The Housing Bubble

Dataquick reports from California. “Home sales in Southern California plunged to the lowest level in more than two decades, as financing with ‘jumbo’ mortgages dropped by half. The median price paid for a home dropped sharply as a result. A total of 12,455 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in September. That was down 29.9 percent from 17,755 for the previous month, and down 48.5 percent from 24,195 for September last year, according to DataQuick.”

“Last month’s sales were the slowest for any month in DataQuick’s statistics, which go back to 1988. The previous low was in February 1995 when 12,459 homes sold. The September sales average is 25,258.”

“The number of Soouthland homes purchased with jumbo mortgages dropped from 5,359 in August to 2,681 in September, a decline of 50.0 percent. A jumbo mortgage is a home loan for $417,000 or more. For loans below that threshold, the sales decline was 19.3 percent, from 9,237 in August to 7,459 in September. Historically, sales drop by about 10 percent from August to September.”

The Union Tribune. “San Diego County, as well as the rest of Southern California, experienced plunging home sales in September as lenders temporarily pulled the plug on jumbo loans for high-priced homes, DataQuick reported.”

“San Diego County’s overall home price median last month was $470,000, down $5,000 from August and off $15,000, or 3.1 percent, from September 2006.”

“Sales counts for San Diego were at their lowest monthly levels since January 1996, when the region was nearing the end of a long real estate recession. The total last month was 2,152, down 35.5 percent from September 2006.”

“Around Aug. 17, many lenders briefly stopped or severely cut back on jumbo loan financing as they reassessed the impact of the credit crunch caused by rapidly rising defaults and foreclosures nationwide.”

The Orange County Register. “Full-month housing data for September from DataQuick shows how big a bite the mid-summer credit crunch took out of the O.C. housing market: a one-for-the-record-books drop in pricing and sales volume.”

“According to DataQuick, last month’s median selling price was $570,000 — the lowest since March ‘05 — and down 9.5% from September ‘06, the biggest month-to-month percentage-point drop since August ‘95.”

“September’s price was also down $60,000 from a year ago. (Prices are still up $386,000 from the ‘96 low!)”

“September sales of O.C residences selling for $600,000 or less was off 29%. Above $600,000? Down 55%. September’s 1,643 sales marked the slowest month in DataQuick’s 20 years of tracking O.C. home-buying habits.”

The LA Times. “September proved to be the cruelest month yet for the sputtering Southern California housing market, as monthly home sales fell to their lowest point in nearly 20 years.”

“The median sales price for homes in the six-county area from San Diego to Ventura also fell in September, a shift from previous months in which sales of high-end properties had propped up the median price.”

From KCRA In Lincoln, CA. “Days after receiving her property tax bill, Annemarie Boyle still can’t believe it. Boyle said her bill was up $2,400 from last year and didn’t have the money in her escrow account to cover it.”

“Boyle couldn’t understand how her property could have increased in value when homes around her were selling for rock-bottom prices and going into foreclosure.”

“In a declining market, some homes may be worth less than that assessed value. Assessor Bruce Dear said his staff looked at more than 20,000 properties for this January and lowered the value on more than 18,000 properties.”

The Sonoma News. “The Hotel Chauvet, lingering in real estate purgatory since March, finally seems to be attracting buyer interest and one of the historic building’s six condominium units has already sold.”

“Rescued from oblivion by a group of investors 11 years ago, it took nearly $5 million and a painfully long time to turn it into luxury condominiums. Had the building been finished a year or two sooner at the height of the most recent real estate boom, it’s likely that all six units - originally priced between $1,195,000 and $1,395,000 - would have quickly sold.”

“But the bubble burst, interest rates rose, and when the luxurious condos were ready for prospective buyers in March, very few buyers appeared and none of them bought.”

“The absence of interest led investment partners Chris Hansson and Larry Paul to try selling the units at an upscale auction held at the Lodge at Sonoma in April. Despite a reserve 35 percent below the asking price, no bidders came forward and the auction was canceled.”

“Sue Paul said she took over the listing and was startled to discover it had not been previously placed on the MLS. Two prospective investors have offered to buy the whole building, said Paul, but not at a price that would cover the original investment.”

