The Housing Bubble

The Voice of San Diego reports from California. “George Chamberlin remains one of San Diego’s most high-profile bulls. Faced with dropping home prices and skyrocketing foreclosures, Chamberlin and others have barely changed their tune, if they have at all. If any of his words were used to convince people to buy with a loan that proved troublesome, Chamberlin disavows responsibility. ‘I have no idea what’s going to happen with prices,’ he said. ‘Sales are obviously much slower than I thought they would be…I do know that long-term, housing prices can only go up.’”

“But critics of that perspective say the frenzy of a few years ago drowned out common sense. ‘These cheerleaders have been disastrous on the way down. The sellers are the ones who are listening to them, thinking, No. 1, ‘It’s not that bad,’ and No. 2, ‘It’ll get better later.’ Those are the two worst things for sellers to think,’ said local Realtor Jim Klinge of the optimistic analysts.”

“Now the buyers waiting on the sidelines have won, he said. If sellers had believed for the last two years that the market was entering a decline, they may have lowered their prices earlier, and the region may have had a hope of a ’soft landing.’”

“Instead? A ‘crash landing,’ Klinge said. ‘Sellers are not doing their homework, or the homework they are doing is listening to the cheerleaders. Literally, nine out of 10 sellers are not selling their homes. That’s not good.’”

“‘Every one of these bubbles always has a group of cheerleaders sitting on the side saying ‘Rah rah, aren’t we great? Rah rah, don’t be late,’ said economist Chris Thornberg. ‘That’s part of the bubble…To some extent, people hear what they want to hear. There have been those of us out here saying, ‘It’s a bubble, it’s not going to last.’”

“The economist often credited with the soft-landing term, Leslie Appleton-Young at the California Association of Realtors, said it’s unfair to judge her statements in hindsight. ‘There’s no doubt that we knew the market was going to change,’ she said. ‘It just happened with a much greater severity (than we predicted).’”

Inside Bay Area. “The bar has been set for new home prices here, real estate experts suggest. When Anderson Homes decided to put 34 brand-new homes in the Paseo West subdivision up for auction to clear out inventory, some were worried the results would negatively affect Manteca’s already inert housing market.”

“Now, real estate agents and developers are saying the auction’s strong turnout, coupled with the successful sale of all 34 homes, is encouraging. ‘It sets the market pricing,’ said Cindy Foster of Re/Max Executive, adding that the auction made buyers realize $380,000 to $390,000 is the range where housing should be.”

“‘A lot of people have been sitting on the fence, but this shows that prices aren’t going to continue dropping,’ she said.”

“Meanwhile there are still 612 resale properties on the market in Manteca — a number that had eclipsed 700 a few weeks ago, Foster said. ‘The number of homes we are seeing available is going down, which is good. It really is a great time to buy,’ she said.”

“Manteca is also dealing with housing problems with regards to vacant properties, as about 300 homes are currently in the final step of foreclosure process.”

“‘I think each of the segments of homes appeals to a different part of the market, whether a foreclosure, resale or new home,’ said Tom Wilson of Wilson Group Realtors. ‘Having a new bottom for new home prices will affect housing in Manteca as a whole.’”

“During the Manteca City Council meeting on Oct. 15, elected officials voted 3-2 in favor of a time extension for home builders to build homes once they’ve obtained building permits from three to five years.”

“There are somewhere between 1,000 and 1,200 empty homes or a three-year cumulative inventory of foreclosures, resale homes and brand-new homes, said Mike Hakeem, an attorney who addressed the council on behalf of the developers.”

“‘If you’re not selling what’s at the end of the production line and you keep producing, then there’s going to be a back-up,’ said said George Gibson of Stockton-based FCB Homes.”

The Record Searchlight. “To borrow from a certain car dealer’s radio commercial — how low will they go? Housing starts in Redding in September sunk to new depths, eight. It’s the smallest one-month total since August, when nine permits were pulled. And August was the lowest month in Redding Permit Supervisor Wayne Gungl’s 27 years with the city.”

“2007 is on pace to be the first year that housing starts in Redding drop below 200 since 1981, when 174 were issued. Nearly 1,900 single-family home permits alone (were) pulled from 2003 to 2006. ‘The market is doing the right thing. If you haven’t got people willing to buy and have a bunch of extra houses out there, you don’t want to be building more,’ Gungl said.”

The San Bernardino Sun. “Christian Barron and husband Rodolfo were shocked when they saw the numbers. The $1,800 they owed on their first mortgage payment in September 2004 was 50 percent greater than the $1,200 their real-estate broker had promised them.”

“But even those numbers pale in comparison to the $3,000-a-month bill the couple now is paying. ‘We’re trying to make ends meet, but it’s really hard,’ Christian said.”

“Christian’s husband Rodolfo works full-time in the construction industry to pay the bills. Home sales dropped in September more than 53 percent compared to a year ago in San Bernardino and Riverside counties, according to DataQuick. Needless to say, the couple worry about Rodolfo’s job security.”

