The Housing Bubble

The Union Tribune reports from California. “The six-county region, including San Diego County, saw a year-over-year sales decline of 48.5 percent, to 12,455 transactions. That was the lowest monthly total since DataQuick began keeping records in 1988. Lori Staehling, next year’s president of the San Diego Association of Realtors, said she could not ’sugar-coat’ the latest statistics.”

“‘It’s a tough time; it’s not pleasant,’ Staehling said. ‘This whole soft-landing idea would be nice, but the number of sales is off so much and the inventory is so much higher than it was, it’s a huge struggle.’”

The Orange County Register. “A mid-summer credit crunch took a big bite out of Orange County’s housing market last month. Sales fell 44 percent from a year ago to 1,643 homes last month, according to DataQuick. That’s the lowest number of homes sold per month in the 20 years that DataQuick has tracked the local housing market.”

“The median price of an Orange County home fell 9.5 percent from the year before, dropping to $570,000. That price was down $75,000, or nearly 12 percent, from the peak price of $645,000 reached in June.”

“Rick Gorman gave up trying to sell an investment property in Rossmoor after failing to get a single offer in three months, even after dropping the price from $950,000 to $899,000. ‘We decided there was no sense in giving it away,’ said Gorman. ‘The real estate market will come back at some period. … (We’ll) wait it out.’”

“Amid sliding home prices, banks foreclosed on 444 homes in Orange County last month. That total is up 469 percent from a year ago, DataQuick reported Tuesday.”

“And there appears to be few buyers for homes going into foreclosure. For example, during an Oct. 3 foreclosure auction at the Santa Ana courthouse, 33 out of 34 properties went back to the bank because no one bid.”

The LA Times. “In Southern California in September, home sales in six counties, Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura, fell 48.5% from the same month last year. They were at their lowest since DataQuick began compiling such statistics in 1988.”

“Garden Grove real estate broker Patrick Schwier, who specializes in apartment buildings, said he had sold 70% fewer buildings this year compared with the same period in 2006. Schwier said he saw two more years of falling sales and prices.”

“‘Prices were too inflated when credit was easier,’ he said, and now home prices, though they’ve been slipping, still ‘don’t make sense. And they will drop until they make sense.’”

“‘We’re on our way down and still picking up speed,’ said Christopher Thornberg, a Los Angeles-based economist who four years ago warned that the pace of housing price gains in the region couldn’t be sustained. Thornberg discounted the overall credit squeeze’s effect on the housing market. He said housing prices, pumped up for years by questionable mortgages, had to drop considerably.”

“The median income of L.A. County homeowners, he said, is at 60% of what’s required to buy a median-priced home in the county, assuming a housing budget of 35% of gross income.”

“‘This thing’s going to get worse when the peak of resets occur next year,’ Thornberg, the L.A. economist, said. His prediction: Southern California sales and prices will decline into 2009.”

The Daily News. “Looking to bottom feed in this depressed real estate market? Take a foreclosed home in Winnekta on the market for $404,900. The asking price is 24 percent lower than what the former owner paid in June of 2006, according to Realtor Steve Smallson.”

“The home, owned by Countrywide Financial Corp, now features a homemade sign with ‘Hurry’ and ‘Wow!!’ written on it to entice potential buyers.”

“‘We’re just trying to stimulate buyers, stimulate the market,’ Smallson said.”

“The three-bedroom house has been on the market for about two months and despite new carpet, it has received no written offers.”

“Geostat Advisory’s analysis of the Los Angeles and Orange County residential real estate markets suggest lenders that repossessed homes and condominiums are slashing sale prices similar to the discount offered on Smallson’s listing.”

“‘Lenders have to offload the nonperforming assets from their portfolios as soon as possible,’ Nima Nattagh, a principal in Geostat, said.”

“Not everyone believes that foreclosures are a big bargain. Yet. ‘There is a discount, but it’s probably in the 7 (percent) to 8 percent range and in most areas there is not much of a discount at all,’ John Karevoll, an analyst at DataQuick, said of Geostat’s assumption.”

“On average, a foreclosed property sells 20.3 percent below its market value. The median discount level is slightly lower in Orange County at 19.6 percent compared with 21 percent in Los Angeles County.”

“70 percent of homeowners who are foreclosed on bought their homes between 2003 and 2005. Homeowners who bought during this period and at the peak of the housing market are likely to be in a negative equity position now.”

“Neighborhoods that experience high levels of foreclosure are likely to see bigger price declines. For example, Geostat said that foreclosures in Lancaster sell at a much higher discount compared with cities in south Orange County.”

