The Housing Bubble

The San Francisco Chronicle reports from California. “Sales of existing homes in the Bay Area and California plummeted in September and prices sank, a state real estate trade group reported Wednesday. In the Bay Area, sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September’s median was a whopping 17.7 percent below May’s peak of $853,910.”

“‘We see a sea change almost overnight in the Bay Area,’ said Robert Kleinhenz, economist with the California Association of Realtors.”

“Analysts said the current downturn is already more severe than the housing slump of the 1990s, and they predicted that before it is resolved it will rival the 1980-82 slump.”

The Independent Journal. “The slump in Marin home sales has boosted the number of homeowners asking the county to reduce their property taxes. County Assessor-Recorder Joan Thayer says her office has already received 150 requests for assessment reviews this year, up from 90 in 2006.”

“Local homes sales dropped 77 percent last month, Thayer said. ‘The housing market has slowed down,’ she said.”

“Thayer said likely candidates could be those homes purchased in the past year or two. ‘They would have to be very recent buyers and they would have to be in areas where homes are declining,’ she said.”

“The county recently reduced the tax value of a home in Novato’s Atherton Ranch neighborhood that sold in 2006 for $1,159,900. Recent sales have been for less, and the county lowered its tax value to $1,065,000.”

The Contra Costa Times. “This week’s implosion of Diablo Funding Group has forced its employees to scramble for work amid speculation about the circumstances that doomed the veteran East Bay mortgage company.”

“Some Diablo Funding workers said the company has not provided them with commission checks they are owed and is three to four months in arrears. ‘We were told that we won’t be paid at all by Diablo,’ said Tony Frerking, manager of a former Diablo Funding branch in Modesto. ‘There is no more money coming from Diablo.’”

“‘We were given a song and dance that Diablo was not going anywhere. They were strong since 1992, but that was not correct,’ said Amanda Wold, a senior loan officer who worked in Diablo’s former Modesto branch. ‘We were promised checks last Saturday. The checks never came.’”

The Press Democrat. “Petaluma lender Homecomings Financial is cutting 40 jobs because of a deep decline in home sales, delivering another blow to the North Bay’s battered mortgage sector. In the North Bay, upwards of a dozen lenders have laid off hundreds of loan officers, processors and other workers.”

“‘It’s due to the overall turmoil going on in the housing and mortgage industry. Fewer housing sales mean fewer loans. It’s been very dramatic this year,’ said Stephen Dupont, spokesman for the parent company.”

“The Kennedy Wilson auction of San Pablo townhouses at the Doubletree Hotel & Executive Meeting Center Berkeley Marina started last weekend with a ‘practice auction’ to get people familiar with the experience, the auctioneer said.”

“Cecily Tippery, an agent in Brentwood who deals with bank-owned homes, said that only three of her 18 listings sold at a private auction in July.”

“‘It’s better to buy in presale because then you get a real feel for what the bank wants and you’re not competing against bidders,’ she said. ‘A lot of the time, the houses are bid on successfully but don’t sell because the bank doesn’t approve the price.’”

“Earlier this month, the Sacramento Business Journal reported that Irwin Union Bank of Columbus refused to transfer title on 20 homes to the winning bidders at a private auction because the bids were an average of $88,000 less than their reserve price, about $275,000 to $355,000 for the initially listed $409,000 to $465,000 homes.”

“Public auctions taking place near city halls or county courthouses are dull affairs. There are no slide shows, no glossy brochures, no stage, no charismatic auctioneer or floor staff and no frenzied bidding.”

“‘Now it’s not unusual to be the only bidder right now or have no bidding going on,’ said Sean O’Toole, a home investor. ‘Right now, a lot of properties selling are a bit upside down.’”

“Joy and Janey Madamba came to the Doubletree on Sunday to find a place to escape their $1,370-a-month rent for an antiquated apartment in Oakland. Joy Madamba said they both hoped to get a ’sweet deal.’ They started bidding on Lot No. 19, the third-to-last property.”

“Joy Madamba raised their yellow card quickly as the auctioneer’s fast-talking mumble jumped in $5,000 increments from $275,000, then $1,000 increments as the price climbed to $305,000, $306,000, $307,000. At $309,000 it slowed to only two bidders.”

“‘Sold at $310,000!’ The Madambas became owners of a three-bedroom, two-and-a-half-bath, 1,500-square-foot townhouse with a garage in Devon Square, a Pulte townhouse development.”

“‘We didn’t even think we’d do it,’ Janey Madamba. ‘But we just kind of went for it.’”

“Both wanted to hear what the last lot sold was and for how much. When they heard it was $293,000 for their same model, they both took it well. ‘Oh, good,’ Janey Madamba said. ‘We didn’t want that one anyway.’”

The Recordnet. “Central Valley sales figures weren’t available for the Wednesday state Realtors association report. In San Joaquin County, real-estate agents and brokers say foreclosure homes have been a logjam in the sales market for existing homes.”

“Nobody is saying that the stoppage is being flushed out, but agents and brokers are reporting that just within the past couple of weeks, there appears to be some movement with foreclosure properties.”

