavez said of the representatives he eventually spoke with at his lenders. ‘But I mean, it’s still, ‘They don’t have a program for you.’”

The San Francisco Chronicle. “Of the Bay Area’s 236 ZIP codes, 25 are foreclosure hot spots - places where more than eight of every 1,000 homes were repossessed by lenders this year.”

“Even in expensive areas like Marin County the crisis is beginning to be felt. One of the Bay Area’s highest-priced ZIP codes, 94920, in the tony Belvedere/Tiburon area, was home to nine foreclosures - including a $1.3 million ‘Bel-Aire tract home’ with ‘floor-to-ceiling windows … and French doors leading to the pool.’”

“In the Antioch ZIP code of 94531, the median price stood at $452,000 in July and August, according to DataQuick. But that seems to be dropping fast, putting more homeowners in danger of losing their largest asset.”

“Real estate agent Luis Salas has about 10 listings in the Antioch area; eight are short sales, in which the sellers ask the bank to take the properties for less than they owe on the mortgage.”

“In part, Salas and others blame the steep competition for buyers’ attention. Along the line separating Antioch and Brentwood sit winding streets filled with just-finished homes - more than 40 percent of the housing stock there is considered new, according to the Construction Industry Research Board.”

“With so many choices for buyers, builders are offering big price reductions or luxurious upgrades. Why buy a home from a bank or distressed homeowner when a builder will kick in granite countertops or knock off tens of thousands of dollars from the sale price?”

“‘They can afford to give you $100,000 in incentives,’ Salas said. ‘I can’t afford to give you $10,000 in closing costs.’”

“Towns closer to the region’s urban core - Richmond, Oakland and East Palo Alto - also show rising foreclosure rates…Those areas do share some of the other characteristics of the most foreclosure-prone parts of Antioch or Oakley: affordability and large price drops.”

“For the first time since the mid-1990s, some Bay Area counties are reducing property taxes for significant numbers of homeowners, mainly those who bought houses since late 2005 in areas where prices have declined.”

“Most of the reductions were in cities where a lot of subdivisions have been built in the past three years, such as Antioch, Pittsburg, Brentwood, Oakley and San Ramon, says Contra Costa County Assessor Gus Kramer.”

“This is the first time since 1995 that his office has proactively reduced property values.”

“Santa Clara County automatically reduced taxes on about 18,000 properties, compared with 6,000 last year. Most of the reductions were on mid- and lower-price homes and condos in cities with less-than-stellar school districts, says Santa Clara County Assessor Larry Stone.”

“San Francisco Assessor Phil Ting says, ‘At this time we haven’t seen any more (property tax) reductions than normal … but I think it’s coming.’”

The Street.com. “Gary Feldstein from Ojai, Calif., has hired auctioneer Sheldon Good & Co. to dispose of the house he bought for about $1.25 million three years ago. His hoped-for take from a sealed-bid auction set for Nov. 7, at least $4 million, says Jamie Somers, the broker in Ojai who sold Feldstein the house but who won’t be getting the listing this time.”

“Somers says he is ’skeptical’ about how well Feldstein’s sale will go, although he says he understands the seller’s need for speed. ‘Even in the upper end, things are not selling quickly,’ he explains. And although Somers acknowledges that Feldstein ‘did quite a number’ in renovating and furnishing the house, ‘he’s asking quite a premium. The upper end is good, but I don’t know if it’s as good as he thinks it is.’ (The lower end, he says, ‘is horrible.’)”

“‘The market is going to determine what the house is worth,’ says Feldstein.”

“Says Feldstein about what’s really underlying his auction decision: ‘I’m a New Yorker,’ he declares. From a timing standpoint, ‘today is okay, but yesterday is always better.’”

The Orange County Register. “Mission Viejo broker/economist Gary Watts, whose home-price insights are widely watching in the local real estate community, conceded Friday that his 2007 housing forecast was wrong, but in his 2008 forecast remains upbeat, predicting that home sales will bounce back.”

“‘The numbers for September and October may be our darkest hour, and then things are going to improve,’ Watts said.”

