The Housing Bubble

It’s Friday desk clearing time for this blogger. “Hanoi’s real estate market is heating up day by day with the prices of apartments in luxury areas like Ciputra, The Manor, and Trung Hoa-Nhan Chinh up by nearly 100%. Mrs Hoa, who owns a villa and an apartment at Ciputra, said that she had decided not to sell the apartment at this moment as she thought the price would rise further.”

“Mr Duc from Bitexco said said that unlike previous years, when prices increased when speculators pushed the prices up, the market is now really hot due to the high demand. Mr Duc said that the supply shortage would make the ‘price fever’ last for a long time.”

“According to former banker and property consultant Carlos Moedas, the banking system in Portugal is just too well run and cautious in its lending policies for a run on the banks caused by the sub prime housing market crisis in the United States. In fact, there’s every sign that the commercial property and housing markets could continue to grow well into 2008 if this year is anything to go by.”

“There have been consistent booms and busts in the property markets on the Iberian Peninsula: 1976, 1985, 1993, and perhaps, 2008-9.”

“‘I can tell people that a good opportunity to buy will come quite soon, within the next two years. This means that people with money to invest in property and buy then, will be laughing all the way to the banks in 10 years time,’ he said.”

“At St Lucia’s Jalousie Plantation, a beachfront resort nestled in a cove at the foot of the Caribbean island, a new development is rolling out about 50 single, one-bedroom (a single with a living room) and double villas ranging from $580,000 to $1.2 million.”

“‘It’s a chance to get in before prices go up,’ says DCG marketing director Suzanne Gryspeerdt. ”It’s about to take off.”

“First-time buyers are purchasing properties with people they have known for less than a year in their rush to get on to the housing ladder, a survey has shown. One in five people who bought their first home with someone other than their spouse admitted they had known the person for less than 12 months, according to the UK’s Skipton Building Society.”

“Jennifer Holloway, head of media relations at Skipton Building Society, said: ‘We can all understand the panic that potential homebuyers must feel at the news that house prices are still rising. So it’s not surprising that they’re resorting to desperate measures to try and put an end to their misery. But desperation shouldn’t mean that caution is entirely thrown to the wind.’”

“Now is the time to buy a house in Wanganui. House sales were at a six-year low last month, according to Ross Watson of the Manawatu-Wanganui Real Estate Institute.”

“Mr Watson said now was the time to buy, particularly for those on the hunt for their first house. ‘There’s a lot of property for sale, so lots of choice for buyers. Property prices really will not be any more affordable than what they are currently,’ he said.”

“Only four houses over $300,000 were sold in September, and Mr Watson said buyers were being cautious. He said the slow sales weren’t confined to Wanganui. ”People aren’t prepared to take the risk of a high mortgage. It’s happening right across New Zealand.’”

“A decade-long boom for the property market in Spain has ended, with prices falling for the first time in many parts of the country, new figures show. The Spanish Government yesterday played down fears of a crash. Rafael Pacheco, the Housing Director, said the figures showed that Spain was experiencing a ‘gradual and gentle landing for house prices. You cannot speak of a crisis,’ he said.”

“If 2007 was the year of ramped-up rents, increasing government regulation and a closer focus on the information homebuyers need before purchasing a property, many experts are predicting the Gulf real estate market in 2008 will forever be remembered as the year when saturation came to town.”

“A quartet of expert studies over the course of the past few weeks have suggested that the real estate market in the Gulf, in particular the UAE, is in danger of seeing residential supply outpace demand by close to 40,000 units and customers finding it increasingly difficult to differentiate between the hundreds of developers touting their business on billboards, print pages, radio, TV and the internet.”

“‘A situation of oversupply is unavoidable by 2009, which will put downward pressure on prices. The extent of the oversupply situation will depend on the timeliness of deliveries,’ Property management specialist Asteco predicted.”

“Yang Ping hasn’t slept well since September 27, when the central bank raised the down payment for mortgages to 40 percent for second apartments. It also lifted the interest rate on mortgages for second-apartment buyers.”

“‘I will go bankrupt,’ said Yang. ‘I need at least another 180,500 yuan for the bigger down payment,’ she said. ‘And my mortgage payment is an extra 780 yuan a month.’”