“Since she listed it, Paul said, ‘I’ve had probably 150 realtors come through.’ Paul holds open house every Sunday from 1 to 4 p.m. and said she’s had from 50 to 300 people come through each week. The renewed interest may be partly a product of a drop in price. The condos are now being offered at $995,000 and $1,025,000 for the two bottom-floor units, and $1,195,000 for the units on the upper two floors.”

“Total the numbers and, if all the remaining units sell for asking price, it looks like the Chauvet’s investors may actually make a small, perhaps very small, profit.”

The Recordnet. “It’s not a magic bus, just a vividly marked one - REPO HOME TOUR.COM - that real estate agent Cesar Dias hopes will work some magic for him in a bleak home-sales market.”

“Dias, an agent and loan officer, has launched a weekly Saturday bus tour to try to get buyers interested in looking at some of the area’s growing number of foreclosure properties.”

“Between a dozen and 20 people a week have taken the tour of 10 to 12 bank-repossessed homes the past few weeks, Dias said, and a few deals have been made. Not bad in a market where home sales in September dipped to the lowest level so far this decade.”

“‘Nobody’s talking about the prices that are really affordable now,’ he said. ‘There’s a lot out there under $200,000 - prices we haven’t seen for four or five years - and a lot of people don’t know that.’”

“One exception is D.J. Johal, a Repo Home Tour veteran. He’s been on three Saturday tours, bought one home and has a deal on a second that he hopes is near closing. He just closed a deal on an Eighth Street house that was listed at $219,000 four months ago and then was lowered to $110,000.”

“He bought it for $75,000.”

“‘I felt good,’ he said. ‘I figure if I put another $20,000 in it, if I have to sit on it until the market turns, it’s still going to turn almost $1,000 a month in rent.’”

“Most the foreclosed homes he saw on the bus tour need work, he said, but with, say, $20,000 or more to ‘freshen up’ the places with new flooring, paint and landscaping, he’ll have properties worth way more than he paid when the market picks up again.”

“Meanwhile, he figures he’ll be getting $1,000 and up a month in rent.”

“‘I learned that these banks already have been sitting on some of these properties for quite a long time, and they’re willing to play ball if you make a reasonable offer,’ he said.”

“The latest Coldwell Banker Grupe-TrendGraphix monthly sales report…indicates that sales and selling prices of existing homes in San Joaquin County have continued to drop as the market moves into its third consecutive year of decline.”

“The 228 sales countywide in September were the fewest this decade, as were the 289 pending sales last month. That compares with 796 sales and 716 pending sales in September 2005, just before the downturn hit.”

“And median selling prices have fallen sharply, from $370,000 in July to $325,000 last month, a 12.2 percent drop in two months.”

“‘It doesn’t matter if prices go down another 10 percent,’ said Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton. ‘In the long run, they are going nowhere but up.’”

A report from the Arizona Republic. “The 3,050 recorded sales in September 2007 heralds in the local resale housing market’s traditional period of doldrums. The activity of September followed August 2007 at 4,240 sales and was below last year’s 4,875 transactions. The month of September brought the year-to-date total to 40,800 sales, which is well below the 52,390 for 2006 year to date and 88,750 sales for 2005 year to date, according to real estate experts for Arizona State University.”

“‘Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines,’ said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness.”

“The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market.”

“Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market. New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards.”

“‘Because of these tactics, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the expectations of even a few months ago,’ said Butler.”

“‘Brutal’ and ‘perfect storm’ are some of the descriptions local economists now use to describe economic conditions in Maricopa County.”

“I think this will be a brutal year,’ said Dennis Hoffman,an Arizona State University economist who helps guide sales tax forecasts for the state.”

“In an interview, he said ‘I think it has a lot to do with the fact that our local sales tax revenues are tied to this new house-new car phenonomen, decorating the house, doing maintenance and repairs and adding new carpeting, furniture and fixtures.’”

“‘It is kind of humorous when you walk on the (auto) lot. You are treated like the messiah returning,’ Hoffman said. ‘The deals are incredible. It’s a great time to be buying an automobile.’”

“Economist Elliott Pollack reiterated that the housing market is a serious worry because there are so many houses on the market and lending standards have become tougher. Also the housing slump could slow migration into the state because homeowners in other states can’t sell their houses to move here, he said.”