“Some asset managers, who are handling foreclosed houses for the entities repossessing homes, are more open to negotiation to reach deals, he said, though it’s not across the board.”

“‘I wouldn’t call it a lot more (sales),’ he said. ‘We’re beating them into submission is what it is - every day it’s ‘You’re priced too high, you’re priced too high, you’re priced too high.’”

“Real-estate agent Kevin Moran said that just within the past few weeks, asset managers are starting to reduce prices on overpriced houses and also are bringing new foreclosures onto the market at more reasonable introductory prices.”

“They also have started telling him that they’re getting instructions from higher-ups to get more aggressive on moving foreclosure properties through better prices and negotiating, he said. ‘I think they’ve sat on their inventory long enough.’”

The Daily News. “San Fernando Valley home sales plunged an annual 55.5 percent in September - a record low - as the market slide accelerated across the region, state and nation, reports showed.”

“‘It’s pretty dismal, isn’t it,’ said Nima Nattagh, a principal at market tracker Geostat Advisory. ‘And it’s not going to get any better anytime soon.’”

“In the San Fernando Valley market, from Toluca Lake to Calabasas, 362 previously-owned single-family houses changed owners, 452 fewer than in September a year ago, said the Southland Regional Association of Realtors. That’s the fewest monthly sales in the association’s database, which dates back to April 1984.”

“‘There are plenty of sellers out there who understand the market, have already listed their house at a highly competitive price and are prepared to do whatever it takes to complete a sale,’ said Jim Link, the executive VP with the association. ‘But sellers need offers to make it happen.’”

“Last month condo sales plunged 48.2 percent with 155 transactions. That’s the fewest sales since 155 condos sold in May of 1995.”

“The association speculates that many prospective buyers are waiting for more foreclosures to come on the market and push down prices. Others are likely locked out of the market for now because lenders have tightened credit standards.”

“Slower sales pushed the inventory to 7,772 properties at the end of September, up an annual 13.6 percent. But new listings fell 17.9 percent. That number of properties equals a 14.4-month supply, the highest level since March 1993. The record is a 23-month supply in February, 1993.”

“In the Santa Clarita Valley home sales fell an annual 51.8 percent to 105 transactions and the median price fell 4.3 percent to $560,000. Condo sales fell 52.3 percent to 52 transactions and the median price fell 3.9 percent to $370,000.”

“In Los Angeles County sales fell an annual 38.4 percent. In Ventura County sales fell an annual 47.3 percent. In the High Desert, which includes the Antelope Valley, sales plunged 62.7 percent.”

“‘I think over the next month or so we will see more of the same thing,’ said Leslie Appleton-Young, chief economist at CAR. ‘There is no urgency in the housing market now for buyers.

The Daily Bulletin. “‘It’s clear that too many unqualified people got into the housing market the last few years,’ said Jack Kyser, chief economist with the L.A. County Economic Development Corp. ‘But to listen to the electronic media, you would think everyone who owns a home is in danger of losing it. They’re panicking. It’s a small percentage of people in trouble - maybe 5 percent.’”

“In the Inland Empire, the news wasn’t good. Prices in Riverside/San Bernardino were off 12.5 percent to a median of $356,510 and those in the High Desert dropped 17.4 percent to $271,940.”

“Sales locally were among the weakest in California, with Riverside/San Bernardino off 47.7 percent and the High Desert off 62.7 percent. ‘September was the month that the more stringent lending standards hit,’ Kyser said.”

A report from the Arizona Republic. “A family of four would fit easily into the 2,800 square-foot house near Chandler’s Sanborn Elementary School, but the owner and Phoenix real estate investor Jessie Ogle hasn’t received any acceptable offers on the $425,000 house. Despite its appeal, leasing the two-story house hasn’t worked. Ogle had two tenants and tried seeking a third, but it sat empty for months. No one wanted to pay $2,000 a month in rent.”

“The expense of maintaining the house, yard and pool is too much. In Ogle’s mind, the 10-year-old home is no longer an investment but a money vacuum. A young arsonist’s visit in May burned a bigger hole in his pocket, costing him hundreds of dollars.”

“‘For me, it’s been enough of a nightmare,’ said Ogle, who put the house back on the market in June. Now, almost four months later ‘I’m looking for somebody who has something I’d rather have.’”

“That’s right. Ogle says he is willing to swap, even if it means getting a house that’s worth less than his and needs fixing up, as long as it’s in a good rental location.”

“Donna Parnham and her husband are having trouble selling their house, which spans 3,390 square feet, about 2 miles southeast of Gilbert.”

“All that space has overwhelmed the Parnhams, who are looking for a smaller house in the same vicinity. They had hoped to sell theirs for $529,000 when they first listed it in May, but there were no takers.”

“They’ve installed new stainless steel appliances, have a tile floo, sculptured carpeting, a courtyard and Tuscan lighting in the foyer. The couple also dropped the price to $458,000. Still nothing.”

“‘The market is so slow. Even as Realtors, we can’t even get our house sold,’ Parnham said. ‘We decided we would try to be a buyer for a smaller home who wants to jump up to a newer home.’”