“Before the new policy was announced, it was a different story. Yang’s new apartment jumped in value from 11,000 yuan per sq m in mid-June to over 15,000 yuan per sq m now. A reporter mainly covering the property sector, Yang believes Beijing’s real estate market still has large growth potential compared with international cities like Hong Kong.”

“When New Jiangnan Construction, a block close to the capital’s CBD, went on sale, Yang decided to snap up an apartment, even though she had only 180,000 yuan to spare, barely enough for the 20 percent deposit.”

“‘I was lucky to even get the apartment,’ said Yang, adding that she was vying with over 6,000 people for the 350 units on offer. ‘I didn’t even have time to discuss it with my husband because he was on a business trip.’”

“In September 2005, an 84-page study was released in response to concerns of a housing bubble. And, just who sponsored this rosy look at the mortgage market on the eve of its collapse: the Mortgage Bankers Association. Look at what happened since.”

“The MBA wasn’t the only organization to paint a too-bright picture. Then Federal Reserve Board Chairman Alan Greenspan, in Feb. 2004, famously touted adjustable rate mortgages for home buyers (while at the same time not pressing Federal Reserve oversight of lenders).”

“The National Association of Home Builders (NAHB) also boasted of an economy ‘on a strong growth path’ and noted ‘house price continued to advance rapidly…bestowing more wealth on American homeowners.’”

“But, while Greenspan tempered his endorsement of ARMs by later saying they were not good for all home buyers and the NAHB forecast that housing would slow and drag the economy, the MBA stuck steadfastly to its optimism. The study, in fact, remains prominent on the Association’s website.”

“The lesson: don’t only look at what the words mean, look at who wrote them.”

“The number of foreclosures in the nation has been on the increase. According to the Silver State’s own Sen. Harry Reid, foreclosures in Washoe, Douglas, Elko and Nye counties over the past two years are up by some 300 percent.”

“‘We can’t afford to wait until the next legislative session in February 2009,’ or so sayeth Assemblywoman Sheila Leslie about a special legislative committee that is scheduled to meet Oct. 22 to address the problem. ‘The problem has reached a crisis level in our state, with Nevada having the highest rate of foreclosures in the nation.’”

“Neither of these two rocket scientists—both in office for the past two years—had a thing to say when banks were making all those ‘high risk’ loans to people. (Why is it politicians are always fixing problems after they’ve become a crisis and never before?)”

“Of course, when times were good, banks were lending money like there was no tomorrow.”

“It is difficult to feel sorry for anyone here. I mean, should you feel sorry for banks who loaned money to people that wouldn’t (or couldn’t) eventually repay said loans? Or should you feel sorry for grown adults who bought more house than they could afford or got into a loan that they didn’t understand?”

“The point here is that perhaps the politicians will leave the private transactions between private parties, namely homebuyers and lenders, alone? Banks will eventually learn not to over-lend and buyers not to over-borrow. Both will learn their lessons, albeit painfully, and neither requires government intervention.”

“Citigroup, J.P. Morgan and Bank of America have proposed the establishment of a new $80 billion superfund to buy underperforming loans from troubled real estate lenders like Countrywide. Beyond the dubious and transparent psychological boost to the market, there is no economic or financial benefit to be derived from this effort.”

“The simple fact is that many customers of Countrywide and other big real estate lenders cannot pay their high priced mortgages and cannot sell their homes for the high prices they paid.”

“The blame belongs squarely on the government’s expansion of the money supply that encouraged what we now see as a bubble housing market. There is no going back and undoing this error.”

“Like all government economic interventions, it can only help some at the expense of others, and whatever action it takes now will have no effect on curing previous malinvestment except to delay its redeployment and exacerbate the problem.”

“The nation should learn from this crisis that government cannot make us rich; it can only make some rich at the expense of everyone else.”

The Modesto Bee reports from California. “A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch. The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. ‘In the end, (condos) aren’t economically viable,’ Ogden said.”

“That leaves investor Michael Chadd, who borrowed to invest with Strategic Investment, very, very unhappy. Chadd bought a $100,000 stake in the condo plan. For the last nine months, he’s watched his money slowly drain away. What Chadd didn’t see and Strategic Investments didn’t mention was the sour state of the residential building market.”