“Christian is a stay-at-home wife, but figuring out how to make ends meet is a full-time job in itself, she said. ‘We’re making it right now, but it’s really hard, because we have to borrow money from here and there,’ Barron said.”

“Helen Moore, executive director of Neighborhood Housing Services, said the recent movement to bail out credit-crunched homeowners is focused on giving them resources.”

“‘We make them smart homeowners, versus people getting stuck in the subprime market and getting into debt,’ Moore said. ‘A lot of them are telling me that they didn’t realize they had an adjustable-rate mortgage.’”

The Press Telegram. “With the ranks of the state’s licensed Realtors swelled to record numbers, most industry watchers believe the number of people exiting the industry will start to swell as home sales continue to drop.”

“‘It certainly remains to be seen how many people are going to be able to stick around,’ said Colleen Badagliacco, a Realtor in Santa Clara and president of the California Association of Realtors. ‘In Northern California we haven’t seen a lot of that at this point…but I do think there’s certainly some consolidation within the firms.’”

“When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. The alternative, if a home owner can’t continue making the home payments, is foreclosure.”

“Badagliacco has seen a strong short sale market in her area, and in particular at her firm. ‘Twenty percent of our listings are coming from that market,’ she said, adding, ‘We know those properties are going to sale.’”

The Daily Pilot. “Valerie Torelli is selling about as many homes right now as she did a year ago. It just takes a little longer to close the deal.”

“Torelli, who owns Torelli Realty in Costa Mesa, is one of many Realtors in Orange County facing a rough time in the housing market. Across the county, home sales in September were down 43.7% from the same month a year ago, and Costa Mesa saw an almost identical drop.”

“‘I just have to work longer hours to get the same thing accomplished,’ she said. ‘You have to go through a lot more showings. You can’t just show one or two houses. You have to show a dozen to two dozen at a time.’”

“Costa Mesa and Newport Beach also saw September sales fall from the numbers in July and August…In Costa Mesa, at least, that translates to more ‘for sale’ signs down the block and fewer people visiting the houses.”

“Torelli, however, said that may not entirely be a bad thing. Part of the reason for the high number of foreclosures, she said, was the fact that many people had purchased homes they couldn’t pay off, and her customers this year were quicker to offer a down payment.”

“‘A year ago, you had more of the people who never should have been looking,’ she said. ‘They were buying above their means, and they were allowed to because of the mortgages we had available. Now, people are putting 10% and 20% down.’”

“Carrie Allen, president of the Newport Beach Assn. of Realtors, said houses in affluent neighborhoods were selling as well as ever, and much of the fear regarding home-buying was due to negative media reports.”

“‘The buyers out there, because they keep reading all these negative headlines and reports, are really skeptical,’ she said. ‘They’re wanting to buy but the more they read, they think, ‘We’ll, wait until next month.’”

The Enquirer reports from Ohio. “Owners of low- to mid-priced houses aren’t the only ones losing their homes to foreclosure in Greater Cincinnati and Northern Kentucky. Expensive homes are falling into foreclosure, too. Thirty-two homes valued at $200,000 or more were scheduled for sheriff’s sale between Oct. 11 and Nov. 15. Fifteen were valued at $300,000 or more.”

“Of those, at least six owners or their spouses were involved in the mortgage banking, property title, real estate or home-building industries.”

“Robert Goering is a bankruptcy lawyer and Hamilton County treasurer, responsible for initiating foreclosure proceedings against owners who don’t pay their property taxes. He says it stands to reason that those who made the most money off the booming real estate cycle are now most vulnerable in the bust.”

“‘Realtors, for example. Realtors were making big money and have nice expensive houses, and then the housing market went the other way,’ he says.”

“Likewise, he says, investors could be stuck with mortgages on houses they planned to fix up and sell. ‘If you can’t rent them or sell them, then you’re in big trouble,’ Goering says.”

“On the outside, 4-year-old Regency Park in Hamilton Township offers everything Middle America wants: New, three-bedroom homes with an average appraised value of $151,000 that people can afford.”

“But on the inside, some suburbanites are hurting. Seven percent of homes are or have been in foreclosure, their owners caught by escalating mortgage rates or tough economic times.”

“Tim Armstron has watched more than one neighbor move out in the middle of the night. One even left his car behind for the repo man. ‘My neighbor was in foreclosure. There’s one across the street and more around the corner. It’s a real problem out here,’ he says.”

“Armstrong is anxious about his own situation, too. More than two years ago, he refinanced his house with an adjustable-rate mortgage. The rate began to climb after 24 months, and in the spring his payments jumped $400 a month to $2,100.”

“‘I kind of brought it on myself - I didn’t read the fine print,’ he says.”

“He’s trying to refinance, but he’s worried that neighborhood property values have fallen. Financial institutions have told him they won’t write him a new loan for the $160,000 he owes on his house.”

The Beacon News from Illinois. “In the Chicago area, housing prices stayed flat in more than half of neighborhoods and suburbs and dropped significantly in one-third of those areas, according to Chicago Magazine.”