“‘We especially have a perfect storm in the housing market,’ he said.”

“Jay Butler, director of Realty Studies at ASU, said some housing prices are improving in some areas, such as east Mesa, and falling in others, such as Surprise and Queen Creek.”

“Apartment rents are stalling to fall, in part because of competition from apartments that were going to be converted to condos that are now reverting to apartments.”

“‘The housing market is structurally about where it should be,’ he said. ‘We have got to get the overhang down where it should be. That is going to take several years.’”

“The Southeast Valley’s housing market continued its slump. The Mesa ZIP codes 85213 and 85215 posted slight gains while the rest of the Valley’s home values fell.”

“‘There’s a gigantic inventory out there,’ said Cindi Dewine-Barebo, a real estate agent who specializes in the Southeast Valley. Dewine-Barebo estimated there are 56,000 homes for sale in the Valley right now.”

“‘In the heyday (2005), there were 7,000 homes,’ she said.”

“Dewine-Barebo said falling values represent an overdue market correction. But she tells sellers that they need to be realistic and not ‘get hung up’ on an asking price that doesn’t reflect today’s market.”

From Builder Online. “Ashton Wood Homes, the industry’s 37th-largest builder last year, reported yesterday that its orders, closings, and net income were hit hard during the three months ended August 31.”

“Like many builders, Ashton Woods finds itself in a bind, where it can’t sell homes without discounting, but where discounting only encourages buyers to think that lower prices are around the corner.”

“‘[T]he demand for new homes has declined as consumers continue to see home prices adjust downward, which has contributed to the weakening of consumer confidence,’ states Tom Krobat, Ashton Woods’ CEO.”

“During the quarter, the average sales price of this builder’s homes fell 7.9 percent, to $270,000, with the biggest dip - 33.3 percent - in the Phoenix market, to $305,000. ‘Phoenix is one of the more depressed [housing] markets, with a tremendous price problem,’ Krobat told BUILDER during an interview.”

The East Valley Tribune from Arizona. “Developers of the planned Gilbert Esplanade have sold the property, becoming the second builder of a major retail center to announce an ownership change in less than a month.”

“Officials with Phoenix-based De Rito Partners said they decided to sell the site at Gilbert Road and the Loop 202 Santan Freeway to an Ohio-based firm when it was unable to fill an anchor space.”

“Dawn McLaren, a research economist at Arizona State University in Tempe, said retail developers are feeling the new realities in the housing market. ‘Things have changed in Arizona,’ she said.”

The Review Journal from Nevada. “The Silver State had the country’s highest foreclosure rate for the ninth consecutive month in September. Monthly single-family home sales are falling dramatically against a staggering inventory of unsold properties.”

“The MLS has more than 30,000 single-family homes, condos and townhouses for sale in the Las Vegas Valley. Rick Brenkus, co-owner of two local Keller Williams Realty offices, sees uncertainty in both buyers and sellers sitting on the sidelines, holding out for a better deal.”

“Some potential buyers think this 18-month inventory of homes warrants a 20- to 30-percent price plunge, he said.”

“‘You have to get rid of that inventory before any real recovery can take place,’ said Dennis Smith of Home Builders Research. Yet at some auctions lenders have been unwilling to discount foreclosed properties more than 20 percent or 25 percent from listed prices, he wrote.”

“But Guy Deiro, president of a local real estate brokerage, auction and liquidation company, said he recently has seen more lenders and individual sellers willing to compromise. In the past month, he said, about 80 percent of the sellers accepted final bids at his auctions.”

“‘Lenders are starting to figure it out, what the story is in terms of where they have to go down to,’ Deiro said. ‘As the month goes on, everyone seems to get more realistic.’”

“Smith suggested lenders follow the example of home builders that have aggressively unloaded their inventory and move on.”

“The new home market has a much leaner inventory than the resale home market, about one to two months’ worth, McCormick said. Area builders sold 1,970 new homes in August, about double the number of building permits issued that month.”

“Presold properties have long been a mainstay for Astoria Homes. Nonetheless, the company was caught off guard when it lost about 25 percent of its buyers because of the subprime crisis.”