“‘We were all pretty stupid,’ Chadd said.”

“It’s back to the future in the Northern San Joaquin Valley as median home prices have plummeted to 2004 levels. Stanislaus County’s median-priced homes sold for just $300,000 last month. That’s lower than during November 2004, when the region’s housing market was booming. In the last 12 months alone, Stanislaus’ prices have dropped nearly 19 percent.”

“Merced County is even worse. Prices there plunged nearly 26 percent to $260,000 in September compared with a year earlier. That’s the biggest decline in California, according to DataQuick.”

“Home sales volume has sunk to levels not seen since the region’s mid-1990s recession. Only 372 homes sold this September in Stanislaus County. In September 2005, more than 1,400 homes sold in the county. Back then the region was in a housing boom.”

“These days, it’s foreclosures that are booming. Last month, 268 homes were repossessed by lenders at foreclosure auctions on Stanislaus’ courthouse steps.”

The Sacramento Bee. “Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation’s mortgage industry abruptly shuttered their dream.”

“‘The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available,’ said Abello. ‘She said we were no longer approved for a loan.’”

“‘The products we used – the creative financing, so to speak – are pretty much gone,’ said Jon Dobbel, Elk Grove branch manager for Gold River-based Summit Funding. ‘It definitely has an effect on people’s ability to buy houses.’”

“Prices have fallen across the region as the supply of homes for sale continues to exceed the number of willing buyers. Sacramento real estate agent Rosanna Garcia attributed September’s downturn ‘to people not qualifying because the lenders have become so strict. It’s also still about fear,’ she said. ‘How much more is it going to drop? Am I going to be overpaying?’”

“Abello and her partners had hoped to buy together what they couldn’t afford separately. That turned out to be a four-bedroom, 1,800-square-foot house in Natomas owned by a San Francisco real estate agent. The long-range plan was to get their feet in the door as homeowners and ‘use real estate to build and create wealth.’”

“But that plan is now on hold. ‘I had to call the (San Francisco) owner and tell her the bad news,’ Abello said. For now, she and her friends will remain renters.”

The San Francisco Chronicle. “Bay Area homes sales sank to a two-decade low in September, as tighter lending standards walloped an already-declining market. It was the slowest September since DataQuick started recording statistics in 1988 and the 32nd consecutive month of declining sales.”

“‘I had an offer come in on a property in Oakley that was a probate sale,’ said Don Forrester, a Realtor in Walnut Creek. To show comparables to his client, ‘I pulled up 30-something (nearby) homes at that price level of $356,000. Eighty percent were bank-owned foreclosures or short sales. That was huge.’”

“Forrester said the price impact was clear: ‘A year ago, (that property) would have gone for $400,000. A year and a half before that, it was $450,000.’”

“Rising inventory levels are another factor that impact sales. The number of for-sale homes in September rose in seven Bay Area counties compared with a year ago, according to MLS data compiled by ZipRealty.”

“At the same time, every Bay Area county had a significant chunk of its listings showing price reductions, ZipRealty said. Price reductions ranged from 25 percent of San Francisco listings to 54 percent of Solano County listings. That doesn’t include homes that were removed from the MLS and then relisted at a lower price, a controversial but common practice.”

“Oakland officials and advocacy groups announced a set of resources and legislative initiatives Thursday aimed at fighting the subprime mortgage mess.”

“Dorothy Hicks said she is on the verge of losing her home in the Havenscourt neighborhood of Oakland. Hicks said predatory lending practices forced the monthly mortgage payments on the home she has owned for 39 years well above $3,100. Hicks said she attempted to pull equity out of her home to start a discount children’s uniform business.”

“With prepayment penalties and high fees, Hicks said she now owes $412,000 on her property. A few years ago, the principal on the loan was just over $20,000. ‘A lot of people will tell you, ‘You knew what you were signing,’ Hicks said. ‘That is not so.’”

From ABC 30. “There are new signs of just how hard the mortgage meltdown is hitting the Bay Area as the latest data shows home sales in Northern California have sunk to the lowest level in two decades.”