“Nattagh believes better deals are ahead. ‘If the inventory of foreclosures continues to rise and if prices remain soft there is a good probability that the discount rate could get bigger than this,’ he said.”

The Whittier Daily News. “The biggest price drops came in San Bernardino County, off 11 percent to $325,000, and Riverside County, off 10.8 percent to $375,500, DataQuick reported.”

“‘Things are clearly getting worse,’ said Christopher Thornberg, a principal with Beacon Economics. ‘It’s going to remain terrible for some time.’”

“Thornberg said the number of mortgages that are 60 to 90 days overdue is climbing, foreshadowing a higher number or foreclosures in the coming months.”

“Stephen Levy, senior economist at the Center for Continuing Study of the California Economy, noted that monthly home sales in the state have now dropped below figures from the early 1990s, when California’s economy suffered a recession.”

“But he believes it will take far less time for sales to recover during this housing slump.”

“‘Buyers have essentially gone on strike, and we need more price correction,’ Levy said. ‘In the early 1990s, because sellers got stubborn, it took seven or eight years to recover. I think this market will clear more quickly.’”

The Press Enterprise. “In September, Riverside County saw a 53.3 percent drop in housing sales compared to a year earlier, and San Bernardino County saw a sales decline of 56.1 percent, according to DataQuick. That is the sharpest sales drop in Southern California and greater than any seen during the last housing recession of a decade ago.”

“‘I don’t think this is just a one-month phenomenon,’ said Leslie Appleton-Young, chief economist for the California Association of Realtors. ‘I think in the next several months there will be more of the same.’”

“The median price of homes sold last month in Riverside County dropped to $375,500, down almost 11 percent from September 2006 — the steepest year-over-year decline in nearly two decades of record-keeping. Median prices in Riverside County have been declining monthly since April.”

“In San Bernardino County, the median home price in September dropped 10.8 percent from a year earlier to $325,000, after beginning a monthly slide in July. It was the largest year-over-year price decline there since May 1995.”

“James Monks, manager of Prudential California Realty’s Riverside branch, said buyers today are demanding deals and finding them primarily in the new-home and repossessed-housing market.”

“But even cutting prices does not guarantee a quick sale, since many would-be buyers are waiting to see if even better deals will be available in coming months.”

“James Mosebach said he and his wife, Sue, have had their three-bedroom house in Moreno Valley listed for $350,000 for three weeks with no takers, even though the couple paid $466,000 for the property in March 2006. Mosebach said about six other houses are for sale in his neighborhood and ‘new homes are being built all around us.’”

“‘It is kind of disconcerting right now. It is nerve-wracking,’ said Mosebach, who was laid off from his job as a production supervisor at a plant in the City of Industry and starts a new job next week in Ohio.”

“Mosebach said with all the competition in the market, it’s been tough to generate interest in his property, which sits on a half-acre lot with a swimming pool and spa. ‘We can’t afford to drop (the price) a whole lot more,’ he said.”

Inside Bay Area. “While the housing market is weakening by the minute, city leaders are strengthening the tools they have to secure homes abandoned by foreclosure. The Manteca City Council unanimously decided Monday night in favor of a series of ordinances that would secure vacant properties, primarily at the expense of the owner.”

“Slumping housing prices and bad lending practices have turned Stanislaus and San Joaquin counties into one of the nation’s leading areas for foreclosures. Manteca, a city that coins itself the ‘Heart of California’ because of its location, is in the center of the crisis.”

“‘This is a nationwide problem,’ Councilman John Harris said. ‘I think we are just entering the tunnel and I don’t see any light at the end of it. We have to take some action; this gives us some teeth as far as prevention.’”

“‘We haven’t seen the tip of the iceberg yet,’ added Councilman Steve DeBrum in reference to the number of foreclosure properties.”

“As of Oct. 1, Manteca has approximately 300 bank-owned residences, with about 800 homes in various stages of foreclosure, Police Chief Charlie estimated in a report, adding the number of bank-owned residences has been increasing by 10-15 homes per week.”

“In Manteca, the rise in foreclosures has not only led to brown or weed-filled yards, broken windows and swampy, mosquito-infested swimming pools, but also reports of vacant lots being used for homeless squatting and parties.”

“‘We’ve had significant issues in some of the houses where vagrants are moved in, bypassed meters and turned on electricity, squatters, they’ve become party houses for kids,’ Halford told the council, adding police responses have markedly increased and neighborhoods have been degraded.”

“He said: ‘This is an effort at the very least to get the bank owned residences maintained by the banks and maybe to get some of the homes in foreclosure, that haven’t been taken over by the banks, better maintained.’”