“Kevin and Earleda Parrishs’ one-time home remained on the market for about six months after the family was sent packing. The family bought the house for $169,900 in spring 2005. After it was repossessed, note holder Fannie Mae put it on the market for $158,900, Earleda said. The home eventually was sold, but only after the price was knocked down to $149,500.”

“‘Home builders were extremely aggressive to fulfill Wall Street expectations,’ said Hugh Smeed, VP of community development for Naperville-based Crown Community Development. ‘They continued to build housing even after the market started to deteriorate.’”

The Courier News from Illinois. “In just a 20-day period in September, the number of foreclosed properties in Elgin increased 15 percent to 153. Of that number, neighborhoods in the southwest and northeast sides of the city showed the highest concentration of foreclosed homes.”

“On one street alone, Wilcox Avenue on the city’s southwest side, six homes in a span of four blocks have been foreclosed upon. On Moseley Street, a few blocks east, are four more.”

“Elgin has had 516 foreclosures from the beginning of the year until the end of September, a 42 percent rise from last year’s number of 363 over the same period.”

“‘I have at least one or two cases every week of someone who is unable to make (mortgage) payments and they’re thinking just to let it go, and to allow the bank to take over the house because they can’t afford the payments,’ said Elgin City Councilman Juan Figueroa.”

“Christen Wiggins, a director at the nonprofit organization Neighborhood Housing Services in Chicago, said it was estimated that for every house foreclosed in Chicago, the value of the surrounding homes have dropped by around 1 percent.”

“‘If you are living on a block that has a lot of foreclosures, you’re seeing your own property values go down,’ she added.”

The News Democrat from Illinois. “A record number of properties are being repossessed in St. Clair and Madison counties, and signs indicate that it could get worse.”

“The St. Clair County circuit clerk’s office has processed about 1,200 foreclosures so far this year and is on pace to surpass the total of 1263 reported in 2006. Madison County foreclosures are also on the rise with 896 having been recorded so far this year. Three years ago, that number totaled 958. By last year, it had soared to 1,278.”

“‘I don’t think that people actually understand,’ said University of Illinois professor Lynne Dearborn. ‘A lot of people are getting into a mortgage without having enough information. The lenders are not the culprits. It’s a series of events. People that are in foreclosure often do not realize what they did. It’s of their own doing. They think that they knew everything, but they do not realize there was more to know.’”

The Capital Times from Wisconsin. “As VP of commercial lending at M&I Bank in Madison, Dennis Sandora is on the front lines of the local real estate scene. And Sandora doesn’t see much hope for a quick end to the housing slump, which has brought construction of new homes to a standstill and left financial markets reeling.”

“‘I’m afraid we’re still at least three years out,’ Sandora said Wednesday during a conference titled ‘Reacting to a Troubled Real Estate Market.’ ‘It’s going to get worse before it gets better, especially on the residential side,’ he predicted.”

“Madison landlord Fred Mohs, who was active in buying distressed properties in the early 1980s, still sees too much air in the market. ‘We’re nowhere near the bottom,’ said Mohs. ‘I’d say we’re five years away from a turnaround.’”

“M&I’s Sandora said the glut of homes on the market here should eventually translate into falling prices. ‘I know there are entire subdivisions that haven’t had a sale all year,’ he said. ‘Builders are just sitting on things.’”

“Attorney Harvey Temkin noted that sale of developable farm land in the area has also slowed to a trickle, but prices haven’t yet come down. ‘Vacant land was very hot here just a year ago,’ he said. ‘Now, nothing is selling but we haven’t seen anything repriced.’”

From WTMJ in Wisconsin. “There is a crisis in Milwaukee. There are almost three dozen foreclosures everyday and the problem is getting worse. Last year 46 percent of homeowners who bought homes in the city used sub prime lenders.”

“‘It’s been called an epidemic; it’s been called a tsunami. It’s a crisis and it seems to be getting worse,’ Bethany Sanchez, a Fair Housing Advocate said.”

The Gazette Extra from Wisconsin. “Despite the nationwide housing slump, developer Tom Keller said he’s pushing full speed ahead to find tenants and businesses to occupy Fulton Square, the $6.1 million project that broke ground this week in Edgerton (and) will include 26 one- and two-bedroom condominiums.”

“‘Obviously, the market’s a little slow, right now, but I think at the end of the day it’s going to rebound,’ he said. ‘If you wait for the market to get better, you might be too late.’”

The Pioneer Press from Minnesota. “For those tracking the Twin Cities condo woes, there are about 10,630 brand-new condo units actively being marketed around the metro area, with nearly 11,000 more proposed, a new report says.”

“Author Ryan Jones said it’s unclear how much of that new condo construction is captured by the local Multiple Listing Service, the basis of the official ‘for sale’ inventory. That means there may even be more housing on the local market than the already record 34,000 total listings suggest.”

“As of the third quarter, about 75 percent of the 10,630 units were under construction, and slightly more than half were reported as presold but not closed.”