“The Parnhams turned to craigslist.com to make their match. A look at the site’s house swap listings shows Phoenix has plenty of pitches.”

“Real estate broker Jason Roggensee at Gilbert’s Property Sales and Management is leery of swaps. The situation is complicated when an owner or both owners have mortgages, a common situation. ‘Unless you pay it off, there’s really no way around it,’ he said. ‘I don’t see any real legal way to make it happen.’”

“Home building permits across metropolitan Phoenix fell to a 14 1/2-year-low to 1,309 in September, according to RL Brown’s latest Phoenix Housing Market Letter. New home construction figures for the Valley haven’t been this low since February 1993.”

“Valley builders also are dropping prices in many subdivions, which is helping new-home sales. Price decreases are replacing hefty incentives on many new home models.”

The East Valley Tribune from Arizona. “Some 2,991 new homes were sold in September, a 34.18 percent drop from the same month last year, according to Brown. Year-to-date, 28,666 sales have been recorded, compared with 37,128 last year.”

“Area builders are also finding success in selling their homes by dropping prices. D.R. Horton was one of the first to seriously reprice their products, he said.”

“‘This last month, we saw pretty much even the laggards get on the wagon,’ he said. ‘I think that’s encouraging. It’s obvious that the pricing surge of 2005 was not sustainable.’”

“The larger the incentives and price reductions, however, the more builders can weaken the existing home market because regular home owners aren’t able to compete, he said. And that can end up hurting builders in the long run because a potential new home buyer can’t make the deal if he can’t sell his current home, said John Fioramonti, at Meyers Builder Advisors in Scottsdale.”

The Wall Street Journal on Arizona. “Some forecasters now warn that home prices are unlikely to start rising in most of the country before 2009 or 2010. A year ago, many home builders and lenders still thought that the housing boom would end with a gentle landing. Now those hopes are dead.”

“‘Everybody’s kind of at a stalemate now, waiting to see what happens next,’” says Donna Butera, who has a business in Phoenix ’staging’ homes for sale.”

“Ms. Butera and her husband are trying to sell six homes in Phoenix and Scottsdale. They bought the properties as investments over the past few years, but now find that the rents they collect don’t cover mortgage payments that are resetting to higher levels after initial low-cost periods of a year or two.”

The Review Journal from Nevada. “Home sales continued to plummet in September to their lowest levels in years, and median prices for both new and existing homes edged downward from a year ago, Las Vegas housing analysts reported Tuesday.”

“‘Our September numbers are in and they’re not pretty,’ Home Builders Research President Dennis Smith said.”

“He counted 1,399 new home sales, the lowest monthly total since January 2000. The year-to-date total of 15,475 is down 44.3 percent from a year ago. Larry Murphy of SalesTraq showed 1,328 new home closings during the month, a 52 percent decline from the same month a year ago.”

“Existing home sales were down 50 percent to 1,466 in September and existing median home prices declined 8.9 percent to $263,075.”

“Murphy said his minister on Sunday invited real estate agents, mortgage brokers, residential construction workers and anyone else affected by the housing downturn to a night of free hamburgers at the church.”

“‘That’s the perception of the public, and perception is reality,’ Murphy said.”

“Home builders are offering substantial incentives ranging from bonus commissions for Realtors to $50,000 to $100,000 in free upgrades and custom options, he said.”

“A number of builders have slashed prices. Lennar Homes dropped prices by 25 percent in about 30 new home subdivisions and Pulte was advertising a 15 percent cut in prices over the weekend.”

“Tom McCormick, president of Las Vegas-based Astoria Homes, said he sold 30 new homes during the weekend of Oct. 12-14 after discounting prices by 10 percent to 27 percent in eight neighborhoods.” “The effects of these price reductions will be reflected in the coming months, Murphy said.”

“‘We have not yet reached the bottom of this market in either new homes or existing homes,’ he said. ‘The short-term outlook for this market is not good. It will take another 12 to 18 months before we will see any significant improvement, in my opinion.’”

“He noted that the resale inventory is at an all-time high of 27,000 homes and nearly half of them are sitting vacant. Looking at the dismal 1,065 closings on the MLS, Murphy calculates an inventory of nearly two years.”

“Foreclosures are four times higher this year compared with 2006. As the banks take back these properties, they will be added to the already swelling inventory.”

“Rick Waltjen is one of those buyers who’s waiting for the housing market to bottom out. He’s been watching it closely for two years, specifically inventory levels that have risen almost weekly for the past six months.”

“‘There is absolutely no sign of the market bottoming out yet,’ Waltjen said. ‘Everyday there are more price reductions. The inventory continues to climb.’”

“‘I think that a key piece that people conveniently ignore when telling us that we are at the bottom or close to it is that we have never been in a market where 40 percent of the homes are vacant,’ said broker Bob Reeve. ‘Just drive around. Why would any buyer buy a boarded-up mess with a dead yard?’”

“The experts talk about burning off the oversupply of resale inventory, but a huge portion of that vacant inventory is going to be permanent, Reeve said.”