“In Contra Costa County, realtor Lynda Bartels says these days, a lot of folks are looking at homes, but not necessarily buying. ‘I think buyers are worried. They want to get a home as low as they can, but at the same time inventory is up and there’s lots to choose from.’”

“The Bay Area housing slump is hitting realtors hard. Bartels’ profits are down 80 percent in the last two years and developers are also trying to unload leftover homes that just won’t sell. ‘The business decision is more of an advantage to sell at a discount and lose money than wait 12 months on a market that might improve,’ says Bartels.”

“The Cerrita Gated Community in Pinole has seven, 3-bedroom, 2-bath homes that will sell at auction next month. Opening bid is $385,000 dollars — nearly half of the asking price.”

“‘I wouldn’t be in a hurry to buy. You can wait over 6-months, a year, even two years, and we’re still going to see those lingering effects,’ says Thomas Davidoff, U.C. Berkeley Haas School Of Business. ‘For the inner Bay Area the worst is yet to come, and it’s going to be best for buyers.’”

The Marin Independent Journal. “Late summer’s credit crunch continued to plague the housing market in September, time-warping Marin’s median single-family home price back to what it was a year ago.”

“The median single-family home price in Marin in September was $860,000, just shy of the $863,500 in September 2006, according toDataQuick. The median single-family home price in August was $1 million.”

“‘September was a really difficult month in Marin,’ said Valerie Castellana, president of the Marin Association of Realtors. ‘The total sales dropped dramatically, more than we’ve seen in recent years. The segment of the market that is most hard hit are properties under $1 million.’”

“‘I think it’s a correction that’s happening that was due,’ said Bruce Berlinger, an agent in Tiburon.”

The Brentwood Press. “It’s no secret that California’s red-hot real estate market has cooled considerably over the past few years. With property values and home prices on the decline and bank foreclosures at an all-time high, local Realtors and their clients have been forced to change the way they approach a deal.”

“Currently there are approximately 3,000 homes for sale in East County, nearly 43 percent of which are bank-owned foreclosures, according to local Realtor Brian Sharp.”

“‘Yes, it is a crazy market right now, and so the one thing you really need to stress is how to help. Half the properties are in foreclosure and people’s loans are upside down, so my job is to find a way to help them,’ said Joy Di Ricco, a Realtor in Antioch.”

“Mark Christopulus of M&H Realty in Brentwood also has managed to stay busy during the downturn, thanks in part to his expertise in dealing with foreclosures.”

“‘What’s hurting the market right now is that banks are taking foreclosures and selling them for under market value because they want to move them,’ he said. ‘What I’ve been doing in this market is taking on foreclosures from the bank and taking the listing and trying to sell them.’”

“So what’s a homeowner to do? Sit tight if you can, and wait for the market to settle, advised Brian Sharp of Sharp Realty in Brentwood.”

“‘I’m telling clients not to buy right now if they don’t have to,’ he said. ‘Uncertainty kills the market, and I believe in the last couple of years greed and bad loans have contributed to the decline of the market, and buyers are scared. What I’m seeing a lot of right now are short-sales. Things are definitely slow.’”

“In Brentwood, there are currently 600 homes for sale. Sharp said 20 homes were sold in September, and there are approximately 10 houses pending for October. He said that home prices have shot up faster than incomes were able to keep pace, and thus ‘everything is out of whack.’”

“What people need to be careful of, he added, are those who are painting a rosy picture that currently doesn’t exist.”

“‘There is a very small group of unethical behavior out there right now, telling people to buy and sell regardless,’ said Sharp. ‘I say: do your job, serve your clients, but have some integrity. That’s the bottom line.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Rhinebridge Plc, the IKB Deutsche Industriebank AG structured investment vehicle that has lost about half its value, is unlikely to repay all its debt. Rhinebridge suffered a ;mandatory acceleration event; after IKB’s asset management arm determined the SIV may be unable to pay back debt coming due, the Dublin-based fund said. Rhinebridge had $1.2 billion in commercial paper outstanding as of Oct. 5, according to Fitch Ratings.”

“Rhinebridge’s mandatory acceleration event means all of the SIV’s debt is now due, according to a company prospectus. As of late August, 79 percent of Rhinebridge’s holdings were in the U.S. and 80 percent in mortgage-backed bonds, Fitch Ratings estimated in an Aug. 22 report. Eighty-three percent of the assets had the highest-possible AAA rating, Fitch said.”