“Farmers Market Flats developer Brian Sweeney said he’s confident in the project because most of the area’s condo glut is high-end units costing $299,000 to $525,000. They shrunk their units to make them cheaper and more attractive in the current market, Sweeney said, and fit a niche for units priced between $144,000 and $244,000.”

“‘The market is still selling units at that price point,’ Sweeney said. ‘There’s just a glut of $350,000 condos.’”

“When he moved to Grey’s Riverview Terrace three years ago, Christopher Rocco figured the town home association that runs the complex was in good enough shape.”

“He never envisioned the jam Riverview Terrace finds itself in today. The wave of foreclosures sweeping across the Twin Cities has hammered the little community on St. Paul’s West Side.”

“Of the 21 town homes, nine are in foreclosure, according to Rocco, the association’s president. The group can’t fix Riverview’s rotting siding because it has just $37 - plus $5,000 in debt it can’t pay and a ledger filled with unpaid monthly dues and late fees totaling more than $35,000.”

“‘We are on the verge of losing everything,’ Rocco said. ‘It’s a lot of stress.’”

“Minneapolis attorney Patrick Burns said he represents more than 75 homeowner associations in the area, nearly all of them struggling with foreclosures that either the bank initiated or they did themselves because owners hadn’t paid their dues.”

“Rocco said he suspects many of his neighbors had high-interest-rate subprime mortgages, or adjustable-rate mortgages such as the one he had until he and his wife refinanced it last year into a manageable fixed-rate mortgage.”

“‘I think people got in over their heads,’ he said.”

The Star Tribune from Minnesota. “The head of a nonprofit group bought 8 foreclosed houses in north Minneapolis as bidders vied for 300 properties in Minnesota.”

“Dave Flatum, a general contractor from Osceola, Wis., paid $97,500 for a Ham Lake house that last sold for $147,500. Amy Anderkay was the winning bidder at $67,500 on a three bedroom house that had sold for $265,500 a few years ago.”

“Thousands of Americans with checkered credit couldn’t handle higher adjustable-rate payments when rates starting rising last year and walked away from their houses or were forced out by foreclosure. Many big lenders and investors in such mortgages lost millions or went out of business.”

The New York Times on Minnesota. “In the loud, overcrowded hall, the misery of subprime loans, exploding adjustable rate mortgages and slumping sales meant one thing: opportunity. ‘Who’s got $150,000?’ said the auctioneer, Mark Buleziuk, motor-mouthing the sale of a four-bedroom house that he said was worth $234,000. ‘It’s a buyer’s market,’ Mr. Buleziuk urged.”

“‘The market’s really low right now, so you can get a good price,’ said Lori Crook, a food server at Keys Cafe who said she was looking for a place she could fix up and sell. ‘Even if you can’t sell it right away, if you just sit on it and sit on it, it will go up.’”

“Representatives from two big lenders that have been hit hard by the collapse of the subprime mortgage market, Countrywide Financial and Bear Stearns, were on hand to provide mortgages — fixed, adjustable, jumbo or interest-only. Both have been criticized for giving loans too freely, leading to a wave of delinquencies and a rush to sell debt securities backed by those loans.”

“‘This is such a stark and dramatic illustration of how serious the problem is,’ said Ron Elwood, a lawyer at the Legal Services Advocacy Project, which lobbies in the interest of low-income residents.”

“‘The reality is, half the reason 300 homes are being auctioned off is that speculators tried to make a killing and failed to do so.’ Elwood said. In Minneapolis, 55 percent of foreclosures this year involved houses not occupied by their owners, according to county records.”

“But instead of alarming buyers about the risks, the auction of so many foreclosures at once was an invitation to speculators, small and large. Some, including Bryan Kihle and Jim Casha, who bought a four-bedroom house for $145,000, bid without seeing the properties.”

“‘I just looked at the picture and thought if we got it cheap enough, we could rent it for a year, then sell it when the market goes back up,’ said Mr. Kihle, a building contractor.”

Some housing bubble news from Wall Street and Washington. New York Times, “For all the pain in the mortgage market, investors who hold bonds backed by risky home loans have continued to receive their monthly interest payments — until now. Collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives.”

“‘At this point, it’s fair to say that everybody expects this shoe will drop,’ said Mark Adelson, an independent mortgage securities consultant and analyst. ‘It’s a foregone conclusion. But when it happens, there will be a market reaction to it.’”

“Investment banks issued some $486 billion in debt obligations linked to mortgages in 2006 and the first half of 2007. In the last two weeks, leading investment banks have written down about $20 billion, much of it in collateralized debt obligations and mortgage-related securities.”

“Most mortgage securities have not yet had significant losses, which are only recorded when homes are foreclosed and sold. Up to two years can pass between a borrower’s falling behind on payments and an auction.”

“‘As far as the security is concerned, it’s only once the property is effectively sold that a loss is recorded,’ said Nicholas Weill, chief credit officer at Moody’s. ‘The process of foreclosure is a long process. It doesn’t just happen overnight.’”