“The so-called ’short sale’ of a home can be a viable alternative to foreclosure and will become more prevalent as millions of adjustable-rate mortgages reset over the next 18 months, real estate industry observers say.”

“Arthur Marvin, broker in Las Vegas and class instructor on foreclosures, said there are 3,350 homes listed as short sales in Las Vegas, more than double the number from four months ago, and 1,450 of them are vacant. That’s a good indicator that many of the short sales are investor-owned, Marvin said.”

“‘That’s a lot of homes that are short sales and every one of them is overencumbered,’ he said. ‘It’s grown exponentially since last year and it’s going to keep on going. Just a reminder; there is an epidemic going on in Las Vegas and they’re called foreclosures. Foreclosures are causing another epidemic called short sales.’”

“‘What they want upfront is a hardship letter from the seller, a contract between the buyer and seller and an estimated settlement statement,’ said Realtor Robin Camacho. ‘They may counteroffer and you continue to negotiate. They’re a lot more negotiable than they were six weeks ago.’”

“She has five short-sale listings, including one in the Sunrise Mountain area of east Las Vegas that’s in escrow for $182,000. It was purchased for $200,000 two years ago and refinanced for about $232,000. She’s waiting for a response from the lender.”

“Camacho said she’s also waiting to hear if an offer will be accepted for a short sale on a 6,600-square-foot ‘fixer upper’ home that will probably sell for 60 percent less than a similar home across the street.”

The Deseret News from Utah. “The number of homes with lingering ‘For Sale’ signs in Salt Lake City’s Avenues neighborhood mirrors the situation in many areas along the Wasatch Front and nationwide, and while homes are still finding buyers, some sellers are having to adjust their expectations on price.”

“‘There are more homes available. Therefore, buyers are able to be a little more choosy,’ Gary Johnson with ReMax Associates.”

“Johnson said some homes may be sitting longer because they are not being priced competitively, as sellers attempt to get higher prices based on those obtained during the boom period rather than what is realistic in the current market.”

“Kevin Blalock put his 3,100-square-foot, recently renovated home in the Avenues on the market about two weeks ago and) is optimistic. After looking at comparable properties in his neighborhood, he said he believes his asking price of $721,000 is reasonable for the current market.”

“‘I think Utah’s economy — and Salt Lake especially — is incredibly strong,’ Blalock said. ‘Our house is priced right for area and the newness of it.’”

“According to a report this month from the Salt Lake Board of Realtors, the number of homes sold in the third quarter of 2007 in Salt Lake and Utah counties was down almost 34 percent compared to the same period last year.”

“Along the Wasatch Front, housing prices have remained fairly steady over the past several months, although the selling prices of homes in the Avenues dropped nearly 14 percent.”

“Blalock acknowledged that he put his home on the market at ‘the dead wrong time of the year,’ and although he said he is not pressed to sell, he hopes to find a buyer by early December. If not, he would be willing to take it off the market and then try again to sell it sometime next spring, or maybe not sell at all.”

“‘We’ve priced (our house) at what we believe is fair market value for what you get,’ he said, and whether he is right or not is up to the market to decide.”

Some housing bubble news from Wall Street and Washington. Reuters, “Sales of new single-family U.S. homes were off 23.3 percent from a year ago. Across the regions, sales were mostly down although the West did see a 37.7 increase. In the Midwest, sales were off 19.5 percent and down 6.6 percent in the Northeast. Sales were up 0.5 percent in the South. There were 523,000 new homes for sale at the end of the month. It would take 8.3 months to clear that inventory at the current sales pace.”

From MarketWatch. “Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed, and no one believed it was strong.”

“‘The crash continues,’ wrote Ian Shepherdson, chief economist for High Frequency Economics. Sales fell at a 35% annualized pace in the third quarter, he said.”

“The sales figures do not account for canceled sales contracts, which have surged in recent months.”

From CNN Money. “The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.”

“Mark Zandi, chief economist of Moody’s Economy.com, estimated that the excess inventory of homes on the market is close to one million, and he added that the glut could get worse if mortgage defaults and foreclosures increase, as it now appears they will.”

“‘We’re awash in inventory,’ he said. ‘I don’t think this [credit] crisis is over.’”

From Bloomberg. “Pulte Homes Inc., the third-largest U.S. homebuilder, reported a third-quarter loss after it reduced the value of its real estate and potential buyers of its homes had difficulty obtaining mortgages.”

“Revenue fell 31 percent to $2.5 billion. The company wrote down the value of its assets by $1.18 billion in the quarter. Orders for new homes fell 37 percent to 4,582, and the company had a backlog of 12,042 homes, worth $4.1 billion, it reported.

“Ryland Group Inc, the No. 8 U.S. home builder, posted a quarterly loss on Wednesday. Ryland said revenue during the quarter fell 35.2 percent to $732.3 million as the number of homes the company sold fell 32.3 percent to 2,495. The average selling price slid to $284,000 from $291,000.”

“New orders were off 20.9 percent to 1,876 units, and the value of the orders fell 27.0 percent. Ryland’s results include charges for write-offs for inventory and property values of $128.1 million.”