“Yields on overnight asset-backed commercial paper, rated A1+ by S&P and P1 by Moody’s Investors Service, the highest for such debt, rose to 5.15 percent yesterday, according to Bloomberg data.”

“That yield is 40 basis points more than the Federal Reserve’s target rate for overnight loans between banks, compared with an average of about 8.5 basis points in the first half of the year. The wider difference signals that investors are still wary about holding asset-backed commercial paper.”

“The amount outstanding has tumbled 25 percent since the week ended Aug. 8 to $888 billion, according to the Federal Reserve in Washington.”

The Associated Press. “Wachovia Corp., the nation’s fourth largest bank, said Friday its profit fell 10 percent in the third quarter, hurt by $1.3 billion in losses and write-downs related to turmoil in the credit markets.”

“The Charlotte-based company also quadrupled its loan-loss provisions in the quarter and signaled increasing credit troubles ahead.”

“Capital One Financial Corp. posted a third-quarter net loss Thursday, hurt by charges from shutting down its GreenPoint Mortgage business.”

“It also recorded $898 million loss from discontinued operations related to the shutdown of GreenPoint Mortgage, which is largely complete, the company said. In acquired GreenPoint in December as a part of a $13.2 billion purchase of North Fork Bancorp, which operates banks in New York, New Jersey and Connecticut.”

The Star Tribune. “MoneyGram International Inc. disclosed late Wednesday that it is the latest casualty of the subprime mortgage crisis. In an effort to reap higher returns, MoneyGram invested hundreds of millions of dollars of customer deposits in bonds backed by the high-rate mortgages. Now that many of those homeowners can’t make their monthly payments, these bonds have plunged in value.”

“MoneyGram said it would take a $230 million loss on mortgage-related investments, forcing the company to consider selling one of its largest business units.”

“‘The question is: Are these losses just the beginning?’ said Brett Horn, an equity analyst at Morningstar. ‘No one seems to know for certain.’”

“As of June 30, MoneyGram had $1.5 billion invested in residential mortgage-backed securities, on top of the $384 million in subprime mortgages. MoneyGram could try to sell part or all of its investment portfolio, but that may be difficult in the current marketplace, and the company could suffer significant losses.”

“‘Who wants to buy a portfolio when a lot of the risk is unknown?’ asked Robert Dodd, a senior analyst at Morgan Keegan & Co.”

From Biz Journal. “The parent of Corus Bank, one of South Florida’s largest condominium construction lenders, said its profit fell 31 percent during this year’s third quarter.”

“Corus reported $200 million in non-performing loans for Sept. 30. That gave it a 4.89 percent ratio of non-performing loans to total loans. Corus also said it has three South Florida condo loans — totaling $91.6 million — on completed projects that are experiencing ‘presale fallout.’”

“At the end of the recent quarter, Corus had $7.3 billion in loans outstanding and committed on 129 condo construction and conversion projects. That included 22 projects with loans totaling $2.1 billion in South Florida.”

“Corus said: ‘At this point in the housing cycle, we are experiencing a disappointing decrease in origination volume, and a certain, albeit very manageable, degree of problem loans. We anticipate that problem loans could get worse before they get better.’”

The Wall Street Journal. “Earlier this week, Cheyne Finance PLC, a SIV managed by London-based hedge-fund group Cheyne Capital Management, halted payments to its creditors. Its receivers said they expect to complete a sale of its assets in the next two to three weeks. Cheyne had roughly $6.6 billion in assets as of August.”

“A U.S. real-estate fund has sued HSBC Holdings PLC, alleging that the British bank’s U.S. mortgage-trading operations took advantage of the crisis to profit at the expense of the fund.”

“Luminent Mortgage Capital Inc., a San Francisco firm that invests in residential-mortgage securities, claims that HSBC’s New York office placed an improperly low valuation on nine subprime-mortgage bonds, which the fund’s subsidiaries had put up as collateral for loans.”

“According to the complaint, HSBC bought the bonds at a deep discount to their fair value, in at least one case employing an auction that included only one other bidder.”