“Some residents argued the ordinances unfairly target the wrong people, while blaming the problem on too many homes being built outside the range of affordability. ‘This is wrongheaded. This is kicking someone when they are down,’ said Joseph DeAngelis.”

King 5.com reports from Washington. “Selling a home in the Seattle area has become trickier. What used to sell in one week can now take months. Home sellers are going to more and more extremes, offering enticing incentives to hook a buyer. Those boom days when homes in Seattle could be sold in a matter of hours are for the most part over.”

“When Tavis Gaudet put up his ‘for sale’ sign on his home in West Seattle, he wasn’t alone. Two houses, one across the street and another up the block, also had signs up as well. Just a couple of blocks away, three houses in a row are on the market.”

“‘You’re always looking for some kind of edge that’s going to take you beyond what your competition is going to be,’ said Reba Haas, realtor.”

“According to real estate statistics, Seattle had 50 percent more homes on the market during the month of September than last fall. At the same time, pending sales dropped by more than 25 percent.”

“For sellers, one of the most important things they can do is to be realistic about the worth of their home. Real estate agents say some of these lower prices are simply because sellers were asking for too much in the first place.”

The Oregonian. “Three years ago, home builders in the Portland market worried about having enough supply to meet sizzling demand. Now, the region faces a glut of available homes, a six-month supply for sale, translating to the biggest inventory in three years and an emerging buyer’s market.”

“To stay in the game, builders are slashing prices and offering incentives such as trips and gift cards to clear out stock, leasing homes rather than selling them, and cutting back on building without confirmed buyers.”

“‘There’s a lot of standing inventory and real price-point issues that are going to slow the pace of construction,’ said housing economist Jerry Johnson, who advises home builders and local governments.”

“In Happy Valley, about 70 upscale homes built by Buena Vista Custom Homes are looking for takers. Average time on the market: three to four months, despite striking views of Mount Hood and Clackamas County, granite countertops and stone entryways. Some have sat empty for six.”

“‘It’s a great time to buy,’ said Don Johnson, broker and the listing agent for the homes. ‘Just on Buena Vista alone, they’ll knock $20,000 off the price — that’s instant equity,’ he said.”

“‘It’s a good market, just not that 30-year-high market,’ said Mike Higgins, a spokesman for fast-growing Buena Vista.”

“In August, pending home sales in the Portland area dropped 18 percent compared with the same month during a hot 2006 season, according to the Regional MLS. Officials estimated it would take 6.2 months to sell 15,782 active residential listings at that pace.”

“Companies such as luxury builder Renaissance Homes are ready to deal, within reason, to tempt skittish potential buyers into any of the 35 to 50 finished homes it has on the market in communities from Forest Grove to Clark County, Wash., to Bend, said VP Kim Whitman. He said the company’s sales this year will be on par with last year but not as strong as projected, in part because of an unusually high rate of ’sale fails’ in 2007.”

“‘It’s just not as crazy as it once was,’ he said.”

“Katie Fellows’ 3,100-square-foot, five-bedroom home in Portland continues to sit on the market as it has for the past seven months, at an asking price of $499,000. ‘We had an open house in September, and three people came, but there were no real nibbles,’ she said. ‘Our listing expired and we relisted it, but nothing really happened then either.’”

“Up the street, five or six brand new empty homes also languish in the subdivision. ‘I’d hate to be a builder right now,’ she said.”

“The downturn threatens to delay construction in Pleasant Valley right when Gresham’s bid to urbanize it should be gaining steam. ‘Unfortunately, we aren’t the real estate gods, the market is what it is,’ said Cody Bjugan, owner of one of the city’s three private development partners. ‘It’s too bad, because we’ve all made a huge commitment.’”

“Now, with the market in flux, no one is sure how much demand to expect, especially since a pocket of houses built next to the valley are selling so slowly a couple have become rentals.”

“‘It’s almost like having a lottery ticket and not being able to cash it,’ said dentist Stan Bohnstedt, who anticipates selling his five acres to be developed when market conditions improve. For the moment, ‘it’s like being in limbo,’ he said.”

The Argus Observer from Oregon. “Two local real estate agents said the housing market in the area is either a buyer’s market or just a good opportunity for potential house hunters.”

“Karen Hollis, a real estate agent in Payette, (and) Kim Bruce, a real estate agent in Fruitland, both agree there are a large number of houses available locally.”

“Hollis said for the most part, the prices for lots and houses are holding, although they have shown a slight decline. ‘I don’t think the bottom’s dropping out, but right now it’s really turning from a selling market to a buying market,’ she said.”