“Watts didn’t issue a price forecast, saying there’s too much uncertainty…A year ago, Watts forecast a 7% gain in home prices this year. House prices actually were flat through August, and are down 2.2% in the latest weekly figures from DataQuick.”

“Watts said he expected inventory to decline this year (plus) higher summer sales and for the Federal Reserve to lower interest rates earlier in the year. And he hadn’t foreseen the subprime mortgage meltdown.”

“His published forecast notes: …In the 1990s, real estate values dropped over 19% in Orange County; in this housing downturn it has been minimal. So what makes this cycle different. The truth lies in the fact that today’s homeowners have more income, more equity and more wealth than in previous cycles.”

The Press Telegram. “The California Association of Realtors annual Expo 2007 ran from Tuesday through Thursday at the Anaheim Convention Center.”

“The housing forecast, delivered on Wednesday by CAR Chief Economist Leslie Appleton-Young was perhaps the low point of the conference. The state’s median home price will incur the biggest drop in 15 years, as sales slide to their lowest point in more than 20 years, Appleton-Young said.”

“The forecast called for California’s median home price to fall 4 percent to $553,000 in 2008, while sales will fall 9 percent to 334,500 units. The last time sales fell below 2008’s forecast of 334,500 units was in 1985, when the volume reached 328,270 units, according to CAR.”

“Appleton-Young blamed the anticipated price drop on a market weighed down by sluggish sales, the mortgage crisis and because the market is no longer boosted by consumer expectations of rising home prices.”

“‘We really are going through a major adjustment right now to a market that isn’t fueled by those expectations,’ Appleton-Young said.”

The Detroit News reports from Michigan. “Michigan’s largest lender Quicken Loans Inc. is retrenching, including freezing hiring in the state, as it sets a new course in the turbulent mortgage industry. The Livonia-based mortgage giant is lowering goals for its loan writers, ending mortgages that investors no longer will buy on the secondary market, and introducing new products backed by the federal government in its effort to gain market share in a shrinking industry.”

“The culprit behind the struggling mortgage industry and Quicken’s need to adjust: the worst housing slump in nearly two decades.”

“Eight ex-employees told The Detroit News that unrealistic sales goals, in a tough mortgage market, led to their dismissal or decision to quit in August and September. They say the goals were laid out in an ‘Opportunity Letter.’”

“‘I got a letter saying they wanted me to write 10 loans by the end of the month — superstars were doing five or six a month,’ once the market took a dip, said Steven Campisi, a mortgage banker who worked in Quicken’s Cleveland office. ‘I knew what they meant: They wanted me to go.’”

“As for the mortgage industry as a whole, it should begin looking up as the credit crunch eases, Quicken CEO Bill Emerson said. ‘Credit guidelines probably got a little too loose, and now they’ve corrected, perhaps too much,’ he said.”

The Citizen Patriot from Michigan. “The number of mortgage foreclosures in Jackson County this year has reached 950 — the highest it’s been in about 20 years, maybe longer, officials said. The number is 10 times greater than it was 10 years ago, and there are still two months left in the year.”

“Officials say there are several reasons why the foreclosure rate is growing: job loss, rising adjustable-rate mortgages, an unstable housing market and flat or declining income.”

“Record homeownership levels in the state increase the probability that more people can’t make payments, according to a state mortgage brokers group. And the road to foreclosure is a slippery slope. ‘You legally only have to miss one payment to start the process,’ said Pava Leyrer, president of the Michigan Mortgage Brokers Association.”

The Business Journal from Indiana. “Pending sales of houses-those with contracts signed by not closed-plummeted 16.8 percent in September from a year earlier, according to Metropolitan Indianapolis Board of Realtors figures released today by brokerage F.C. Tucker Co. Sales in Boone County fell the most, by 42.7 percent.”

“‘Central Indiana’s housing market is continuing to balance out,’ said Tucker President Jim Litten. ‘Inventory levels are still increasing slightly, but we are hopeful that the decline in new home construction and the steady pace of existing homes sales will be reflected in sales statistics in coming months.’”