From Reuters. “Barclays and Royal Bank of Scotland have lined up emergency funds of up to $30 billion from the U.S. Federal Reserve to bail out American clients caught up in the global credit crunch, a paper said.”

“The banks would have to put up assets as collateral with the Fed to gain access to the credit line, which has been set up as a contingency and may not need to be used at all, the report said.”

From MarketWatch. “Royal Bank of Scotland is in exclusive talks to purchase the assets of Cheyne Finance, a structured investment vehicle, or SIV, that entered receivership last month, people familiar with the matter said Monday.”

“It wasn’t immediately clear how much RBS is offering for the assets. S&P marked all of Cheyne Finance’s assets to ‘D,’ or default, said the book value of the portfolio is $6.19 billion plus $948 million in cash equivalents.”

“On Wednesday, the vehicle stopped repaying its maturing debt after the receivers determined there had been an insolvency event. Two people familiar with the situation said junior capital noteholders would likely get nothing while mezzanine lenders will get some of their investment back.”

The Wall Street Journal. “The real-estate slowdown that hit the U.S. is spreading to Europe. Home prices in some of Europe’s hottest markets are falling after a decade of double-digit-percentage increases. The reasons resemble those across the Atlantic: higher interest rates, faltering confidence and tighter lending standards.”

“‘A year ago it was all, ‘no problem,’ but now they’re making us jump through hoops,’ said Iciar Caro, a 29-year-old school psychologist in Spain who can’t find a bank to give her a mortgage on a €236,000 ($337,000) house in a northern suburb of Madrid.”

“The housing boom was a global phenomenon, affecting virtually every developed country outside of Japan during the past 10 to 15 years.”

“Tomas Gonzalez bought a spacious, three-bedroom apartment in downtown Madrid last fall, with help from his in-laws. He and his wife felt monthly payments of €800 on a 35-year, €200,000 loan were manageable.”

“Now, the payments have risen €200 a month after the European Central Bank’s gradual lifting of interest rates, which it began in 2005. Plus, the Gonzalezes fear their home is worth less than they paid for it. One set of neighbors have repeatedly cut the price of their home in a yearlong effort to sell.”

“Mr. Gonzalez has stopped eating out and curtailed his purchases of books and music. ‘We are trying to save something for the lean times ahead,’ he said.”

From Bloomberg. “Commerzbank AG, Germany’s second- largest bank, dropped in Frankfurt trading after Chief Executive Officer Klaus-Peter Mueller warned of larger-than-expected losses related to U.S. subprime investments.”

“Mueller told the Financial Times Deutschland that the original 80 million euros in provisions set aside for writedowns on 1.2 billion euros of subprime-linked investments ‘won’t be enough,’ spokesman Peter Pietsch confirmed today. Analysts forecast subprime-related losses of 100 million euros to 450 million euros, according to M.M. Warburg’s Andreas Plaesier.”

From China Daily. “Autumn is usually the best time of year in Beijing, but for the city’s property developers, the season may already feel like a chilly winter.”

“After raising the down payment and mortgage rates for second home buyers on September 27, the government has now further tightened the screws on property developers by requiring them to pay land-use fees in a lump sum rather than in installments.”

“‘Developers before could get loans from banks once they acquired the first certificate. Sales from the first block were then used to finance the development of the remainder, which meant they could embark on several projects with limited capital,’ says Peter Pan, CEO of Care Property Holdings.”

“Insiders say it was a common practice for developers to postpone paying the government for rights acquired at high prices. Some even privately negotiated about the payment process.”

“‘In that case, most of the risks are transferred to financial institutions,’ says Pan. ‘Once one of the links goes wrong, banks may foot the bill.’”

The China Post. “Sweating in the bright afternoon sun, the men and women stand on the sides of the roads like homeless people clutching wrinkled cardboard signs. Waving the boards, the real estate agents call out to cars zooming by.”

“‘Come take a look.’ ‘You’re welcome to visit.’ ‘Over here!’”

“Surrounding the agents in this upscale neighborhood are vast swaths of empty apartments that just a few months ago were selling at record high prices.”

“China’s central bank has raised interest rates five times this year and upped reserve requirements for commercial lenders eight times. ‘What China is doing nowadays can be described as crossing a river by fumbling for stones. The Chinese government is in fact fumbling for the right path for Chinese economic development,’ said Huo Deming, an economics professor at Peking University.”

“An unusually high degree of risk-taking across asset classes made recent financial market turmoil all but inevitable, former Federal Reserve Chairman Alan Greenspan said on Sunday.”

“‘The financial crisis that erupted on August 9th was an accident waiting to happen,’ Greenspan said in a speech on the sidelines of the International Monetary Fund and World Bank meetings. ‘Credit spreads across all global asset classes had become suppressed to clearly unsustainable levels. Something had to give.’”

“‘If the crisis had not been triggered by a mispricing of securitized U.S. subprime mortgages, it would eventually have erupted in some other sector or market,’ Greenspan said.”