“‘The cycle’s always up and down,’ she said. ‘But we’ve overbuilt a little bit.’”

“In the future, Hollis said she expects the types of housing being built in Payette County to better reflect the income base of the area. ‘I think it’s a good thing,’ Hollis said. ‘You hate to see them overbuild something that the community can’t support.’”

“Bruce said, currently in the area, houses are selling ‘if the price is right,’ but added ‘buyers do have the benefit right now.’”

The Statesman Journal from Oregon. “State lawmakers vowed Tuesday to pursue a subprime-mortgage lending reform bill in February’s special legislative session. But the scope of the bill still is unclear, as consumer advocates and mortgage industry representatives remain at odds about the role the state should play.”

“Milwaukie resident Bob Barney, who was forced to sell his home and forfeit his retirement savings because of an ill-advised mortgage, said when he boards a bus, he rests assured the uniformed driver is responsible and will get him there safely. Home borrowers should have assurances their home lenders are trustworthy, and not like people selling used cars through the classified ads, Barney said.”

“‘I believe that the people who are selling these products have a responsibility,’ he said.”

“Consumer advocate Angela Martin, of the group Our Oregon, said 15,000 Oregon homeowners have adjustable-rate subprime mortgages at risk of foreclosure in the next 12 months, because their monthly payments will jump $400 or more.”

“Christopher Ambrose, president of the Oregon Mortgage Lenders Association, warned that other states’ efforts to restrict predatory lending were ‘unmitigated disasters,’ reducing home ownership. ‘This is a national crisis that requires national solutions,’ Ambrose said.”

“‘The lending community is perfectly happy with lax lending laws,’ Martin said after the hearing, skeptical that a consensus can be forged.”

“Sen. Ben Westlund said the state needs to avoid hampering the industry and causing the economy to ‘crater.’ But, he added, ‘there has to be more fiduciary responsibility and individual accountability for the mortgage lending industry.’”

“Westlund said, ‘If someone thinks this isn’t a problem, then they’re wrong. The worst is yet to come.’”

The Idaho Press. “Idaho ranked 17th in the nation with 646 foreclosure filings, or one for every 922 households. That’s almost a 19 percent increase from August 2007. RealtyTrac’s Web site currently lists 275 foreclosure properties for Caldwell and 496 for Nampa.”

“As far as what’s driving an increase in foreclosures from last year, Travis Franklin, VP of marketing at Home Federal Bank, said, ‘I think it falls back on some of the unique lending products that were being used.’”

“Franklin said that during the housing boom, some banks and lenders ‘wanted to make a buck’ and were making riskier loans to finance people who were greater credit risks. However, Franklin said Home Federal Bank has only had four foreclosures this year. ‘As a local bank, we’ve been pretty conservative,’ he said.”

The Idaho Statesman. “Andrea Campbell couldn’t sleep at all Thursday night, anticipating the new Corey Barton house in Meridian she planned to buy, thanks to a big sale Barton’s company, CBH Homes, is holding this weekend. Campbell arrived at the Meridian sales office at 8 a.m. Friday.”

“Her purchase was one of six sales there in the first hour. Campbell and her husband had been looking for a home in less-expensive Nampa. ‘We couldn’t afford a home in Meridian,’ Campbell said. ‘This sale came and saved the day.’”

“The sale is aimed at pushing potential homebuyers off the fence by reducing prices on 200 Treasure Valley homes. The biggest discount in Meridian: $70,000 off a $377,895 home on White Birch Drive, lowering it to $307,895.”

“But while Barton’s ads prominently advertised ‘up to $70,000 off,’ that was the only home in Meridian with so big a discount. A price sheet listing 78 Meridian homes in eight subdivisions featured discounts mostly between $20,000 and $30,000.”

“The four-bedroom, 2,000-square-foot house Campbell looked at — and signed a purchase agreement for — was discounted $30,000 to $179,900.”

“Barton’s sale could inject energy, at least briefly, into a Treasure Valley housing market crowded with nearly 8,000 unsold homes in August.”

“A couple of buyers in line when the doors opened at 9 a.m. were hoping for the same house. The one who arrived three minutes earlier snagged it. The other buyer went searching for another deal.” “‘The phones have been ringing off the hook,’ said Michelle Jacobi, the office manager.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Housing starts in the U.S. plunged more than forecast to a 14-year low in September, the Commerce Department said. Building permits fell 7.3 percent to a 1.226 million pace. The number of housing starts was the lowest since March 1993. The decline was led by a plunge in construction of townhouses, apartments and condominiums.”