The Rockford Register Star from Illinois. “Kitzman’s Lumber and Building Materials opened in 1979 as a straightforward hardware store, but that wouldn’t be enough to succeed in 2007. Many businesses are finding that diversification is the key to growth, maybe even survival, as subprime mortgage woes and credit crunches affect the economy.”

“Kitzman’s major customers are the area’s custom home builders such as Sean Adams Custom Carpentry of Byron and Zimmerman Home Builders of Rockford. Still, housing starts for the tract builders as well as custom home builders were down more than 30 percent through May.”

“‘We’re very fortunate because not all of our eggs are in the residential market,’ said Scott Kitzman. ‘Last year was a phenomenal year. If we were just in home construction, we’d be down 10 to 15 percent.’”

The Chicago Tribune from Illinois. “A new study by a home-improvement industry research firm found that the nation’s homeowners, expressing doubt about the market, are doing fewer fix-up projects. And they’re holding the glitz.”

“‘The thrill is gone,’ said Bruce Forni, a Detroit-based researcher whose firm, TNS-NFO, this summer studied 2,900 homeowners for a trade group that held its fall meeting in Chicago last week. ‘Fewer people are saying [they're remodeling] because they want the best house in the neighborhood.’”

“Forni said the shift may come from homeowners too time-pressed to pay as much attention to their homes as in years past. But it also may be a reflection of housing-market jitters, said Forni, whose company conducted similar studies in 2003 and 2005.”

“‘Home isn’t a safe [financial] haven any more,’ he said. ‘Homeowners are uncertain about the stability of their primary investment.’”

“He also said historically low interest rates no longer seem to be spurring as much remodeling. Freddie Mac has reported that the amount of home equity cashed out through refinancing in the second quarter was down about 25 percent from the year earlier. Forni said consumers tend to have low opinions of interest rates, particularly of adjustable-rate loans and mortgages.”

“‘Maybe they just don’t have the equity to borrow against,’ he said.”

“Though the home-improvement institute’s study found a large majority of homeowners said they agreed, at least to some extent, that putting money into their homes ‘is always a good investment,’ they were less confident when asked whether home values would increase in the next two years.”

“‘That’s where it starts to get disconcerting,’ Forni said. ‘They’re not seeing near-term improvement. There could be less confidence in trying to increase the value of their home.’”

“Rick Baumgarten, president of Lee Lumber on Chicago’s North Side, said there is a big segment stuck in neutral, watching to see whether home prices drop.”

“‘Instead of spending $60,000 to do their kitchen or $80,000 doing a room addition, they’re telling themselves that the prices are coming down so much that they may be able to get a home that’s got all those things done already,’ said Baumgarten.”

“South suburban remodeling company executive Jack Philbin said he is hearing some tales of woe.”

“‘I know from talking to many of my suppliers that they’re hurting,’ said Philbin, president of Philbin Construction & Remodeling in Crestwood. ‘One company that deals with insulation and drywall tells me their business is down 50 percent. One of our millwork suppliers is having a strong cutback in staffing, getting back to the nitty-gritty of people.’”

The Standard Democrat from Missouri. “Foreclosure rates in the area are beginning to edge up, a shadowing of what is occurring in the national market.”

“‘They are by far higher this year,’ said Tom Dirnberger, Scott County recorder. ‘Every day, we’re getting one or two, and it used to be one or two a week.’”

“In fact, a record number have already been filed this year. More than 200 were filed so far this year — a sharp contrast to the 153 total filed in 2006.”

“A big chunk of the filings in Scott County deal with land fraud. ‘In Scott County, there have been at least 300 fraudulent loans — fraudulent meaning loans given on properties that were over-appraised,’ he said.”

“‘It’s just been aggressive lending practices in general,’ said Lori Fowler, a broker in Sikeston.”

“One practice has been 100 percent financing often offered to borrowers. ‘People who wouldn’t have traditionally qualified for a home qualified,’ she said. ‘Some people who were not as financially stable were buying houses.’”

“‘I think most of the real estate agents in this area think the real estate market has been a little softer this year,’ Fowler said. ‘Sellers have to be a little more patient; and they may not get that really high dollar they were getting recently for their homes.’”