The Denver Business Journal. “Denver home builder M.D.C. Holdings Inc. battled a ‘turbulent’ housing market in the third quarter of 2007. The builder suffered a net loss for the period ended Sept. 30 of $155.4 million. M.D.C. reported $249 million in inventory impairments related to 7,000 lots in 132 subdivisions.”

“Nearly half of M.D.C.’s markets saw decreases in selling prices.”

“Home builder Tousa Inc said it would exercise the right to abandon a number of home-sight option contracts in response to deteriorating market conditions in the third quarter.”

“‘As a result, the company anticipates that it will incur significant deposit write-offs and abandonment charges in the third quarter of 2007,’ Tousa said in a filing with the SEC.”

The Dallas Morning News. “Centex Corp. officials said Wednesday that they have cut the Dallas-based homebuilder’s nationwide workforce by 40 percent and plan to further reduce overhead. Centex’s sales in the most recent quarter were down in every region of the country, including Texas, which has been one of the builder’s strongest markets.”

“Overall, Centex said that its average home prices were down 8 percent during the last quarter. In some markets, prices were cut as much as 20 percent.”

“‘Unlike in previous quarters, our Texas results were weak as areas like Houston in particular were especially hard hit by the disruptions in the mortgage market,’ said Centex chief financial officer Cathy R. Smith.”

“The Bank of England said the global financial system is at risk of further instability because of ‘ongoing uncertainties’ about credit-market losses. In a worst-case scenario, U.K. banks would have to raise as much as 170 billion pounds ($348 billion) if market conditions prevented them from selling the loans on their balance sheets to other investors, the central bank said.”

“The report also said the market selloff may be welcome because investors were taking too-optimistic a view on the risks facing the global economy. ‘A return to earlier conditions would be undesirable as that involved an underpricing of risk,’ the Bank of England said.”

“Nomura Holdings Inc., Japan’s largest securities firm, reported its first loss in more than four years after U.S. mortgage investments plunged, forcing the company to close some operations, cut staff and shut its Chicago office.”

“Nomura’s U.S. arm posted a $620 million loss on subprime, prompting CEO Nobuyuki Koga to shut the unit’s residential mortgage operation. The world’s biggest financial companies have reported credit and market losses of more than $30 billion after defaults on subprime U.S. mortgages contaminated securities backed by home loans and other types of debt.”

The Sydney Morning Herald. “ANZ Bank missed forecasts as provisions for bad loans increased. ANZ’s provisions for credit impaired loans jumped 39 percent last fiscal year to $567 million.”

“Investment banking firm Friedman, Billings, Ramsey Group Inc. said Thursday its third-quarter losses widened due to the weakening of the mortgage market. FBR reported losses of $214.7 million.”

“Financial guarantor MBIA Inc. followed the trend set by its rivals in reporting a third-quarter loss due to its cutting the value of its credit derivatives portfolio.”

“Though MBIA had a big mark-to-market loss, it did not follow the lead of some other financial guarantors in pre-announcing its results to give investors some warning of the effects of falling prices for securities backed by mortgage loans. MBIA’s mark-to-market losses were ‘well above the $175 million we had expected given the recent preannouncements by its peers,’ said Morgan Stanley analyst Ken A. Zerbe”

The Associated Press. “Triad Guaranty Inc. lost money in the third quarter as soaring defaults on home loans forced the mortgage insurer to pay more claims, the company said Thursday.”

“Triad paid $28.5 million on mortgage default claims and socked away an additional $78.3 million anticipating more defaults. The company’s premiums jumped by more than a third to $72.1 million. But for each premium dollar Triad collected, it spent $1.70 administering claims.”

“‘We believe delinquency and claim trends will only deteriorate further,’ said Bear Stearns analyst Michael Nannizzi.”

“Merrill Lynch & Co., the largest brokerage firm, may have to write down another $4 billion in the fourth quarter as the value of subprime assets continues to drop, according to CIBC World Markets.”

“‘Thus far, Merrill has taken the largest writedown of its financial peers, but unfortunately, we believe in aggregate it will only get larger,’ CIBC analyst Meredith Whitney said.”

“When Stan O’Neal’s rivals started backing away from subprime lending late last year, the Merrill Lynch & Co Inc CEO plunged in.”

The Wall Street Journal. “In a conference call with investors yesterday, Merrill CEO Stan O’Neal acknowledged that the firm had fumbled the CDO business: ‘The bottom line is, we got it wrong by being overexposed to subprime.’ Mr. O’Neal added that Merrill had misjudged the risk of many CDOs. ‘It turned out that both our assessment of the potential risk and mitigation strategies were inadequate,’ he said.”

“Credit ratings agency Moody’s is poised for further subprime-related surprises from banks and expects financial markets to remain nervous about bank exposures for months to come, it said on Thursday.”

“Moody’s downgraded its ratings on Merrill Lynch on Wednesday and warned it could suffer further. The rating agency said surprise loss revelations, prompted by the difficulty banks are having in estimating losses on subprime-related assets on their books, may strike again.”