“Construction of single-family homes fell 1.7 percent to a 963,000 rate, today’s report showed. Work on multifamily homes slumped 34 percent to an annual rate of 228,000.”

“The decrease in starts was led by a 28 percent drop in the Midwest. Construction fell 12 percent in the South and 10 percent in the West. Starts jumped 45 percent in the Northeast. The number of homes under construction fell 1.4 percent to a 1.114 million pace and the number of properties completed dropped 8.2 percent to an annual rate of 1.391 million.”

The Street.com. “‘Starts have declined at almost a 40% annual rate over the last three months, as the problems in credit markets gave the housing market another leg downward,’ said Wachovia economic analyst Adam York. ‘We think new construction will continue to decline into 2008.’”

“Housing analysts continue to say that a reduction in overall home inventories is a necessary precursor to any recovery in housing prices, which are falling in nearly half of U.S. markets.”

From MarketWatch. “Economists were clearly shaken by the accelerating weakness in housing starts. ‘There is no end in sight to the drop,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics.”

“He noted that housing starts fell 66% from 1978 to 1981. ‘This episode will likely be worse. The housing hit is intensifying,’ Shepherdson said.”

The Guardian. “‘September’s housing starts figures were so bad I’ve just had to apologise for using a profanity out loud,’ said Paul Ashworth, economist at Capital Economics. ‘Starts peaked at almost twice that level only 21 months ago. The credit crunch may only have had a limited impact on the rest of the economy but it has devastated an already weak housing sector.’”

The Associated Press. “Homebuilders are getting gloomier about the slumping housing market, as a 22-year-old index that tracks their sentiment set a new record low Tuesday.”

“The National Association of Home Builders said its housing market index, which tracks builders’ perceptions of conditions and expectations for home sales over the next six months, fell two points to 18 in October, the lowest level since the index began in Jan. 1985. It was the eighth straight monthly decline.”

“The group’s chief economist, David Seiders, said in a statement that many prospective buyers have ‘unrealistic expectations’ about new home prices and about how much their current homes are worth in this market.”

“Nationwide new home sales are projected to fall to 805,000 this year, down 23 percent from 1.05 million last year, the National Association of Realtors said last week. If that happens, it would be the worst year since 1997, and sales are expected to drop a further 6.6 percent in 2008 from this year’s forecast, according to the Realtors group.”

“In August, new home sales tumbled to the lowest level in seven years, and the median nationwide sales price fell by 7.5 percent from a year earlier to $225,700. That was the biggest drop in percentage terms in nearly 37 years, the Commerce Department reported last month.”

From Forebes. “‘Builders in the field are reporting that, while their sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,’ said NAHB President Brian Catalde.”

“The Mortgage Bankers Association predicts the housing recession will last until the end of the third quarter next year. And if confidence isn’t restored in the credit markets, the wait could extend until 2009, the group’s chief economist said.”

“‘Tough times,’ said said Doug Duncan, chief economist of the group, after sharing the group’s loan production estimates during a briefing with reporters.”

“‘We have a ways to go in the housing recession. It is clearly a deep recession; at this point, we figure that will dissipate at the end of the third quarter,’ he said. ‘Anyway you look at it, there are massive supplies of homes that have to be worked off the marketplace before we return to an increase in activity, and certainly in terms of construction.’”

“In fact, the publicly reported inventory numbers are likely underestimated, considering they don’t include contract cancellations for new homes or foreclosed properties that aren’t being marketed by a real estate agent, Duncan said.”

“With the current glut of homes for sale, ‘any significant increase in homebuilding is probably years off,’ Duncan said.”

“‘The day of the 100 percent loan-to-home value loan in the subprime world are gone,’ he said in an interview with The Associated Press.”

“‘If you’ve got a spotty employment record, but good financials on your credit record, you may well still be able to get credit,’ he said. ‘But if you have a spotty employment record, and late payments on three credit cards, and you don’t have cash reserves, most likely you’re not going to get the credit.’”

“‘Layered risks is what that is all about,’ he said.”

The Sun News. “Troubled home builder Levitt and Sons has halted construction at all of its home projects across the Southeast, a spokesman for its parent company said. Fort Lauderdale, Fla.-based Levitt and Sons ordered builders to stop working Thursday - the same day the parent company, the Levitt Corp., announced it would write off huge losses from its home-building subsidiary.”

“The glitch leaves home buyers in Seasons, Levitt’s planned 460-house community for people ages 55 and older in Murrells Inlet, in limbo.”

“One buyer, Eileen Behrens, had been looking forward to moving into the Seasons community next month. She said she put $42,000 down on the house, including luxury upgrades.”