“‘Central banks around the world have essentially lost control over the markets beyond maybe three or four or five years out. In other words, there is no evidence that we at the Fed had the capability of affecting mortgage interest rates,’ he said, noting that even when the U.S. central bank began raising rates in 2004, mortgage rates remained low.”

From AFP. “‘Credit spreads across all global asset classes had become compressed to clearly unsustainable levels,’ Greenspan said.”

“Greenspan noted that housing bubbles had emerged in nations throughout the globe where the Fed does not control interest rates.”

“‘If indeed, it is short-term interest rates that created the bubble in the US, what created the bubble’ in Europe, Australia and other parts of the world, Greenspan asked.”

“Former Federal Reserve Chairman Alan Greenspan said the dollar’s depreciation may reflect growing unwillingness among foreigners to buy U.S. debt.”

“‘Obviously there is a limit to the extent that obligations to foreigners can reach,’ Greenspan said. The dollar’s decline to its lowest since 1997 may be ‘an indication America is approaching this limit.’”

“Greenspan’s warning came after the U.S. Treasury reported last week that international investors sold a record amount of U.S. financial assets in August. Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July.”

“The dollar has declined about 8 percent against the euro this year and 4 percent against the yen.”

“Greenspan was critical last week of a plan by some of the U.S.’s biggest banks to help revive the asset-backed commercial paper market, which seized up because of investor concern that too much of the paper was backed by securities containing subprime loans.”

“Greenspan was quoted as saying that he was unsure ‘the benefits” of the plan ‘exceed the risks.’”

“‘These peculiar financial structures that have become very prominent in the past four or five years are about to disappear from the scene,’ Greenspan said, citing ‘various variations’ of collateralized debt obligations and ’special’ investment vehicles as examples.”

“‘They have been tried and they have failed,’ Greenspan said. ‘The failure is the basic way that investors have been misled as to what the value of these products is.’”

“Greenspan questioned whether there was any longer a market for such ‘peculiar’ assets. He noted that demand for sales of debt backed by subprime mortgages has dried up.”

“It pains me to say this, but this time Alan Greenspan is right about housing. His latest pronouncement, that the market rescue plan being pushed by Henry Paulson, the Treasury secretary, is likely to make things worse rather than better, looks all too accurate.”

“Supposedly safe investments suddenly turned into junk bonds when the housing bubble burst. High profits reported by hedge funds…turn out to have been based on wishful thinking.”

“Thus, when two hedge funds run by Ralph Cioffi of Bear Stearns imploded last summer, it came as a huge shock to many investors, and helped trigger a market panic. But a recent BusinessWeek report shows that the funds were a disaster waiting to happen. The funds borrowed huge amounts, and invested the proceeds in questionable mortgage-backed securities.”

“Even worse, ‘more than 60 percent of their net worth was tied up in exotic securities whose reported value was estimated by Cioffi’s own team.’ We’re profitable because we say we are — just trust us. That hasn’t ever caused problems, has it?”

“Mr. Greenspan’s take, expressed in an interview with the magazine Emerging Markets, seems broadly similar. ‘If you believe some form of artificial non-market force is propping up the market,’ he said, ‘you don’t believe the market price has exhausted itself.’”

“Translated: this rescue scheme could be seen as an attempt to hide the bad debts everyone knows are out there, and as a result could delay any return of trust to the markets.”

“Bankers remain wary of plans to launch a massive investment rescue fund to soften the blow of the U.S. subprime meltdown, saying it could interfere with a market recovery and stall a resolution to the credit crisis.”

“‘It might be better to let the markets work it out. Trading platforms like that are always a difficult task,’ Carl Stalberg, executive chairman of Swedbank, told Reuters on the sidelines of a banking conference.”

“Despite the U.S. government’s active role in seeking support for the plan, many bankers and investors remain cautious, with some saying they have nothing to gain by participating.”

“‘Markets are rather suspicious about that policy. It could interfere with the market mechanism and introduce biases,’ said Olivier Garnier, deputy general manager at Societe Generale Asset Management.”

“The scope of the losses won’t be clear until buyers regain confidence, he said, and then the holders of the assets will likely have to face up to losses.”

“‘Once liquidity returns and impaired assets can be marked to market, some investors or financial institutions will see the true losses and will be forced to sell and deleverage further,’ Garnier said.”

“The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday.”

“‘I would suggest that….the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge,’ Kroszner said in a speech to the Institute of International Bankers.”

“Trading in some derivatives, such as collateralized loan obligations, or CLOs, and collateralized debt obligations, known as CDOs, has ground to a virtual halt since August.”

“Kroszner said these markets broke down because investors didn’t do sufficient due diligence and the products were complex and opaque. ‘Put simply, investors suddenly realized that they were much less informed than they originally thought,’ Kroszner said.”