The Rapid City Journal from South Dakota. “Although some areas of the United States seem to be headed for a housing meltdown, builders and Realtors in Rapid City say the market here is holding its own for the most part.”

“‘Our market, contrary to all of the negative publicity from coast to coast, is not seeing that reality,’ said Sheila Tom, president of the Black Hills Board of Realtors. ‘All real estate is local, and what’s going on here might not reflect what’s happening there.’”

“On the construction side, building permits for single-family homes is down about 18 percent in Rapid City and Pennington County in the first eight months of the year.”

“For area builders, their biggest fear is fear itself. If people perceive that the housing marketing is headed for a fall, they will be reluctant to buy a new home - or a bigger home. It could become a self-fulfilling prophecy, they fear.”

“Builders have been trying to counter the perception that the housing market is in the dumps. Meanwhile, they’ve also cut back to reduce the inventory of houses.”

“Contractor Ken Fuerst of K1 Construction in Rapid City said he built 14 houses a year during the peak times; this year he’s done about four houses so far.”

“Scott Mueller of Mandalay Homes, one of the biggest builders in the area, said his company has about 45 homes in some stage of permitting, construction or sale. That’s about half what it was in 2005, he said.”

“Black Hills home values have seen steady, not spectacular, growth over the years. The average price increase has ranged from 4 percent to 6 percent in recent years. We simply don’t have that far to fall.”

“However, Sgt. Mike Dailey of the Pennington County Sheriff’s Office said foreclosures have been on the rise. So far in 2007, the sheriff’s office has handled 74 foreclosures, compared with 58 during the same period last year and 57 in the first nine months of 2005.”

“In 1997, the Pennington County Sheriff’s Office was involved in 33 foreclosures for the entire year.”

“Jack Lynass of BankWest in Rapid City said he remains bullish on the Black Hills economy. ‘I think the Black Hills area is recession-proof; we’ve been through tough times,’ he said.”

Some housing bubble news from Wall Street and Washington. The New York Times, “Three of the nation’s largest banks, working together at the behest of the Treasury Department, announced this morning that they were creating a large fund to serve as a buyer of bonds and other debt at a time when many investors are avoiding them. Citigroup, Bank of America and JPMorgan Chase will create a fund, called a conduit, that will be able to buy around $75 billion to $100 billion in highly rated bonds and other debt from structured investment vehicles, or SIVs.”

“Those vehicles own mortgage-backed bonds and other securities and have had trouble obtaining financing since early August, when the credit markets froze up. Bank and government officials are concerned that if these vehicles are forced to dump billions of dollars worth of debt in the coming weeks, it could cause a repeat of the crisis that rattled markets in August and sent the cost of mortgages and other loans soaring.”

“To maintain its credibility with investors from whom it would raising money, the conduit will not buy any bonds that are tied to mortgages made to people with spotty, or subprime, credit histories.”

“Each bank will put up an unspecified amount of its own capital into the fund, and other banks from around the world are expected to join the consortium in the coming weeks. The conduit will raise most of its money by selling commercial paper.”

“But it remains unclear how officials will determine the price of some bonds that have not been actively traded since August, because the difference between what buyers are willing to pay and what sellers want has widened significantly.”

“‘For me, this is more of a P.R. blitz,’ said analyst Christian Stracke. The banks are ’saying, it’s not just that we are doing this on an ad hoc, individual basis. Rather, we have a plan and consortium in cooperation with Treasury, which gives it a veneer of respectability.’”

From Bloomberg. “The group formed by Citigroup, Bank of America and JPMorgan will be known as the Master Liquidity Enhancement Conduit, or M-LEC.”

“‘This is mostly symbolic,’ said Christian Stracke, strategist at a New York bond research firm. ‘The banks were going to need to inject more liquidity into the SIVs anyway, so the public cooperation just makes the bailouts of SIVs seem more orderly.’”

From MarketWatch. “There won’t be any public money involved in the fund, said Robert Steel, the Treasury’s deputy undersecretary for domestic finance, in an interview on Bloomberg TV.”