“But when Behrens drove through the neighborhood Thursday, she found that all work had stopped. But as the road progressed through the development, homes were less and less complete. Frames of homes stood deserted on lots, as if a permanent lunch break for construction workers had been called.”

“‘It’s just sort of like a ghost town there,’ Behrens said.”

The New York Times. “J.P. Morgan Chase took $1.6 billion in write-downs and increases to loss reserves, in line with several of its Wall Street peers, after it suffered from a sharp drop in leverage loan values, bad trading bets, and deteriorating home equity loans.”

“CEO James Dimon was cautious about the next quarter or two. ‘Clearly there are still a lot of issues out there that will take time to resolve and there is a lot of risk on the balance sheet.’”

“Mortgage lender Thornburg Mortgage Inc. said Wednesday it lost more than $1 billion in the third quarter due to the fallout in the mortgage markets and elected not to pay a dividend to holders of common shares to conserve cash.”

“During the third quarter, Thornburg Mortgage sold a total of $21.9 billion of loans at a loss of $1.09 billion. Thornburg also posted a loss of $11.5 million to fund forward commitments.”

“The lender was forced to sell loans from its portfolio at a discount because of the declining mortgage market. Thornburg Mortgage originates jumbo loans.”

From Reuters. “Fremont General Corp, which quit offering subprime mortgages in March, on Wednesday reported a $1.06 billion loss for the 18 months ended June 30.”

“CIT Group Inc., the largest independent commercial finance company in the U.S., reported a third-quarter loss, dragged down by costs from closing its subprime home-loan unit. he loss included a $290.5 million charge for lowering the value of its home lending portfolio to reflect market conditions, following a $495.3 million charge in the second quarter.”

“MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss and said it won’t be profitable next year as the U.S. housing market worsens.” “The net loss of $372.5 million, was the worst quarter for the Milwaukee-based company since it went public 16 years ago.”

“MGIC reported third-quarter costs of $602.3 million, more than three times as much as a year earlier, to cover losses by the mortgage lenders it insures. CEO Curt Culver said on a conference call that U.S. real estate prices may drop 10 percent over the next 18 months.”

“MGIC wrote off its $466 million investment in Credit-Based Asset Servicing and Securitization LLC, jointly owned with Radian Group Inc., after demand for subprime loans collapsed.”

“Fitch Ratings said it may downgrade MGIC’s claims-paying ability because mortgages insured in 2007 appear to be performing as badly or worse than 2006 loans.”

The Kansas City Star. “Kansas City-based NovaStar Financial Inc., scrambling to survive the subprime mortgage meltdown, plans to sell much of its remaining business and slash about half of its remaining staff.”

“The company late Tuesday announced a deal to sell its mortgage-servicing rights for $175 million to Saxon Mortgage Services of Fort Worth, Texas. NovaStar said it would use the proceeds to pay off debt. At the end of June, NovaStar had about $633 million in short-term liabilities.”

“The once high-flying company has been laid low by the woes of the subprime industry, which makes residential loans to borrowers with blemished credit histories.”

“As of June, more than 1 million mortgages were in default or foreclosure, up 50 percent since June 2005, according to a report released Tuesday by the Government Accountability Office.”

“By selling off its mortgage-servicing rights to Saxon, NovaStar hopes to buy time until housing conditions improve. Whether it can do that while other subprime lenders declare bankruptcy, close their doors or get bought out by larger concerns remains an open question.”

The Journal Sentinel. “The U.S. housing market has become an economic drag on the businesses it once fed, A.O. Smith Corp.’s chief executive said Tuesday. ‘Housing weakness will continue for the foreseeable future and may be accompanied by slowdown in other market segments,’ said CEO Paul W. Jones. ‘As subdivisions don’t get built, some strip malls and the like will be delayed.’”

“‘The first couple weeks in August, when credit dried up and everyone decided we weren’t at the bottom of the housing market after all, we saw a couple weeks with practically no orders,’ Jones said.”

The Palm Beach Post. “Treasury Secretary Henry Paulson said he wants lawmakers, regulators and lenders to focus on ‘putting an aggressive plan together and moving forward.’”

“The roots of the problem reach back to the 2002-05 housing boom, when many lenders aggressively pushed subprime mortgages. Paulson also urged Congress to ‘make some changes in our laws and rules in order to prevent some of the excesses and abuses of the last few years from happening again.’”

“‘Some of the conduct and practices that I have learned about are shameful,’ he said. ‘It is no secret that, while not the norm, some fraudulent activity on behalf of mortgage brokers occurred.’”