“‘Merrill Lynch was a victim of that, but we don’t believe they were the only ones,’ Moody’s senior VP Lynn Exton told a financial conference. ‘As news comes out, we will be taking ratings actions as necessary,’ said Exton, who is responsible for large UK and Benelux banks at Moody’s.”

“The collapse of confidence in Merrill Lynch & Co. after the world’s biggest brokerage lost six times more than it forecast earlier this month helps explain why Treasury Secretary Henry Paulson’s attempt to rescue SIVs is troubled.”

“Investors aren’t willing to rely on estimates by Wall Street traders to value these bonds and there’s no central trading system or exchange. Fitch Ratings says the value of SIVs, which own more than $320 billion of bonds, fell to 73 percent as of Sept. 28 from 100 percent in July.”

“‘Continuing to mask transparency by means of rearranging risk without actually offloading or recognizing the true value of that risk is not going to help anyone,’ said Joseph Mason, an associate professor of business at Drexel University and a former financial economist at the Office of the Comptroller of the Currency.”

“Many of the 30 SIVs worldwide can’t find buyers for their commercial paper, debt that comes due in 270 days or less. The concern is that without the funding, the SIVs would have to sell their investments and might have to accept fire-sale prices.”

“The largest SIV, the $52 billion Sigma Finance Corp., declined to let Fitch disclose its value. S&P reports show the value of pieces of top-rated CDOs owned by Rhinebridge slumped 15 percent or more in three days last week.”

“One of the lessons that investors seem to have to learn over and over again, and they’ll have to learn it over again in the future, is that not only can you not turn a toad into a prince by kissing it, but you also cannot turn a toad into a prince by repackaging it,’ billionaire Warren Buffett said today.”

“Real estate wealth is expected decline anywhere from $2 trillion to $4 trillion out of a previous valuation of roughly $21 trillion when the total costs of recent credit crunch are tallied, the New York Times reported on Thursday, citing economists.”

“And financial firms could face aggregate losses of some $400 billion from expanding troubles related to the subprime mortgage market fallout, the paper said.”

“That is higher than the roughly $240 billion in financial institution losses from the savings and loan crisis of the early 1990s, adjusted for inflation, the paper said.”

“The losses in real estate wealth, while large, are substantially less than what investors suffered in the stock market collapse earlier this decade, which erased more than $7 trillion, or about 40 percent of market value, the paper said.”

“Two million subprime-mortgage foreclosures are likely to occur by 2009 if home prices continue their downward spiral, a congressional report said Thursday.”

“In the wake of the financial market turmoil that arose over the summer, there has been a remarkable lack of finger-pointing so far over the cause of the crisis. But one observer, Tom Schlesinger, the founder and executive director of a think tank that has followed the Federal Reserve closely for the past decade, believes the blame for the crisis falls squarely on the Fed and accuses the central bank of ‘regulatory foot-dragging’ that has harmed the public.”

“Schlesinger maintains the Fed’s prevailing regulatory philosophy has shifted from that of 20 or 25 years ago, which in essence was ‘here is the line between right and wrong, don’t cross it,’ to a current underlying policy that ‘anything and everything that might be called financial innovation ought to be embraced.’”

“‘This is a very faulty premise that deserves debate and reflection and ultimately, in my opinion, a changed perspective,’ Schlesinger said in an interview with MarketWatch.”

“Upon joining the Fed, former Fed chief Alan Greenspan said he had a ‘pleasant surprise’ when he found the Fed staff was not so keen on regulation either. Together, they interpreted congressional legislation with a view to ‘letting markets work,’ he wrote.”

“Schlesinger says this practice was actually ‘regulatory foot-dragging’ where the Fed had a clear obligation under law to police markets but went about it ‘with such reluctance that in some cases the supervision is difficult to detect.’”

“In an interview on ‘60 Minutes,’ Greenspan said the Fed couldn’t stop subprime mortgage originators. Schlesinger disagrees. Although the abuses came from independent originators and not banks, Schlesinger said the Fed had ‘all or most’ of the authority it needed to police the market under two laws passed by Congress.”

“‘The Fed’s unwillingness to flex the muscle that those statues granted is a real black mark on the central bank,’ he said.”

TC Palm reports on Florida. “Existing home sales and prices in September continued to fall in Indian River County, a report from the Realtors Association of Indian River County said Wednesday. In the county, 94 existing single-family homes sold in September, down from 141 units the year before, the Realtors association said. Prices dropped to $174,495 from $220,400 between the same months.”

“‘Figures seem to show we are not at the bottom yet and that sellers are reducing their prices,’ said Richard Hope, past president of the Treasure Coast Builders Association and a Vero Beach general contractor.”

“The median sales price for an existing single-family home in the area dropped 17 percent to $202,000 in September compared with $244,300 last year.”

“‘I think this shows that we’re still an affordable community,’ said Sheri Wetzel, president of the Realtors Association of St. Lucie County. ‘Where else can you find a waterfront community and find affordable housing that a family can make payments on?’”

“Statewide, home sales dropped 38 percent to 8,688 in September from the same month of 2006, the state association said.”