“The dispute highlights a problem that many banks and investors faced this summer as troubles in subprime mortgages triggered a broader credit crisis. Market prices for many types of securities all but disappeared, forcing holders of the securities to come up with estimates of their value.”

“Because those estimates often involved subjective criteria, they left ample room for possible dispute.”

“Irwin Financial Corp., a lender focused on small business and consumer mortgage loans, said Friday it expects to report a third-quarter loss of $15 million to $20 million due to discontinued operations.”

“‘Our provision in the third quarter has created significant reserves for larger potential losses from future repurchase demands in the discontinued operations and loan losses in our consumer home equity portfolio,’ CEO Will Miller said.”

From Reuters. “St. Louis Federal Reserve President William Poole said on Thursday the recent U.S. housing market cycle diverged from past experience because it had been fueled by developments in the securities markets.”

“‘This cycle was really quite different and the boom was driven importantly by the growth of the subprime market and the securitization of those markets,’ Poole told a monetary policy conference.”

“‘(It) all worked as long as house prices were rising — and it all collapses when house prices stop rising. Obviously, this segment of the market, it is going to be a long time before it comes back,’ Poole said.”

“‘I think this housing cycle is … in many respects quite different from previous housing cycles, and has unique characteristics from the housing cycles from the postwar period, and is unlikely to give us much insight into the housing market for the longer run,’ he said.”

“Billionaire Warren Buffett said he was skeptical about the U.S. Treasury’s plan to create an $80 billion fund to buy distressed assets from structured investment vehicles linked to home lending.”

“‘I don’t see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself — whether people can make the payments,’ he said. ‘It would be better to have them on the balance sheets so everyone would know what’s going on’”

From MarketWatch. “Residential builder NVR Inc. on Friday said its third-quarter net income fell 30% from a year earlier as the industry continues to wrestle against a softening housing market.”

“The Reston, Va.-based builder said its results included land-deposit impairments of about $96.5 million. NVR noted activity slowed ’significantly’ in August and September due to tightening in credit markets.”

“The average new-order price in the third quarter fell 9% from a year earlier to $330,100, the firm said. The cancellation rate rose to 27% from 16% in the second quarter.”

“First American LoanPerformance today announced the release of its August 2007 LoanPerformance Home Price Index. ‘This latest home price index confirms that property values in key mortgage markets like California, Nevada, Florida, and Arizona continue to exhibit on-going declines,’ said Damien Weldon, VP of collateral and prepayment analytics for First American LoanPerformance.”

“‘Within these States, cities like Los Angeles, Las Vegas, Miami and Phoenix are leading the market downwards. At the ZIP code level, the picture is often much bleaker because there are individual ZIP codes that are down nearly 20 percent compared to last year,’ added Weldon.”

Dow Jones Newswire reports on Florida. “Advisers say even millionaire clients aren’t immune to fallout from current real-estate market woes. Take, for example, a wealthy client of financial adviser Michael Charleton. ‘He came to me with about $3 million’ just about four years ago, Charleton says. The client subsequently invested in 21 individual million-dollar condominiums in Cape Coral, Fla., planning on re-selling them.”

“The client had kept the risk of his investments manageable before, Charleton says, ‘because he always put 20% down.’ But this time around, says Charleton, ‘all the foreclosures’ in Cape Coral ‘are killing him. It’s a perfect storm,’ he says, ‘and he just has to wait it out.’”

“‘Every client thinks that their house is worth X amount,’ says Darlene McConnell, a retail lending manager at Raymond James Bank. ‘That’s the sensitive part of the market that we’re in right now.’”

“This line of service can also entail much soothing of nerves, says Cadaret Grant’s Charleton. Beyond providing financial analysis, he says, ‘it’s more of a hand-holding type of thing.’”

From TC Palm. “City Attorney Roger Orr said his staff is hoping to secure about 50 lots between Interstate 95 and Savona Boulevard by January or February so the first phase of construction can get under way as planned. But now several property owners along Becker, including many who bought at the height of the real estate boom, are resisting the city’s offers.”

“Karen Allen from North Loxahatchee, bought her quarter-acre lot in 2005 for $86,000, according to records on the St. Lucie County Property Appraiser’s Office Web site. Allen said…a city attorney told her by phone that the city appraised her land at $55,000.”