“A plan by top U.S. banks to set up a fund preventing the forced sale of billions of dollars of hard-to-value securities faces some serious obstacles.”

“Analysts said the pool might end up hurting existing SIVs even more by stripping them of their best assets. Nor is it clear who would manage the new pool. ‘It’s all a bit of a shell game,’ said Bill Cunningham, head of global fixed income research State Street Global Markets in Boston.”

“The chief of JPMorgan Chase & Co Inc, which is helping create a roughly $100 billion fund to bail out risky, illiquid investments, said there may be some of these investment vehicles that will not be helped.”

“JPMorgan CEO Jamie Dimon said on Wednesday the so-called super fund for structured investment vehicles, or SIVs, won’t help every SIV equally. ‘No one ever said every SIV is going to be helped,’ Dimon said.”

“‘There may be some SIVs that it’s not going to help, and that’s life in the fast lane,’ Dimon said.”

The Washington Post. “Only on Wall Street, and in its political annex, the U.S. Treasury, could someone think that the way to prevent a meltdown in structured investment vehicles is to create a giant structured investment vehicle.”

“While we’re at it, why not locate it, with all the other SIVs, in some offshore financial haven like the island of Guernsey or the Cayman Islands, where we can shield it from lawsuits and regulatory scrutiny and make sure nobody has to pay taxes until the profits are repatriated.”

“Like the SIVs it is hoping to rescue, let’s make sure it is highly leveraged, to get the best return on the relatively modest amount of real cash anyone puts into it.”

“And let’s ensure none of the banks setting up this Super SIV will have majority control or assume too much of the risk, so they won’t have to put any of it on their balance sheets or set aside their own money — ‘regulatory capital’ — in case something goes wrong.”

“Best of all, let’s use it as another chance to earn big fees!”

“International investors sold a record amount of American securities in August. Total holdings of equities, notes and bonds fell a net $69.3 billion, the Treasury Department said Tuesday. None of the dozen economists surveyed by Bloomberg News predicted the decline, the first since Russia defaulted in 1998.”

“Foreigners dumped American assets as mortgage defaults set off a surge in borrowing costs that spurred central banks to flood the banking system with cash and forced the Federal Reserve to reduce interest rates.”

The News Press reports from Florida. “Many of the Real Estate Network Services’s clients, 65 percent, are faced with a ’short sale’ situation, where the loan balance exceeds the home’s market value, said broker Beth White-Dahlstrom. ‘It’s very intricate, right now, to make sure that a property owner knows, realistically, what a property is worth,’ she said. ‘But that’s not always a really bad thing because the banks are working with us now. But it makes it tougher to sell a house. That’s why we have to be realistic with the price.’”

“‘If you don’t need to sell right now, I would say hold on to your house for a little while. But if there is a need to sell, I’d say make sure your price is competitive with similar homes within a quarter mile of you. No matter how much you owe, what we have to look at is what is today’s value,’ she said. ‘You should make sure that you’re priced toward the bottom few homes in your class. I’m not saying give it away, but make sure that your value is correct. The sellers need to put themselves into the buyer’s shoes because when you’re a seller, right now, you’re competing with a lot of other people.’”

The Star Banner from Florida. “In Marion County, some 1,181 petitions were filed with the county’s Value Adjustment Board. By comparison, there were 626 petitions filed in 2006 and 108 filed in 2005.”

“Greg Meade owns a few mobile homes he rents out. The appraised value went from $75,500 in 2005 to more than $303,000 in 2007.”

“‘Make no mistake, those people went crazy on assessments,’ Meade said.”

“After Meade filed his appeal, the Property Appraiser’s Office went out to visit the property and reduced the appraised value to a little more than $254,000. Meade dropped his appeal. But he said his concerns remain.”

“‘We’ve got an actual property tax crisis here,’ Meade said. ‘If you own any property except homestead, you’re dying. It leaves me in the unenviable position of maybe getting out of the rental business.’”

The Orlando Sentinel from Florida. “Nearly twice as many people face losing their homes in Central Florida this year compared with 2006, many of them borrowers struggling to repay adjustable-rate loans or investors unable to sell in a glutted market.”

“Through the first eight months of 2007, more than 11,000 homeowners in a seven-county area in and around Orlando have entered the foreclosure process by defaulting on their mortgage payments — 85 percent more than all of last year.”

“Experts say the evidence points to both homeowners living beyond their means and investors grasping for quick riches as prime sources of the problem, with foreclosure notices stretching from the new resort-home subdivisions near Walt Disney World in Osceola to the established starter-home neighborhoods of Deltona in Volusia County.”