The Kennebec Journal reports from Maine. “Augusta has tended to trail other communities in Kennebec County, in population, income and new housing. ‘Around the year 2000, something happened,’ says Hallowell consultant Frank O’Hara. ‘Augusta joined the national housing boom. Augusta’s population turned up for the first time in 20 years. What prompted the change? ‘It wasn’t an increase in jobs,’ said O’Hara, ‘The city lost about 750 jobs between 2001 and 2005. It wasn’t an increase in incomes.’”

The Boston Globe from Massachusetts. “Middlesex North Register of Deeds Richard P. Howe Jr. was at the Registry when housing prices tripled, and he is there now, as overextended homeowners are losing the roofs over their heads.”

“After the Sept. 11, 2001, terrorist attacks, the US government and business leaders became concerned that the economy would never recover, said Howe, so the Federal Reserve began charging a lot less for financial institutions to borrow money. That, combined with easier-than-ever-to-obtain credit, drove up housing prices, he said, and triggered the refinancing boom.”

“‘People realized that, for the same monthly payment, they could pull $50,000 out of their home, and they went crazy,’ he said. ‘They’d go out and buy a new car, take a trip to Disney World, and get that new kitchen.’”

“Because people believed they could always sell their homes for more than they paid, ‘the only question people were asking was, ‘Can I afford the monthly payment?’ he said.”

“‘The spring of 2003 was the busiest we have ever been,’ he said. That year, the registry recorded 140,000 documents, he said. ‘That summer, people here were eating PowerBars at their desks, instead of going to lunch, because of the volume of work,’ Howe recalled.”

“As 2004 began, he said, the market was still robust, but he was getting nervous. ‘You’d heard the stories about ‘For sale’ signs going up, and the seller getting three offers the next day, all above the asking price,’ he said. ‘That’s when I started telling people, ‘This won’t end well.’”

“The September median price of a single-family home in Massachusetts was $304,000, down 4.4 percent from a year ago, and September was the 17th straight month that prices have fallen on a year-to-year basis, a report out today said.”

“The number of Massachusetts single-family homes sold in September was 3,735, an 18.7 percent drop from September 2006 and the steepest monthly decline in a year, the Warren Group said.”

“‘It appears we’re seeing in September the ramifications of July’s credit crisis,’ said Timothy Warren Jr., CEO of the Warren Group. ‘We’re also seeing the tightening of the mortgage market. Jumbo mortgages are becoming less common.’”

“The total number of foreclosures in 36 Massachusetts communities north of Boston nearly tripled from January through September compared with the same period last year, showing the national mortgage turmoil is hitting home with a vengeance.”

“‘You can see that it’s a crisis,’ said John L. O’Brien, registrar of deeds for southern Essex County. ‘It’s starting to take on a life of its own.’”

“The numbers of lenders buying back properties at auctions now is on a par with the deep housing recession of the early ’90s, a broker said.” “‘It’s been years since we’ve seen anything like this,’ said Juliana Tache, a broker in Salem, which is marketing more than 100 homes and condos owned by lenders.”

“‘A lot of distressed properties are clogging up the system,” Warren said. ‘When you have a lot of bargain prices out there, it’s hard for people to sell at the full, fair-market value.’”

The Eagle Tribune from Massachusetts. “‘You look at communities that had a high rate of homeownership a few years ago, now there are two and three vacant buildings on the block,’ said Tina Brooks, state undersecretary for Housing and Community Development. ‘That puts a stigma on that community.’”

“‘We can’t save a lot of these foreclosures - people made very bad decisions and couldn’t afford any type of mortgage,’ said Sen. Susan C. Tucker.”

The Staten Island Advance from New York. “For the first time in his life, Tony Morreale must ask for help to pay his mortgage. Despite recent promises of aid for struggling homeowners from everyone from President Bush to Morreale’s own lender, Countrywide Home Loans, Morreale isn’t getting a lot of sympathy.”

“Morreale and his wife are two months behind on monthly mortgage payments of $3,360 on their semi-attached home in Arden Heights, and their adjustable rate mortgage is set to adjust again in six months to $3,600.”

“Morreale acknowledges he’s made financial missteps along the way. He’s not the only one who’s made some bad decisions. A Manhattan-based nonprofit estimates that foreclosures on the Island could reach 1,471 by the end of this year, when adjustable rate mortgages reset.”

“‘If home prices were still rising, borrowers would have better opportunities to refinance. It’s not a perfect storm, but there can be these cascades of events,’ said Keith Gumbinger, VP of HSH Financial Associates.”

“‘Their adjustable rate mortgage, which jumped by $380 in July, will jump again early next year to $3,600. ‘We should be living in Beverly Hills for that,’ Morreale joked.”

The Long Island Business News from New York. “Foreclosures have hit Long Island hard, but with a slew of adjustable rate mortgages ready to reset, the worst may be yet to come.”

“The conventional wisdom that Long Island’s wealth would deflect the foreclosure collapse is clearly wrong. In fact, Suffolk County topped the national foreclosure average in the first half of 2007; one out of every 180 Suffolk homes entered foreclosure between January and June, compared to the national average of one in every 216 homes, Kamer said.”