The News Press. “Debra McAlister-Brown’s not too concerned she’s had to cut the price of her home in today’s falling market.”

“McAlister-Brown has her 2,000-square-foot, four-bedroom house in Estero for sale at $329,000, newly reduced from $364,900. She originally listed it at $399,000 when she decided to sell and move to Stoneybrook. But time has not been on her side.”

“In Lee County, compared to a year ago, September’s numbers also were bleak: The price was down 11 percent, from $261,400, and sales were down 53 percent compared with 693 in September 2006.”

“McAlister-Brown said she’s philosophical, having made $10,000 in 2005 when she sold a 1,600-square-foot house for $360,000 to buy the one in Fountain Lakes for $350,000. ‘At the time when I bought it, it was a really good deal,’ she said. ‘I’m really not losing like a lot of people.’”

“In Charlotte County, the median sales price was $170,000, down 20 percent from $213,200 in September 2006. The number of sales also fell, 16 percent, from 226 to 189.”

“Her listing agent, Kerry Collier, said, ‘If someone’s going to buy a home and sell it in a year or two, I’d be cautious.’”

The Naples News. “Looking forward, numbers Brett Ellis, a partner with The Ellis Team at RE/MAX Realty Group in Fort Myers, uses to predict future statistics don’t bode well for the short term. Using a formula based on the number of active listings and the number of pending sales to come up with a current market index, Ellis doesn’t see good things for October or even November figures.”

“‘The index tells me this market has not bottomed out yet,’ he said.”

“The 15,438 single-family homes on the market in Lee County translates to about a three-year inventory, he said. He estimates that the 8,212 condominiums for sale is about a five-year inventory.”

“‘Right now the buyer is actually looking at the best of both worlds — lower prices and lots of houses to pick from,’ he said.”

The Tampa Tribune. “Home sellers in the Tampa Bay area appear be coming around to the idea that striking a deal in this sluggish market means lowering prices. But buyers appear to be holding out.”

“The median sales price of existing, single-family homes in the Tampa-St. Petersburg-Clearwater area in September fell 10 percent to $200,700 compared with the same month last year, according to the Florida Association of Realtors.”

“The number of homes sold plummeted 40 percent in September to 1,691, compared with the same month last year when 2,803 were sold.”

“‘Halloween came a little early for the Florida housing market,’ said Mike Larson, a real estate analyst based in Jupiter. ‘These numbers are scary.’”

“The condo market continued to slow statewide. Sales fell 37 percent and prices slid 4 percent to a median of $194,200.”

“Local real estate agents have been trying to persuade clients to price homes realistically. Nancy Otten, an agent in Tampa, said sellers are getting the message and buyers are getting more home for their money.”

“‘You can put any kind of offer out there and see what sticks,’ Otten said. ‘There are phenomenal deals out there.’”

The St Petersburg Times. “As sales continue to plummet in the Tampa Bay area, sellers are finally waking up to the fact that they’ll have to lower their prices if they hope to get rid of their property.”

“The price slashing should provide psychological relief for entry-level workers and other wanna-be home buyers, who could have snapped up a home in the $130,000s if they’d been buying five years ago. The median housing price here hasn’t dipped below the $200,000 mark - or come close to it - since May of 2005.”

“Michael Bullock, the president of Michael’s Carpet & Vinyl in Lakeland, says a year ago, about three-quarters of his jobs were in new or remodeled homes. Now, about three-quarters of his jobs are in office buildings. He knows of two nearby carpet stores that were recently shuttered because they did only residential jobs.”

“‘I’m not hearing anything’ from home builders, said Bullock.”

The Miami Herald. “Prices of homes and condos in Broward County dropped in September compared with a year ago, a sign that stubborn sellers may finally be accepting the reality that they are no longer able to get the sky-high prices of the boom years.”

“Broward’s single-family home sales were off last year’s number by 46 percent; condo sales declined 39 percent. But prices also fell — the median home price down 7 percent year-over-year to $345,200 while condo prices slipped 15 percent to $174,600.”

“In Miami-Dade, single-family home sales were more than cut in half for the month, dropping 53 percent from September 2006. Condo sales were similarly off 47 percent. The number of homes for sale has continued to balloon. A record number of new condos will be completed in 2008, and many observers predict that those units will go back on the market for sale and add to the existing overhang of condos for sale.”

“‘Too many sellers are still refusing to face reality, that all of the inflated prices and price increases over the last few years was not realistic. They think they should still be entitled to the same prices as their neighbors a few years ago,’ real estate analyst Jack Winston said.”

“Gabriella Berenyi, a seller in Oakland Park, said she will not budge further on her price. Nearly a year ago she put her three-bedroom lakefront condo up for sale, asking $289,000. She found few interested buyers, and the ones she found couldn’t qualify for a mortgage. So she dropped her price to $279,000.”

“‘This has been the worst experience,’ she said. ‘But I don’t believe in going down too low [on the price] because I invested so much remodeling it. If I go down too low, I can’t get any money out of it. So I am trying to rent it out now; people say prices will go up in six months or a year.’”