“‘The goal here is to help the markets start to work,’ Steel said. ”This is a temporary solution in order to transition the market on to more sound footing.”

“The announcement of the fund came as Citigroup reported its third-quarter net profit fell by 57%, reflecting accounting for previously announced write-downs for bad loans and other credit issues. ”

From Reuters. “Citigroup Inc said on Monday third-quarter profit fell 57 percent as losses mounted from subprime and leveraged loans, fixed-income trading and its U.S. consumer business.”

“The earnings decline was the largest in three years for the No. 1 U.S. bank, and reflected $6.5 billion of pre-tax losses and writedowns, $600 million more than previously estimated.”

“‘This quarter’s performance was well below our expectations, and frankly surprising,’ CEO Charles Prince said on a conference call.”

“Citigroup reported pre-tax writedowns of $1.35 billion for leveraged loans, $1.56 billion for subprime mortgages, and $636 million from fixed income trading.”

“It also reported a $2.98 billion increase in credit costs, including a $780 million increase in net credit losses and a $2.2 billion charge to boost reserves for bad loans. Delinquencies on second mortgages nearly doubled last quarter.”

“CFO Gary Crittenden said Citigroup ended September with exposure to $57 billion of leveraged loans.”

“Crittenden said U.S. consumer credit conditions ‘will continue to deteriorate’ this quarter. He also said Citigroup faces $10 billion of mortgages whose rates will reset by the end of 2008, though 90 percent of these are higher-quality loans.”

“Nomura Holdings, Japan’s largest brokerage, on Monday said it will quit the U.S. residential mortgage-backed securities market and cut one-fourth of its U.S. workforce.”

The Wall Street Journal. “Nomura said it would take a loss of $621 million on write-downs of residential mortgages and an additional charge of about $85 million for restructuring the business. That will swing Nomura to a pretax loss of as much as $510 million in the quarter ended Sept. 30, 2007.”

“‘This is extremely regrettable,’ Nomura CEO Nobuyuki Koga said at a press briefing in Tokyo today. ‘The pace of the collapse in the U.S. residential mortgage-backed securities market was quicker than we expected.’”

“The world’s largest banks and securities firms have reported credit and market losses of at least $21 billion after defaults on subprime mortgages contaminated securities backed by home loans and other types of debt.”

“‘We found out that there was a limit to the measures that could be taken to cope with changes in the U.S. without having a thorough understanding of the market,’ Koga, said.”

The Washington Post. “Long before the mortgage market fell apart this summer, Friedman Billings Ramsey, Washington’s largest investment bank, saw the trouble ahead.”

“In early 2005, the company invested an eye-catching half-billion dollars, a third of what it had available, in the subprime mortgage business, even buying a mortgage lender. The company bet big that these high-risk loans to people with poor credit would return impressive profits.”

“But by the end of the year, FBR realized that it had miscalculated. The Federal Reserve kept raising short-term rates, and the firm suddenly was paying more to borrow money than it received in interest on its loans.”

“FBR sold some investments to stem the losses but didn’t move aggressively enough. Eventually, 80 percent of its mortgage-related investment would be lost and the company’s stock price would spiral downward.”

“‘It was brutal, extraordinarily difficult. There’s no other way to describe it,’ said CEO Eric Billings, of the firm’s series of investments in subprime mortgage lenders. ‘Our timing was very bad.’”

The Dow Jones Newswires. “Months before Merrill Lynch & Co. preannounced a third-quarter loss and a writedown of $5 billion last week, it had been assuring investors and the press that its portfolios of mortgages and asset-backed securities were well-hedged and profitable.”

“Investors are now questioning why Merrill would dissemble if the truth was going to come out weeks later. Similar questions could be asked about Citigroup Inc. and UBS AG, which each wrote off fixed-income assets of $1 billion or more months after sending out soothing words about their franchises. Bear Stearns Cos. whose mortgage woes triggered the summer credit crisis, similarly offered assurances that its mortgage portfolios were solid.”

“‘They didn’t understand or someone was willfully deceiving them,’ says Arthur Levitt, a former chairman of the Securities and Exchange Commission. ‘I don’t think either is a very good excuse.’”