“Kamer (pointed) out that 51 percent of Long Island residents already live in unaffordable housing – a home is considered unaffordable if the owner spends more than 30 percent of household income on it. ‘It’s likely that the foreclosure problem will be worse on Long Island than elsewhere,’ she said.”

The Philly Burbs from Pennsylvania. “Homeowners across the country and around the state are defaulting on their mortgages at a record pace — and Bucks and Montgomery counties aren’t immune from the trend.”

“‘Our numbers definitely are up this year,’ said Sharon Krusen, who coordinates real estate cases for the Bucks County Sheriff’s Office.”

“‘The people in trouble now are just the beginning,’ said Mike Bannon, head of Bucks County’s Consumer Protection office. ‘The first wave is affecting the less expensive houses, but I think it’s going to keep spreading.’”

“‘Subprime refers to the loan, not the borrower,’ said Joseph Mason, a professor of finance at Drexel University. ‘It’s a loan that allows the borrower to borrow more than they would otherwise be eligible for, by lending you an amount that’s way above your means.’”

“The only way for people to buy homes that would otherwise be out of their financial reach was to keep their monthly payments down by using loans that don’t pay down the principal, Mason said.”

“‘For awhile, this was OK with people, because housing prices were rising, which would give people an ownership stake in the home,’ Mason said. ‘When that stopped, the arrangement became less worthwhile.’”

The Press of Atlantic City from New Jersey. “Elliot Building Group on Nov. 6 will auction off all of its properties at 14 New Jersey and Pennsylvania developments - including Seapine Estates in Egg Harbor Township and Forest Walk in Millville.”

“Founder and Chairman Brad Elliott said Friday that the company has abandoned attempts to reorganize under Chapter 11 bankruptcy and will sell all of its assets.”

“‘Timing is everything in life,’ Elliott said. ‘It seems like whatever could go wrong, did. The projects were not selling when we needed them to (because of the real estate industry slump), and when we did go to reorganize, the credit crunch happened a week later.’”

“Numerous homebuyers who signed contracts for houses and paid deposits of $40,000 to $50,000 haven’t known for much of the year whether their homes would eventually be built, whether their deposits were lost or even whether they could shop for houses elsewhere.”

“Like many others who made deposits on Seapine Estates and Forest Walk houses that weren’t built, Dr. Lance Smith is seeking reimbursement as one of several dozen creditors in the bankruptcy case. He said he knows he won’t get back his full deposit, but he hopes he gets something.”

“‘For some people, unfortunately that was their life savings,’ he said.”

“Georgeanna Newmones of Executive Realtors in Egg Harbor Township said the trend to rent rather than sell is highest among those who bought homes or condominiums pre-construction and are committed to the deal.”

“Newmones said he recently worked with a couple from Atlantic City who had to move to California but didn’t have enough equity to sell their home. The couple ‘had to put a tenant’ in the home, Newmones said, and they ended up renting it to a family last weekend, with the hope that they will be able to build the equity to sell it later.”

The Gazette from Maryland. “First Mariner Bancorp, the Baltimore parent of First Mariner Bank that was founded in 1995, showed a net loss of $3.9 million for its 2007 second quarter.”

“Total assets also declined to $1.25 billion from $1.4 billion a year ago. A key reason for the decline was a $45 million decrease in outstanding commercial loans and a $23 million drop in residential construction loans, executives said.”

“First Mariner has stopped issuing ‘Alt-A’ mortgages — loans falling between prime and high-risk subprime quality — through its wholesale lending division, said CEO Edwin F. Hale Sr.”

“Home foreclosures continued to increase in September across Maryland from a year ago, according to RealtyTrac. Last month, the state had about 2,800 foreclosure filings, a rise of 393 percent from September 2006.”

“‘The residential mortgage loan market is not what it was two years ago, but qualified borrowers need not worry,’ said Atwood Collins III, president of M&T’s mid-Atlantic division in Baltimore.”

The Baltimore Sun from Maryland. “Staging is garnering attention in today’s sluggish real estate market. With properties sitting longer, asking prices being slashed, and lenders scrutinizing loan applications more closely - anecdotal evidence suggests Realtors, sellers and investors alike are increasingly turning to staging, for that competitive edge.”

“During the housing boom a few years back, ‘people in the industry had more money, and they could afford to pay professional stagers,’ says E.J. Villarreal, an agent in Baltimore. ‘Now, many Realtors, like myself, are pinching pennies and staging the homes themselves. Baltimore has a lot of inventory now, and [to sell] you have to be a cut above the rest.’”

“‘In this market, it’s become a necessity,’ says Abe Soumah, an investor who buys properties. ‘It has slowed down across the board. At one time in Baltimore, you would see Dumpsters and scaffolding on every street. Now crews aren’t as busy.’”

“‘I’m hearing that investors and Realtors are getting nervous,’ says Lisa Kane, president of Just Stage It in Sparks, of the shifting market. ‘Many investors are overextended with mortgage payments, and there are million-dollar houses that are sitting empty.’”

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