The Sun Sentinel. “September’s home sales plummeted in Palm Beach County. In the coming weeks and months, buyers should expect sellers to keep dropping home prices, experts said.”

“‘In last 60 days, anecdotally we’re hearing about a lot more capitulations on part of sellers,’ said Brad Hunter, a housing analyst with Metrostudy in West Palm Beach.”

“In September, sales of existing homes in Palm Beach County declined 17 percent to 471 from 566 a year ago, FAR said Wednesday. The county’s condominium market also was sluggish last month. Sales fell 29 percent, and the median price of $180,000 dropped 18 percent from $220,500 a year ago.”

“Joel and Linda Levy have been trying to sell their three-bedroom home in a gated community west of Boynton Beach for about two months. They think their asking price of $389,900 is a good value, but the couple may have to consider dropping the price.”

“‘A lot of people liked it very much, but no one has offered a penny yet,’ Linda Levy said.”

“Area real estate agents and experts say sellers still have room to lower their asking prices. ‘Sellers need to get a grip,’ said David Dweck, head of the Boca Real Estate Investment Club. Homeowners are not likely to sell their homes if they’re not ‘priced slightly below the market and your property is not beautiful,’ he said. ‘Buyers have their pick of the litter.’”

“Home prices also are being affected by the increasing number of mortgage foreclosures. ‘The banks are starting to deal,’ Dweck said. ‘Banks will have to liquidate to get off the book by year’s end.’”

“But existing homeowners trying to sell will be competing with builders, some of whom are slashing prices to reduce their inventory by the end of the year.”

The Bradenton Herald. “Bradenton-Sarasota’s once soaring existing-home prices, which two years ago were $90,000 more than the state median, are now less than $25,000 above it, according to numbers released Wednesday by the Florida Association of Realtors.”

“‘Short sales and foreclosures have definitely affected the price point,’ said May Aston, 2007 president of the Manatee Association of Realtors.”

“Aston also attributes the falling home prices, in part, to more realistic sellers. ‘I think people are realizing they are not going to get the prices they wanted,’ Aston said.”

“In some areas throughout the county, prices have returned to 2004 levels, but every street is different in the settling market.”

“Lower prices have brought back a familiar face to the market: the investor. ‘They are the ones buying the foreclosures,’ Aston said.”

“Most are only buying homes they can snap up at way below market value.”

“Although current sales numbers appear bleak compared to the go-go years of the real estate boom, 2007 is on track to be the fifth highest year on record for existing home sales, said Lawrence Yun, senior economist for the National Association of Realtors.”

The Herald Tribune. “The state’s real estate agents sold just 8,688 homes last month, down 38 percent from a year earlier. But the number looks even worse when you compare it with previous years. In September 2003, agents handled 18,222 transactions, according to the Florida Association of Realtors. Their records go back to 1993, when September sales totaled 9,249.”

“‘If you look at the existing home numbers for the nation as a whole it is the same story, and Florida is just worse,’ said economist Adam York of Wachovia Corp.”

“The median price for a home in the Sarasota-Bradenton market during January 2006 was $353,500. From then until now, the two-county area has taken a 31 percent hit, or $109,200 off the median price.”

“In Charlotte County-North Port, the median went from $227,400 in early 2006 to $170,000 last month, a 25 percent drop.”

“The incoming president of the Florida Association of Realtors, Chuck Bonfiglio Sr., joked that he asked if he could go from president-elect to immediate past-president. ‘But they wouldn’t let me,’ said Bonfiglio, who works in Fort Lauderdale.”

“His market suffered so much so that its single-family home sales for the month were actually less than in the Sarasota-Bradenton market, at 441 transactions. The figure was off nearly 50 percent from one year earlier.”

“David Dutch just landed a waterfront house on Longboat Key for what he thinks was a great deal. Previously, Dutch had found he ‘couldn’t touch anything under a million directly on the bay.’”

“The seller for Dutch’s house was a speculator with multiple mortgages, including an ARM with a fast-approaching reset. The seller’s original asking price was $1.5 million, but he got no offers. Then he dropped it to $1.3 million. Still no offers.”

“‘The seller received a $1.1 million offer a while back, which was rejected,’ said Dutch, who bought for $800,000. ‘It felt good.’”

“Dutch thinks the local real estate market is still a couple of years away from normalcy. ‘Did we catch the bottom? I don’t know, but I think that Florida rose and fell the fastest, so hopefully we bought at the right time,’ he said.”

“The developer of Thomas Ranch, an area which is primed for 15,000 homes, will be allowed to extend the town-sized development into one of the last remaining rural tracts in south Sarasota County.”

“The 2,850-acre property’s rural land use already allowed about 1,000 homes in an area that county planners said could be overburdened by the more than 15,000 homes already approved for south Sarasota County and North Port.”

“‘There is not a need for additional capacity’ in housing, county Planning Director Anne McClung told the commission.”

“The dissenting commissioners echoed the comments of residents, who questioned both the need and the timing of the proposal. ‘Call me crazy,’ said Englewood resident Kellie Pearson, ‘but I don’t see why we need another 6,000 homes.’”

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