“‘This market is characterized by an overwhelming number of synthetic and derivative products that are not adequately understood by people who build them and by people who buy them,’ Levitt said. ‘Investors in companies dealing in these opaque products probably bear risks that they never knew they were buying into.’”

“Autumn in New England may feel more like a winter of discontent for the 4,000 home lending specialists heading to Boston next week for an industry jamboree set amid the worst housing slump in a generation.”

“The Mortgage Bankers Association’s annual convention, a gathering ordinarily known for its pomp, parties and star sightings, this year will reflect the belt-tightening across a business under siege.”

“As of Thursday the MBA had registered just 38 Countrywide employees for the Oct. 14-17 meeting, down from 61 last year and 63 at the height of the housing boom in 2005. Wells Fargo & Co, JPMorgan Chase & Co’s Chase Home Mortgage and WaMu also sharply trimmed registrants.”

“Many previous conference-goers are now out of work, with 97,509 housing-related jobs slashed in the past year, according to Challenger, Gray & Christmas Inc.”

“The bottom line: Mortgage bankers lost $50 per loan in 2006, compared with $258 profit in 2005, according to the MBA.”

“Seismic shifts of power in the industry are still unfolding, with some lenders still nursing their wounds and others moving forward.’We’re at the beginning of an 18-month period that’s going to be very bumpy,’ said Alfred DelliBovi, president of the Federal Home Loan Bank of New York and a former HUD official.”

“Larry Goldstone, co-founder of jumbo lender Thornburg Mortgage, added: ‘There seems to be a lot of uncertainty about exactly what people want to do’ in the near-term.”

National Mortgage News. “Countrywide Financial Corp. has plenty to worry about these days: it’s facing a second-quarter loss that could top $2.5 billion, not to mention tons of negative publicity concerning its loss mitigation efforts on delinquent loans.”

“But now it may have a new worry. Loan brokers that use the company for table funding say its service is getting worse. One broker told us, ‘Ever since they closed local offices in Fresno their Sacramento office has no clue of what the hell is going on. I never get any of my calls returned and my clients tell me: ‘Why would I want to put them into loan with Countrywide?’”

The News Press reports from Florida. “WCI Communities Inc. is the latest developer to be targeted by homebuyers trying to get out of deals now that prices have fallen drastically. A federal class action lawsuit filed recently claims there’s a fatal flaw in the contracts used by the Bonita Springs-based developer to sell the 116 units in its luxury, 21-story condo tower Florencia — now some buyers want their deposits back.”

“The lawsuit is one more symptom of a softening housing market. The median price of an existing condo in Lee County has fallen 38 percent from February 2006, at $353,900, the highest on record, to $218,800 in August 2007, the last month available, according to the Florida Association of Realtors. For single-family homes, the price has fallen 22 percent from the all-time high of $322,300 in December 2005 to $250,800 in August 2007.”

“In this case, David Berry and John Schrenkel want out of the contract and their $115,000 deposit returned. But WCI attorney Thomas Roehn told Miami-based attorney Robert Cooper, who filed the suit, in a letter that it’s all just a misunderstanding. ‘WCI looks forward to Mr. Schrenkel and Mr. Berry closing upon their purchase of Unit 1202 at Florencia.’”

The Palm Beach Post. “Behind doors in Palm Beach County and along the Treasure Coast, from the meanest fixer-upper to the glitziest gated community, thousands of homeowners are struggling to make the mortgage.”

“Between Jan. 1 and July 1, homeowners in Palm Beach, Martin and St. Lucie counties defaulted on 4,318 mortgages worth $1.05 billion. That’s a 311 percent increase in defaults from the 1,051 recorded during the same period in 2006.”

“Loans in tony new communities crashed just as disastrously as homes in Counterpoint Estates, the aging middle-income subdivision just down the road from Versailles’ golden gates. Condos that once generated traffic jams of eager buyers went dark.”

“The $1.05 billion would buy the net assets of Florida Atlantic University — twice. And the number of soured mortgages adds up to one for every man, woman and child in Juno Beach.”