“‘There is blame for everybody: builders who overbuilt, Realtors who oversold, lenders who weakened loan criteria and borrowers who stretched too far knowing nothing goes up forever,’ said Doug Duncan, chief economist for the Mortgage Bankers Association.”

“Don Casselman of St. Cloud started missing mortgage payments on his home earlier this year, after work injuries and a failed attempt to start a business. When Casselman, saddled with two mortgages, tried to sell it recently, he got no takers. Last month, Minneapolis-based U.S. Bank forced his family to leave.”

“‘They take people who are not in the best of credit, and they treat us like we’re millionaires — then they try to rip every dollar that you can make from your pocket, and they try to draw blood,’ said Casselman, who couldn’t persuade lenders to refinance his adjustable-rate loans when the $974 monthly payment was about to double. ‘They try to keep a poor man poor.’”

The Atlanta Journal Constitution from Georgia. “Foreclosure actions for metro Atlanta hit an all-time high this month, with 6,809 properties in 13 counties threatened with public auction in November. So far this year, lenders have published 41,312 foreclosure notices against properties in the 13-county area of metro Atlanta.”

“The October statistics, released Monday by Equity Depot, represent a 38 percent increase over September and a 49 percent jump when compared with October 2006. ‘This is the largest swing we have ever seen from month to month,’ said Barry Bramlett, an Equity Depot VP.”

“The total estimated value of properties entering foreclosure in metro Atlanta was $1,076,975,783.”

“Bramlett said mortgages with high interest rates are driving foreclosures across Atlanta. Adjustable rate mortgages make up about half of 2007 foreclosure notices.”

“Bramlett said an unusually high number of construction loans also showed up in this month’s listings, representing developments that never got off the ground or that failed to sell when construction was complete.”

“The October totals represented an all-time high for each of the 13 metro Atlanta counties, suggesting that the national mortgage meltdown is touching virtually every corner of the metro area. Even Fayette and Forsyth, where foreclosures have historically been rare, saw big jumps this month.”

“‘Now that we are at this kind of quantum level up in terms of foreclosure activity, I think we’re going to start really seeing the effects on housing prices,’ said Dan Immergluck, a Georgia Tech professor who is an expert on foreclosures.”

The Post & Courier from South Carolina. “Homes sales in the Charleston area were off significantly again last month, weighed down by too much supply and not enough demand. The Charleston Trident Association of Realtors said Wednesday that 885 homes changed hands in the three-county region in September, a 28 percent drop compared with the same month in 2006.”

“It was the second-steepest decline in monthly sales since the local housing slump took hold early last year.”

“Builders are trying to keep their prices stable, but to do so they are offering upgrades and more-attractive financing packages to bring buyers in the door, said Frank Hefner, an economist with the College of Charleston.”

“Nearly every zone that the Realtors association tracks saw sales volume drop off last month. The declines were mild in some areas and eye-opening in others. In Hanahan, sales plummeted to 10 last month, compared to 84 a year earlier.”

“The competition for buyers is especially tough in developing suburban residential areas where sellers of existing homes are going up against deep-pocketed national companies that are offering incentives on newly built models, said real estate agent Tenia Cattles. ‘They get very frustrated because they can’t give away the farm like builders can afford to do,’ she said.”

“Frank Finlaw, the local president of Atlanta-based Beazer Homes, said September sales for his division were healthy compared to the first half of the year, thanks to reduced prices and more-attractive incentive packages. ‘We’re much more willing to negotiate,’ he said.”

“These days, many local home buyers are either relocating from other areas or are making their first purchase, Finlaw said. ‘Someone who has to sell their house — those folks have come to the realization that it would be very difficult to sell right now,’ he said.”

“Experts agreed that the local inventory will have to fall back to a more-manageable level before the market trends will change course. As of Wednesday, 10,887 residences were listed for sale in the Charleston region, more than double the average number of properties on the market in 2004 and 2005, according to association data.”

“The rental side of the housing industry also is providing some relief, said Bonnie Miller, owner of Mount Pleasant-based Old Dominion Realtors. She said some owners who bought a new home before selling their first are having to seek tenants to help them cover both mortgages.”

“Miller said the rental trend ‘helps the market, too, because it gets some of that influx of supply off.’”

“Finlaw noted that the local supply of new homes is falling, a good sign for the industry. Once that happens, demand for existing homes will go up, bringing the overall market back into balance. ‘This has been a cyclical business since the housing industry started,’ Finlaw said.”

Please post off-topic ideas, links and Cragslist finds here.