“‘These are people who had bought from us and told us they had a loan, and the lender went broke, so the buyer never closed,’ McCormick said. ‘That is why we had a sudden burst of inventory.’”

“Astoria Homes bolstered its financing promotions with other incentives, including lot premiums, customized upgrades and discounts that created savings upward of 15 percent off the sales price, he said. The builder expects to sell its remaining homes, which totaled about 60 early this month, by the end of the year.”

“The Greater Las Vegas Association of Realtors reported 990 single-family home sales in September, down 24.8 percent from the previous month and down 43.1 percent from September 2006.”

“As a sign of the times, Brenkus, with 22 years in the business, estimates that 20 percent of the properties his offices handles are foreclosures or short sales, up from about 7 percent a year ago.”

“The stumbling housing market has tentacles that could reach into every household in the Silver State.”

“From thousands of lost jobs to widespread housing depreciation to a dip in the revenue flowing into state and county coffers, the fiscal fallout of a lagging housing sector is settling across Nevada’s economy.”

“‘All sectors are feeling the effects of (greater delinquencies and dropping home prices),’ said Brian Gordon, a principal in the economic research firm of Applied Analysis. ‘It’s impacting the willingness of consumers to spend on discretionary purchases ranging from automobiles to dining out to gaming, and everything in between.’”

“Clark County’s construction sector shed more than 4,100 jobs between the first quarter of 2006 and the first quarter of 2007, according to the state’s Department of Employment, Training & Rehabilitation.”

“Pile on job contractions in real estate-related fields such as title insurance, mortgage banking and property appraisals, and the effect on consumer spending becomes more acute.”

“More than a fifth of loans made in Nevada in 2006 were interest-only mortgages with payments that will rise in coming months and years, according to LoanPerformance. Another 17 percent of the loans made here last year were option-ARM mortgages.”

“Falling home prices are also vaporizing assets: Every 1 percent drop in the median single-family home price costs Clark County homeowners $800 million in household wealth, said Jeremy Aguero, another principal at Applied Analysis. Toss in condominiums and town homes, and the impact approaches $1 billion, Aguero said.”

“The median price of an existing home in Las Vegas was $270,000 in August, down 6.6 percent from $289,028 in August 2006, according to SalesTraq.”

“Nevada’s revenue from taxable sales has declined three months in a row, falling 2.6 percent in July when compared with July 2006, and 0.3 percent in June when compared with the same month in 2006. May’s 3.6 percent slide in year-over-year revenue was the biggest drop since December 2001.”

“Tyler Corder, (a) car dealer’s chief financial officer, knows of a ‘fair number’ of consumers who plan to avoid auto purchases until they can sell their homes.”

“‘They’ll say, ‘My house has been sitting on the market for 90 days and I haven’t had any offers on it,’ Corder said. ‘I know of a few people who bought second homes as speculative properties, and they’re having difficulty renting out their homes or unloading them.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “D.R. Horton Inc., the second-largest U.S. homebuilder, said orders in the fiscal fourth quarter plunged to the lowest in almost six years as customers canceled and banks restricted lending. Buyers agreed to purchase 6,374 homes from the Fort Worth, Texas-based company, 39 percent lower than a year earlier. The value of those fell 48 percent to $1.3 billion.”

“Customers canceled 48 percent of homes they reserved, up from 38 percent in the previous quarter. ‘We expect the housing environment to remain challenging,’ said Chairman Donald Horton. ‘Buyers continued to approach the home buying decision cautiously.’”

“The five largest homebuilders have reduced the value of their real estate and incurred expenses totaling $4.7 billion in their most recent quarters, in the worst housing slump in 16 years.”

The Street.com. “The sharp order drop was disappointing since Horton was facing an easy comparison from a year ago, when orders declined 25% year over year.”

“The question now becomes whether the big sales drop came even amid aggressive price cuts. If so, that’s bad news for the homebuilding business, since it points to an even larger supply and demand imbalance than most analysts had been projecting.”

“Orders came in lower across all of Horton’s markets. California was among the worst, with a 58% plunge.”

From MarketWatch. “Morgan Stanley analyst Robert Stevenson said D.R. Horton’s preliminary results ‘underscore the continued decline in housing operating fundamentals and further extends our timetable for stabilization.’”