“Millions of dollars in mortgages collapsed before a single payment was made. Borrowers holding pre-construction loans defaulted on dirt before homes could come out of the ground.”

“‘This is all new territory,’ said Jessica Cecere, president of Consumer Credit Counseling Services of Palm Beach County and the Treasure Coast. ‘Two years ago, we could see it coming and thought it would be a disaster, but not this.’”

“This is staring her in the face the minute she leaves her house: A half-dozen homes in her neighborhood are in foreclosure.”

“Michael Sichenzia, lead investigator for (a) Deerfield Beach law firm, noted the media frenzy accompanying the boom. ‘Every book that was written, every time you read the paper … all you heard was flipping your way to wealth, borrow your way to wealth,’ he said.”

“That’s the environment in which mortgage broker Micki O’Callaghan snapped up two homes in Andros Isles and three in Terracina in West Palm. Same thing for Demetrius Walton, a 24-year-old South Florida man, who managed to purchase two Wellington homes and a housing lot with roughly $2 million in loans and no money down.”

“That sort of exuberance, irrational or otherwise, is the sort of thing loan officers and lenders once walked away from.”

“To keep the roof over her head, cancer survivor Deborah Tipton is squaring off with one of the largest banks in the world. Global powerhouse Deutsche Bank never wrote a loan on her modest Greenacres condo. It never saw her credit score, checked her baby-sitting income or requested an appraisal.”

“Tipton admits her $100-a-week baby-sitting wages should not have qualified her for a home loan in January 2006. But when her abdomen ruptured and herniated, a life-threatening post-cancer complication, she had no health insurance. She needed money. After 12 lenders turned her down, Fremont Investment and Loan Co. and QuoteMeARate.com Inc. said yes.”

“In broker documents, there’s no mention of Tipton’s meager wages. Instead, the paperwork says Fremont made a call to Wyn Solution Services Inc. of Sunrise, which said Tipton worked there as a district manager, earning $3,800 a month.”

“Deutsche Bank, which purchased Tipton’s loan along with millions of others and sold them to investors, declined to comment, citing the pending foreclosure. Deutsche Bank holds roughly $154 million in Palm Beach, Martin and St. Lucie county mortgages that defaulted between Jan. 1 and July 1, more than any other lender.”

“‘We all own a piece of this mess,’ said Bill Davis, former president of the Palm Beach County Mortgage Brokers.”

“In Anthony Groves near West Palm Beach, a half dozen homes on Berenger Walk defaulted on mortgages between Jan. 1 and July 1. In Counterpoint Estates in Royal Palm Beach, Oliver Lane had defaults; in Lake Worth, Wauconda Way; in Riviera Beach, West 30th Street.”

“It’s economics 101, Davis said: Prices are a function of demand. In Palm Beach County, the number of homes for sale in August rose to a three-year supply at the current pace of sales. In August, 33,708 houses and condos were for sale in Palm Beach County, according to Illustrated Properties.”

“‘My neighborhood is a classic case,’ Davis said. ‘Three years ago, you could put a for-sale sign out, and in three days you would have a contract and two backups. Now, houses are still listed for 12, 18 months. They don’t even have open houses anymore.’”

“‘The first part of this year, we started to see an increase, a lot of layoffs, even with the smaller contractors,’ said Steve Munnell, executive director of the Florida Roofing, Sheet Metal and Air Conditioning Contractors Association.”

“Not only is construction of new homes off but also homeowners looking to put their homes on the market are more likely to repair or replace tiles and shingles. Now, though, ‘people are not putting their homes on the market because there is no market,’ he said.”

The Orlando Sentinel. “More than 11,000 homeowners in the seven-county Central Florida region have defaulted on their mortgages through August. As in other communities walloped by the nation’s mortgage crisis, real-estate agents say Osceola’s foreclosure boom is fueled by small-time speculators and buyers who got no-money-down mortgages at teaser rates — and then got trapped when home prices fell.”

“‘If a buyer’s looking for a house and they have 100 homes to look at, and 10 or 15 of them are bank-owned properties that are well below market value, those are the ones they’re going to buy,’ said broker, Bryant Tutas.”

