The Housing Bubble

The Los Angeles Business Journal reports from California. “California’s housing market, suffering from a slump in single-family home and condominium sales, will ’stay tough for quite some time,’ KB Home CEO Jeffrey Mezger said, Bloomberg News reports. ‘I think it’s going to take quite some time for the inventory to clear,’ said Mezger, whose Los Angeles-based company is the fifth largest U.S. homebuilder by sales.”

From CNBC. “The CEO of U.S. home builder KB Home said home prices in California could fall another 10 percent to 15 percent in the next 18 months.”

“CEO Jeffrey Mezger was speaking on a panel with Countrywide Financial CEO Angelo Mozilo and California State Treasurer Bill Lockyer. Lockyer said they all expected about 10 percent or more.”

“Mezger saw a 10 percent to 15 percent drop, Lockyer told Reuters after the panel ended, which Mezger later confirmed.”

“‘The others were all 10, maybe 10 plus. The north side of 10,’ Lockyer added. ‘I’m probably the least able to forecast, but that seemed like a reasonable trend.’

The Orange County Business Journal. “Orange County’s growth will be stunted by the downturn in the area’s real estate market, economists from the UCLA Anderson School of Management said on Monday.”

“‘We’re floating dangerously close to a recession,’ economist Ryan Ratcliff said.”

“As for the housing sector, speakers at the event expect to see home prices fall by nearly 15%, and for sales to remain slow until at least 2009.”

“‘It will seem like a recession (here) if you are related to residential real estate,’ said Mark Schniepp, director of the economic forecast.”

The LA Times. “Attention, you picky buyers who think you have all the time in the world to house hunt before you ink an offer. Listen up: Agents are mad as hell and aren’t going to take you anymore.”

“And sellers, those of you who don’t believe that your palace won’t fetch what the shack up the street sold for a year ago, you aren’t making any agent’s short list of whom to call back today.”

“Walter Sanford, a top-producing realty sales agent for more than 20 years and today a sales-coaching guru, is brutally blunt on the topic. In a down market like this, he tells agents, dump the buyers and spend your time and budget cultivating more listings of motivated sellers and only motivated sellers. It’s a way for agents to avoid financial ruin.”

“Sellers too, at least the unrealistic ones, are getting the same tough-love treatment. ‘You can’t waste time with cement-head sellers,’ is how Sanford puts it.”

“Lonnie Maples, who has been selling real estate for 29 years in inventory-saturated Riverside, had a listing appointment with a seller whose property had been in the MLS for more than a year. The owner had made several price reductions from it’s original $1,095,000, and he was now ready to list at $895,000.”

“‘I knew it wouldn’t sell for even that,’ Maples says. ‘That house, in this market…$750,000 was more like it. I declined the listing because I didn’t want to waste my time and money.’”

“And then there are those who say they never walk away from a potential listing. Anthony Marguleas, broker in Pacific Palisades, says he and his agents never turn down listings. Period.”

“The onus, he says, is on the agent to educate the client. ‘If all the comps show a house is worth $1 million and the seller wants $2 million for it, it’s the agent’s job to explain to him why that’s not possible. We won’t give up. We show the seller market analysis, comps of recent sales; we show him what else is currently on the market. It’s our job to not let him make a mistake.’”

“As for agents who sideline buyers if the buyers don’t want to commit, Marguleas says that behavior is just plain ‘lazy.’”

“‘It’s actually more than lazy; it’s insulting,’ he says. ‘Buying a home is the largest investment of someone’s life, and an agent doesn’t have the patience or time to show them homes anymore? That’s not right.’”

“A salesman at Irvine mortgage brokerage Sunwest Lending Group said everyone at the brokerage took pains to carefully explain to borrowers the risks as well as the benefits of option ARMs.”

“The salesman acknowledged many borrowers at all income levels are attracted to the option ARM because they have let their personal spending get so out of control that the low payment is the only one they can afford.”

“‘Newport Beach, where everyone is driving a Mercedes and the homes start at $1 million, is like an old western movie set,’ he said, describing the finances of many wealthy homeowners as precarious. ‘It’s all just a front, with stilts holding it up.’”

The Daily News. “Sales of single-family houses in the San Fernando Valley plunged an annual 55.5 percent to a record low 362 transactions in September.”

“In the third quarter, there were 854 home foreclosures in the Greater San Fernando Valley, from Burbank to Calabasas.”

“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., credits the high end with propping up the median. ‘High-end homes have been selling, and people at that end of the market don’t have to worry about funding.’”

“Andrew LePage, an analyst at DataQuick, said jumbo loan originations fell by 50 percent in Southern California from August to September.”

The Sacramento Bee. “The nation’s housing crisis has hit Sacramento’s economy like a sledgehammer, prompting a city government hiring freeze this month and an urgent examination into how millions can be trimmed from the budget.”

“‘We were hoping for a soft landing from the housing market problems, but it didn’t turn out that way,’ Russell Fehr, the city’s finance director, said on Sunday. ‘We have a widening gap that will grow and grow if we don’t do something about it.’”

“Sacramento’s financial picture has worsened rapidly, to the extent that city officials said they had not foreseen.”

“Home foreclosures have escalated at an astonishing pace in Sacramento. There have been far fewer sales of both new and existing residences than were anticipated in the city’s budget, according to the report. Development activity in the city will be 60 percent less than prior years, the report states.”

“‘Current staffing and service levels are not sustainable, given the current weakness in revenue growth,’ the report finds.”

The Modesto Bee. “The valley’s housing woes have triggered an employment collapse in some industries closely tied to the market. Mortgage companies and title insurance firms are closing branch offices and shedding employees by the dozens. Some real estate agents have walked away from the business.”