“He said the nearly 50% cancellation rate for the quarter ‘illustrates that the problem is industry-wide and not merely focused on the smaller builders in significant financial trouble.’ There are concerns some companies may not have the financial strength the weather the downturn.”

“‘Given falling home prices and the various mortgage-market issues, we expect cancellation rates to be [at least 40%] for most builders this quarter,’ Stevenson wrote. ‘Coupled with the level of oversupply and our view that there could be another [10% to 15%] hit to home prices from foreclosures in 2008.’”

“Banc of America Securities analyst Daniel Oppenheim in a report Tuesday said D.R. Horton has been ‘extremely aggressive’ on price cuts in recent weeks in two speculative markets, Phoenix and Southern California, and is gaining market share.”

“‘We think Horton’s aggressiveness is likely to reset the bar even lower for home prices as other builders react by matching these price cuts, which should trigger significant further impairments,’ Oppenheim said.”

“Wells Fargo & Co., the biggest bank on the U.S. West Coast, said third-quarter profit rose less than estimated after losses from home equity and consumer loans climbed.”

“Chief Financial Officer Howard Atkins said in an interview the weakness will also hurt fourth-quarter results. ‘The decline in home prices accelerated’ in the third quarter, ‘which produced somewhat higher losses than we anticipated,’ Atkins said.”

“The bank reported net credit losses of $892 million, up 35 percent from a year earlier. About half of the increase stemmed from home equity loans, where lower home prices caused steeper- than-expected losses, Chief Credit Officer Mike Loughlin said.”

“Mortgage originations at Wells Fargo dropped 12% from a year earlier to $68 billion. Wells Fargo said that mortgage applications in the pipeline fell 18% to $45 billion.”

From Reuters. “Challenges facing homeowners today are so manifold that even lenders’ best efforts to stave off foreclosures may never work, according to a major lender and a community group.”

“The combination of falling home prices, rising payments on adjustable mortgages and higher unemployment in some regions have created problems so diverse that single solutions, such as widening the Federal Housing Administration’s reach, will not be enough, said Mary Coffin, an executive VP for Wells Fargo & Co.’s loan servicing group.”

“‘You have so many factors happening at once that there are some customers (the industry) cannot help,’ Coffin told Reuters at the Mortgage Bankers Association annual meeting here. The industry must be careful about making blanket statements suggesting it will be able to help all borrowers prevent foreclosure, she said.”

“Just getting the customer to call is a big frustration for Wells Fargo, which found 30 percent of borrowers it services have contacted the company, she said.”

“Options may still not keep people in their homes, according to consumer group NeighborWorks America. Some borrowers who because of falling house prices owe more than their home is worth are able to sell their home to the bank at the appraised value, freeing themselves of the debt, said Douglas Robinson, a spokesman for NeighborWorks.”

“‘Not everyone can be helped in the way they want,’ he said.”

“Treasury Secretary Henry Paulson, defending an effort he spearheaded to stabilize credit markets, has ‘no interest in bailing out lenders or property speculators,’ the New York Times reported on Tuesday.”

“Later on Tuesday Paulson will call for new regulations for mortgage lenders, changes in credit-rating agencies’ practices and stepped-up oversight by financial regulators, the Times reported.”

From CNN Money. “Paulson did not allow borrowers to escape without their share of blame. ‘Buying a home today is a complex process, but that in no way excuses home buyers from their obligation for due diligence.’”

The Associated Press. “Paulson also stated, ‘When investors are relieved of the cost of bad decisions, they are more likely to repeat their mistakes. I have no interest in bailing out lenders or property speculators.’”

The International Herald Tribune. “At least give Peter Kasch, managing partner of Catalyst Capital, a London real estate firm, credit for his brutal honesty. With a hint of nostalgia, Kasch recalled the heady days when low-cost borrowing and willing investors made European real estate a business in which it was hard to go wrong.”

“‘A lot of us only had to get out of bed to make money,’ Kasch said.”

“Like a villain in a Scooby Doo cartoon, the banks behind the new $80 billion bailout fund are essentially saying, ‘We would have gotten away with it, if it wasn’t for those pesky subprime loans.’”