“Leonardo Calvo, a carpenter in East Hampton, N.Y., thought the house would be an easy investment. Years earlier, his friend bought a house in the Kissimmee area for about $150,000 and sold it two years later for more than $200,000.”

“The broker who sold him the house said he could get $2,000 a month by renting it. But Calvo never got close to that. He tried to sell the house for a year before giving it back to the bank. ‘It was a big mistake,’ Calvo said. He also blamed real-estate agents for misleading him.”

“‘Those guys are liars. They said this is a good deal, you can do this, you can do that. They say everything is easy, and you’re going to make a lot of money,’ Calvo said. ”When they give you the keys and they say, ‘Congratulations, goodbye,’ by that time, you’re going to be in trouble.’”

“For every Poinciana house sold in August through a real-estate broker, more than three homeowners entered the foreclosure process.”

The St Petersburg Times. “Tampa Bay area home sales keep probing new bottoms. September’s totals were off 39 percent from the none-too-spectacular sales of September 2006. That part about probing bottoms sounds proctological, but the market is about as savory as a barium shake.”

“Why aren’t people buying? Prices have retreated up to 20 percent. Builders are giving away the kitchen sink, along with Jacuzzis and hard-wood floors. Banks are dumping repossessed homes at discounts.”

“Many buyers wait for home prices to strike bottom, whenever that might be. They assume prices have room to fall, so why buy a diminishing asset?”

From Reuters. “Workers are painting, patching stucco and peeling protective plastic from gleaming panes of balcony glass at a new 1,000-unit condo called The Plaza, two towers that rise 43 and 56 stories over Miami’s bank district.”

“The opening of a raft of big complexes has analysts predicting the market, fueled by a frenetic construction spree that saw cranes sprout like mushrooms on the skyline, is edging toward a cliff.”

“In August, condo sales in Miami-Dade County dropped 44 percent, according to the Florida Association of Realtors. But the number of condos on sale has climbed to 25,000, a 36-month supply.”

“Some analysts believe 2008 will be the turning point, when pre-construction buyers are forced to pony up the full purchase price or walk away from deposits, speculators feel the pain of holding too many properties and developers need to dump excess units at discounts of 30, 40 or even 50 percent.”

“At the peak some 60,000 units were under construction, planned or permitted in the city of Miami, whose 400,000 people represent only 16 percent of Miami-Dade County. Some of those projects have been canceled. But the ones already underway and soon ready for residents are shrouded in uncertainty as buyers look to back away from contracts, unable to get mortgages or fearing they are paying too much.”

“‘We have definitely not seen the bottom yet. In the next six to 12 months we’ll see the beginnings of that moment of truth,’ said Brad Hunter of Metrostudy. ‘It could be 2012 to 2014 before this market needs to build more condos.’”

“Between 2006 and 2009, one analyst said, developers will drop 28,000 new units into the Miami market. In just eight prominent buildings in the downtown and banking districts more than 6,600 units are nearly ready.”

“A smaller Miami-area condo glut in the 1980s took six years to correct, analysts say. This one could be worse. ‘I think we’ve only seen the tip of the iceberg in terms of the pain the market will see,’ said Matthew Martinez, point-man for a Connecticut-based private equity fund.”

From CBS 4.com. “CBS4 has been bringing you to the latest on South Florida’s housing crisis as countless condos and homes remain unsold and record-breaking foreclosures continue. Now some insiders say our real estate crunch is going from bad to worse.”

“Cutler Bays’ John Shimmel just put his home up for sale. Fed-up and laid off the Miami native is looking for a new life anywhere but Florida. ‘I just got laid off, and I think it’s just never a better opportunity to leave,’ said Shimmel. ‘It gave me a good chance to get the house up for sale 100 percent, and I’m ready to go.’”

“Shimmel’s optimistic he’ll be able to sell his home before he gets into real financial trouble. His advice for any other neighbors still struggling to pay their tax and insure bills?”

“‘If they want to stay, it’s a beautiful sunshiny state, but there’s better places to be. I’ve lived all around — traveled all around the United States, and there’s just better places to be than right here,’ said Shimmel.”

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