“‘If they wanted to give me what I paid for it, at least I wouldn’t lose anything,’ Allen said. ‘But it’s really an insult to want to take my lot and give me less than what I paid for it.’”

“‘There’s going to be enormous displeasure,’ Orr said. ‘We understand that we’ll be dealing with property owners who acquired land at the top of the (real estate) bubble.’”

From Newsweek. “Roger Elliott’s neighbors call it the Dream House. Elliott, a contractor, and his wife Allison, built the house in Palm City, Fla., from plans they drew themselves. All told, they’ve dropped about $750,000 on their home, which they’ve lived in for just over a year. But as the housing market has shifted into reverse, the Elliotts–Roger in particular–are plagued by doubts.”

“He’s grown to expect his home to provide more than simple shelter. He wants it to provide a return on his and his wife’s investment–preferably one that’s measured in double digits.”

“Instead, the Elliotts’ Dream House is losing value. Across the country it’s a familiar scenario. The local real-estate market is terrible, Roger says, with listed properties languishing. Roger guesses the house is worth 10 percent less than it cost to build–and he’s worried its fall has just begun.”

“‘I have personal angst,’ Elliott says. ‘Yes, I built this fantastic house. My wife loves it. Everybody in the neighborhood thinks it’s great.’”

“But it was a house built for appreciation. Now that prices are falling, he wishes he’d built something far more modest.”

“Since the home was built partly with an inheritance, Roger feels a special responsibility that the money left to his wife by her father turns out to be a wise investment. It doesn’t help that because Roger served as his own general contractor he chose many of his home’s pricey extras.”

“The Elliotts are realizing they have more house than they need. Roger regrets building a home that has so much unused space. ‘If I could do it again I’d do it a lot differently. I’d scale it back in every area,’ he says.”

“Roger admits his parents probably wouldn’t recognize the anxiety he’s feeling. ‘They bought a home thinking they were going to live there for 30 years and pay off the mortgage,’ he says. ‘It wasn’t ‘We’ll live there for five years and pocket some money.’ It wasn’t an investment game for them.’”

“Then again, they couldn’t imagine living in a $750,000 home, either. ‘We’ve kind of oversold ourselves on the need for our homes to be investments,’ he says reflectively.”

The Wall Street Journal. “Tom Crossett is one investor on the verge of walking away from his properties. At the height of Florida’s condominium boom two years ago, the air-conditioner contractor from Delray Beach, Fla., bought four units with the plan to flip them quickly. He paid between $143,000 and $173,000 for the units.”

“Mr. Crossett now says the developer of the complex that sold him the converted-from-apartment units reneged on many of the promises, including extensive renovations, making them a tough sell.”

“To help make monthly mortgage payments totaling $4,000, he’s been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages.”

“‘The only way I can see for me is to just get out, stop the bleeding and let them go,’ Mr. Crossett sighs.”

The Sun Sentinel. “Levitt and Sons, the cash-strapped Fort Lauderdale company trying to survive the housing slump, said Thursday it has temporarily stopped building houses as it tries to restructure its debt. The action is an inconvenience for consumers who plan to move into Levitt homes and now are in limbo.”

“‘I’m up in the air,’ said Angelo Palermo, who’s waiting for his $380,000 house in Port St. Lucie to be finished. ‘This is a very bad situation.’”

“‘We realize that there are a number of questions from customers,’ said Michael Freitag, a spokesman for Levitt Corp. ‘But until the matter of financing is resolved, we don’t have answers to those questions.’”

“Bob Oblas of New York was scheduled to close on his two-bedroom house in Seasons at Tradition on Oct. 31, but said a company representative told him Thursday that it was not likely to happen. He wonders about a clubhouse and other amenities that have yet to be built.”

“‘I’m very concerned about the viability of the community,’ said Oblas.”

The Palm Beach Post. “The average rent for an apartment in Palm Beach County from July through September was relatively unchanged from the same period a year ago, RealFacts said.”

“The sale of rental communities also stalled as the condo conversion craze fizzled in the worst housing slump in 16 years. There was only one sale of an investment-grade apartment complex this year, compared with six last year and a peak of nine sales in 2005, according to the report.”