“Problem is, the issue was never just subprime loans, it is the far wider and deeper problem of loans made on overly optimistic assumptions secured on U.S. real estate, which is now in a once in a generation slump.”

“The banks, in isolating the better mortgage debt, run the risks that the market either offers them a price that would force damaging writedowns of other mortgage debt held on or off balance sheet, or worse, refuses to fund at all.”

“‘I’m not sure it will be easy to find people to buy this stuff,’ said Jochen Felsenheimer, head of credit strategy at Unicredit . ‘It’s not just a subprime-linked problem. The problem is that we have used securitization instruments to create a bubble. We sold a lot of risk just knowing that the CDO or other manager would buy it.’”

The New York Times. “The biggest banks in the United States, with active encouragement from the Treasury Department, unveiled a plan yesterday to keep the housing-related debt crisis from worsening. ‘The idea is to avoid a fire sale of assets,’ said one banker involved in the initiative.”

“Josh Rosner, an expert in mortgage-backed securities at Graham Fisher, an independent research firm in New York, questioned why the banks needed to establish such a vehicle.”

“‘If they really believe these are good assets being mispriced in the market,’ he said, the banks could just buy them and wait for the asset values to recover. ‘This raises the question of whether the banks are doing this just to avoid taking their losses.’”

“‘I don’t really see that this is going to make a significant difference,’ said Jan Hatzius, chief United States economist at Goldman Sachs. ‘It seems a little more like a P.R. move, frankly.’”

“Mr. Hatzius said he wondered ‘why this is going on when previously the official word was that things were getting better.’”

“During the summer credit crisis, investors concluded that the default rates on subprime mortgages made last year would probably prove to be the highest in the industry’s history. But there appears to be another contender for that dubious honor: subprime loans made in the first half of this year.”

“Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year, according to a report by investment bank Friedman, Billings, Ramsey.”

“The report’s author, Michael Youngblood, a portfolio manager and analyst at Friedman, Billings, Ramsey, said that most mortgage companies and banks had not tightened lending standards for borrowers with weak, or subprime, credit until July or August, even though early this year regulators, analysts and mortgage investors knew that the easy lending policies of 2005 and 2006 were producing high default rates.”

“‘There are $10.6 trillion of mortgage loans outstanding in the U.S., and even if the brakes had been slammed, it was going to take a long time to slow this locomotive down,’ said Youngblood, who has researched home lending for more than 20 years. ‘And I don’t see that the brakes were slammed on or that the engineer had a new track to follow. That track only now seems to be appearing.’”

“He noted that Countrywide Financial, the largest U.S. lender whose practices are often emulated by smaller companies, did not significantly tighten standards until August.”

“And it was only in mid-July that Moody’s Investors Service and Standard & Poor’s, the large ratings agencies, said they would make major changes in the assumptions that they use to evaluate pools of home loans sold to investors.”

“Standard & Poor’s on Monday cut its ratings on $4.6 billion worth of residential mortgage-backed securities exposed to subprime mortgages, citing expectations of further defaults and losses in the securities.”

“The downgrades include 402 pieces of 138 transactions. All are backed by first-lien subprime mortgage loans issued in the first three quarters of 2005.”

“‘These rating actions incorporate our most recent economic assumptions, and reflect our expectation of further defaults and losses on the underlying mortgage loans and the consequent reduction of credit support from current and projected losses,’ S&P said in a statement.”

“In response to a question by Henry Kaufman, the former Salomon Brothers Inc. economist, Federal Reserve Chairman Ben S. Bernanke said investment firms ‘need to be as transparent as possible’ about how they value their assets.”

”This current financial stress is not likely to disappear overnight; partly it is an information problem,’ Bernanke said. ‘It is going to take a while for investors to appropriately value these assets.’”

“‘I would like to know what those damn things are worth,’ Bernanke joked, referring to the products that investors have shunned in the credit rout. ‘This episode has revealed a weakness in structured credit products,’ namely the difficulty in coming up with valuations in periods of stress.”

“Moody’s Investors Service last Thursday downgraded another $33.4 billion in mortgage-backed securities, noting that it now assumes losses tied to currently delinquent loans will be 40% to 50%. ‘The downgrades are coming so fast that you could go to the bathroom, come back to your desk and find you’re a junk bond manager,’ says James Bianco, president of Bianco Research.”

“U.S. housing prices will continue to decline at least through the end of next year and may not begin creeping upward again until 2010, executives from the biggest mortgage financiers said Monday.”

“Officials with government-sponsored mortgage companies Fannie Mae and Freddie Mac and CEOs from two major mortgage banks told the Mortgage Bankers Association’s annual convention that the continuing spike in foreclosures and a glut of unsold homes will prevent any quick price rebound.”

“‘It’s going to be a long time before we see it bottom out and recover,’ said David Lowman, CEO of JPMorgan Chase & Co.’s Global Mortgage unit. ‘There’s too much inventory already in the marketplace.’”

The Baltimore Sun reports from Maryland. “The Station North townhouses rise four stories and boast granite kitchens, open floor plans and the floor-to-ceiling windows that new-home buyers have come to expect. But the courtyard is deserted. In about half of the 32 homes, the oversized front windows reveal an emptiness back to rear windows. Several ‘for rent’ signs appear next to front doors.”

“Like other new residential projects around the Baltimore area, Station North was planned at the height of the housing boom but not finished until after the market began to fizzle.”

“Many other builders around the city and region are grappling with half-occupied, completed projects they assumed would be sold out long ago.”

“New condo sales in metropolitan Baltimore fell 37 percent in the first half of this year, while new townhouse sales fell 15 percent, according to Hanley Wood Market Intelligence. And in the third quarter, as the credit crunch hit the market, there were more contract cancellations than sales in the Baltimore metro market, according to Delta Associates, which includes projects that are selling or under construction.”

“Builders now are cutting prices to levels that are more than 10 percent below the height of the market.”

“‘The market has definitely slowed down dramatically from what it was when we were under construction,’ said James D. Campbell, a principal with the Station North builder, which originally had projected homes would be sold out by now at prices up to $450,000.”

“Instead, it has reduced to $299,900 a home with hardwood floors in the kitchen, a slate-surround electric fireplace with remote; a security system and a full-size stackable washer and dryer.”

“‘We had hoped to be out by now,’ Campbell said. ‘The concept was to leave the last units until they were ready to be completed and get the highest prices, but unfortunately the market changed before we got to completion.’”

“The number of unsold new condo units in metro Baltimore has been growing since the end of 2005, when the region had 2,843 unsold units, according to the Delta Associates analysis. By the end of this September, the number had jumped to 5,091, including 865 in the city.”

“In April 2006, Jessica Franklin made a deposit on a $375,000 townhouse in Station North, with plans to move there from Washington and work from Baltimore as an affordable-housing consultant.”

“But her job plans changed, and she decided to stay in Washington, she said. Shortly after closing on the home in May 2006, she put it up for sale. But by then the market had turned, and it was difficult to compete with the builder, who had lowered prices on new units and begun offering incentives. Now, the builder is offering one of the townhouses for $299,900.”

“‘I just think that it was not a good investment for me because it turned out that the market is just not ready for those prices and probably won’t be ready for that for a few years,’ said Franklin, who has since rented out her home and is waiting for the market to improve.”

“‘Our expectations back [in 2005] might have been unrealistically optimistic,’ said Campbell, of Somerset Development. ‘We’re hoping now our expectations are unrealistically pessimistic, and we could do better.’”

The Worchester Business Times from Massachusetts. “Home stats in Worcester County are looking more troubled than in many parts of the state. According to the Warren Group’s August real estate roundup, Worcester County single-family sales dropped 7 percent during that period, and condo sales plummeted 13.5 percent.”

“‘Overall, I think a significant impact on the Worcester market is our high rate of foreclosures,’ said Jeff Hall, VP of the Worcester Regional Association of Realtors.”

“Area developer Roger Kane said the slump in Worcester County and boost in Middlesex County may reflect buyers taking advantage of falling prices to move east. ‘A couple years ago, a buyer couldn’t afford to buy a home, say, in Sudbury,’ he said. ‘This year they might be able to.’”

“Kane said there is less demand for starter homes in places like Holden and Shrewsbury than he’s ever seen, and he doesn’t know why. ‘There’s always been a shortage of that first-time homebuyer home,’ he said. ‘Now it seems like some of those homes are sitting.’”