“‘It’s like musical chairs,’ said Chris Bates, sales and marketing director for RealFacts. ‘The music stopped, and everyone is left holding what they have.’”

“Declining occupancy is a trend that confuses Bates, given that other data-analysis companies have documented a tsunami of foreclosures in what has come to be known as the ‘mortgage meltdown.’”

“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn’t find it.’”

“Then he realized that credit reports took a nosedive after foreclosure. ‘When they’re foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can’t rent.’”

“The question then becomes: Where have all these people gone? They can’t own a home and they can’t rent. That’s one of the major dilemmas of the housing crash of 2007.”

“‘They’re doubling up with friends and family,’ Bates theorized, ‘or else they’re exiting the locale.’”

“Local investors stuck with condos and townhouses they couldn’t sell are dumping them on the rental market, real estate agents say, hoping to recoup their carrying costs, even if they don’t make a profit. But getting owners to set realistic rental prices has been a problem, agents say.”

From WFTV Orlando. “Sluggish sales and high foreclosure rates are causing higher bills for some condo owners. Residents at the Uptown Place condos in downtown Orlando said their monthly association fees have gone up $150 to nearly $450 a month. They have also been asked to pay an additional $689 for emergencies.”

“The hike compensates for vacant units and foreclosures.”

“‘That’s not my fault. I’m doing what I’m supposed to do. I shouldn’t be expected to pay for everyone else,’ said Christine Geever, a condo owner.”

The Street.com. “With the housing boom in a massive retreat, homebuilders are feeling a lot of pressure, perhaps none more so than Tousa. The Hollywood, Fla.-based builder of single-family residences, town homes and condominiums has seen its shares lose more than 90% of their value over the last year. The dismal news seems to have given Tousa’s unsecured creditors cause for concern that Tousa may be on its way to a bankruptcy filing.”

“A creditor group that owns more than $1 billion in senior notes and subordinated debt has hired law firm Akin Gump Strauss Hauer Feld to assess its rights in the event of a bankruptcy filing, TheStreet.com has learned.”

“Joe Snider, senior credit officer at Moody’s Investors Service, downgraded the homebuilder’s debt rating…back in July. ‘They really reduced the financial flexibility of the company to zero, in our opinion,’ Snider says. ‘There is definitely a lot of pressure. Just about every one of the macro economic indicators are flashing serious warning signs.’”

The News Press. “Construction and sales of houses in Florida are nearing bottom but expect more decreases in prices, economist Hank Fishkind told the Southwest Florida Regional Economic Outlook on Thursday.”

“Statewide, ‘I think we’re about at the bottom of the housing market,’ the Orlando-based Fishkind said, although he doesn’t expect much improvement over the next two years.”

“Don’t expect your home’s value to go up, he warned. ‘Those prices haven’t adjusted. They’re going to, and it’s going to be very painful in the next two years.’”

“Lee County is especially overbuilt with houses, Fishkind said — at about 15,000, it’s a bigger inventory of unsold houses than anywhere else in the state, and more than four times what it was two years ago. Meanwhile, the median price of an existing single-family home has fallen from an all-time high of $322,300 in December 2005 to $250,800 in August.”

The Naples News. “Southwest Florida has reached the bottom of its housing slump, but a significant turnaround may take some time. That’s the message economist Henry Fishkind delivered in Fort Myers on Thursday afternoon.”

“Fishkind told attendees the volume of housing transactions has stopped going down, and appears to be bouncing along the bottom. However, there remains a 36-month inventory of homes for sale in Lee County and a 12-month inventory in Collier.”

“‘We’re at the bottom of the housing cycle, but it’s going to be long and flat, I’m afraid,’ he said.”

“‘It’s going to take time for that inventory to be absorbed because there’s so much of it,’ he told an audience.” “The hardest-hit housing segment when it comes to values, he said, is the condo market. ‘Condos are at a great risk,’ he said.”

“Some panelists acknowledged the pain that has accompanied the housing slump. ‘I know countless people in business who are just trying to get through,’ said Blake Gable, VP of Naples developer Barron Collier Cos. ‘For the next 12 to 18 months it’s more about surviving than growing.’”

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