The Boston Globe from Massachusetts. “When one of the condominiums at Dale Village, a 108-unit complex in Roslindale, fell victim to foreclosure last month, its owner left behind more than an unpaid mortgage. She also owed the condo association $9,000 in fees and legal expenses.”

“The association, which has sued the woman and her lender to collect the overdue balance, believes it eventually will get its money. But until it does, the complex has delayed small repairs to focus on bigger issues.”

“‘If one owner is unable to pay, then the other owners are left holding the bag, so to speak,’ said attorney Janet O. Aronson of the Braintree law firm which represents 2,700 condo associations in Massachusetts, New Hampshire, and Rhode Island. ‘Because when you buy a condo, you’re linked financially with people you don’t know, and you have to take the good with the bad.’”

“Aronson’s firm has seen a 150 percent increase in the delinquency of fee payments in the past two years, tracing back to when subprime mortgages exploded in popularity.”

“Unlike during the last real estate slump of the early 1990s, when some condo associations were ruined financially by unpaid fees, Massachusetts now makes it easier for condos to recover delinquencies.”

“When condo associations sue delinquent owners, ‘a lot of people say, ‘That’s not fair. Why did you do that? Why not cut me some slack?’ said Charles A. Perkins Jr., a Chelmsford lawyer who represents condo associations and whose debt-collection activities have doubled since last year. ‘But the association has no choice.’”

The Republican from Massachusetts. “At a Congressional hearing in Boston’s Roxbury neighborhood, Attorney General Martha Coakley said the home foreclosure crisis was far from over and would spread beyond urban areas to the suburbs.”

“There have been 1,000 home foreclosures in Boston in the past six months, clustered in minority and low-income neighborhoods, Coakley said. But the problem is not isolated to the cities, she said.”

“‘You haven’t seen the end of this crisis yet,’ Coakley said. ‘You are going to see foreclosures in some of our middle and more tony communities.’”

“In Springfield, according to The Warren Group, the number of foreclosure auction notices - the last step before the actual auction - totaled 682 from January to August this year, a 154.5 percent increase over the 268 auction notices in the same period last year.”

“Michael J. Farrell, president of Northeast Financial Group in Wilbraham, who helps people trying to stave off foreclosure, said he hasn’t seen a consistent approach from lenders dealing with the wave of delinquent borrowers.”

“Instead, mortgage companies have been postponing foreclosure auctions ‘without any end in sight. The banks just don’t seem to have a game plan,’ Farrell said.”

“He has been able to work out ‘quite a few’ short sales, he said. But the biggest problem is time. Lenders are taking so long to agree to the lower price, with lower loan repayment amount, that ‘in the meantime, we lose the buyer,’ Farrell said.”

The Cape Cod Times from Massachusetts. “Cape Cod is among the areas of the Bay State to see its share of foreclosure turmoil in recent months. On the Cape, more than 200 homeowners have lost their property to foreclosure so far this year, according to the Barnstable County Registry of Deeds.”

“So far this year, the registry has recorded nearly four times as many foreclosures as it did during the same period in 2006.”

“The Housing Assistance Corp. in Hyannis has been working on ’short selling,’ with its clients for about a month, said the organization’s CEO Rick Presbrey. ‘I think there’s been relatively little success,’ Presbrey said, noting that the state government has little real authority over national mortgage companies.”

The Street.com. “On the New England resort island of Nantucket, real estate attorney Stephen Meister has hired the auction house, Sheldon Good, to sell off three properties, two of which he developed and a third that his son bought and renovated.”

“Meister, who owns a residential development company on Nantucket, says he chose to auction because ‘I want a definite timeline,’ and the flexibility to make his next moves.”

“Meister says he has set minimum bids for his properties ‘at least 15% to 20% below market value,’ at $7.65 million, $2.55 million and $1.15 million.”

“Is Meister pursuing the right course? Ryan Wagner, a VP a real estate broker, said he recalled ‘two other instances where it’s been tried, but I don’t think in either the reserve price was met.’”

“Wagner says that ‘the market is fine.’ However, he adds, ‘I don’t think anyone in their right mind would have hoped things would continue’ at the pace that pulled the market forward in 2005 and 2006.”

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