“For real estate agents in particular, he said, times are extremely tough. ‘A lot are going hungry,’ said Terry Harwell, division president of Alliance Title Co. in Stanislaus County.”

“Oscar Dominguez was one of them. The former agent for PMZ Real Estate got into the business in 2005. Dominguez thought it would free up more time to spend with his family, but instead found himself racing around to houses on the weekends and putting in 60-hour weeks. Then the slowdown hit.”

“‘My timing couldn’t have been worse,’ said Dominguez, who sold two houses during his tenure and now is training to become an electrician at Modesto Junior College.”

“‘It was tough. I was fortunate enough,’ Dominguez said. ‘There’s some agents who didn’t even sell two houses, like I did. Even established agents right now are struggling.’”

“Realtors are stymied by sellers who refuse to lower their prices, Dominguez said. Most people can’t or won’t accept less than what their house was valued at a few years ago, he said, meaning only the very best houses at the very lowest prices will sell. And those are few and far between.”

“‘Just about all of my co-workers are struggling and will tell you it’s a tough market,’ he said. ‘The buyers have all the strength. They can basically just name their price.’”

A report from the Arizona Republic. “Still dragging down the market is the number of existing homes for sale. Listings are still hovering in the mid-50,000s. Resales continued their slide in September, as did the median price of existing homes sold. Lower prices are helping the new-home market now. RL Brown, publisher of the Phoenix Housing Market Letter, said most Valley builders finally have realized they need to drop prices to sell homes.”

“David Seiders, National Association of Home Builders chief economist, said last week that these four areas will be most vulnerable to the subprime-loan fallout: California, coastal Florida, Phoenix and Las Vegas.”

“The speculator-driven housing boom is to blame. All those areas saw the huge run-ups in prices prompted mainly by speculators, often using subprime loans. Regular home buyers then often had to take out subprime loans to afford the higher prices.”

“‘With many of these mortgages scheduled to reset to higher rates in the remainder of 2007 and through 2008, additional weakness in housing markets is likely,’ Seiders said.”

“He said the potential for a vicious cycle of defaults and price declines will depend on the level of exposure to subprime loans, the current house-price environment and the strength of the local economy. Metro Phoenix is at a 15-year high for foreclosures.”

“Reason 97 that we’ve maxed-out on real estate reality shows: A Scottsdale, Ariz., couple are participating in a pilot for a TV series that aims to show, via their experiences, that the downturn in the market is pinching the wealthy, too.”

“The short version of the ‘Real Estate Rescue’ pilot, according to the Arizona Republic newspaper: A well-off guy takes early retirement, gets stuck with two very expensive houses and his new business, a tutoring service. To make ends meet, he goes back to his early career, as a pharmacist at a local grocery.”

“The fledgling producers hope to make a weekly go of chronicling the real estate travails of the well-to-do. There are no network or cable takers for the pilot, the newspaper reported. Big surprise.”

In Business Las Vegas from Nevada. “The number of new-home and existing-home sales in September fell to the lowest monthly total this decade as home prices continued to tumble, according to statistics. Builders didn’t show much confidence in the Las Vegas housing market in September when they took out 591 housing permits. That’s the lowest monthly total this decade, said SalesTraq’s Larry Murphy.”

“New-home sales plummeted to 1,328 in September, down 52 percent from September 2006, when there were 2,565. The median prices fetched for new-home sales in September was $308,055, 13 percent below the market’s peak in April 2006 when the price was $355,435.”

“As for existing-home sales, there were 1,466 in September, down 50 percent from September 2006 when there were 2,946. Of those homes that sold, the median price of $263,075 is nearly $27,000 or 9.2 percent below its peak of $290,000 in October 2006. That’s the lowest median price since it was $263,000 in March 2005.”

“Inventory remains at record levels with a 19-month supply.”

“Builders continue to offer…as much as $100,000 in free upgrades to buyers, Murphy said. Earlier this month, Lennar Homes dropped prices 25 percent in about 30 of its new-home subdivisions, Pulte had a sale advertising a 15 percent cut in prices while Astoria Homes had price cuts of $70,000 or more.”

“The fall in prices comes as a credit crunch makes it harder for buyers to qualify for loans. Analysts said that’s an even bigger problem in Las Vegas where there are a lot of first-time and second-time homebuyers. In addition, casino workers who in the past have relied on stated income loans aren’t qualifying today.”

“The release of the data by SalesTraq comes as a local housing analyst said Wall Street investment bankers are concerned that at least one and maybe other major public builders will pull out of the Las Vegas housing market.”

“Steve Bottfeld, VP of Marketing Solutions, declined to name the builder analysts named, but said they are concerned because Las Vegas has been so profitable for builders.”

“Despite the prices and sales continuing to nosedive, Bottfeld remains optimistic. ‘If we are not at the bottom, then we will have one more bad month before we see it turn around,’ he said.”

“For the ninth month in a row, Nevada reported the highest foreclosure rate in the nation, nearly triple the number of filings in September 2006, according to RealtyTrac.”

“Las Vegas firm SalesTraq reported that through September, 5,603 homes had been repossessed by banks, a 472 percent gain over all of 2006, when 1,829 homes were repossessed.”

“Tim Sullivan, president of the Sullivan Group Real Estate Advisors cited a report from Banc of America Securities tracking the volume of resetting adjustable-rate mortgages. In March, one estimate said it would peak at about $110 million and remain elevated through next summer, Sullivan said.”

“‘The net effect is that we have the first six months of 2008 to go through this and another three to four months of where we go from there,’ Sullivan said. ‘The implication is that it’s going to be a very difficult year for figuring our values from a real estate standpoint. There is going to be a lot of competition.’”

“Michael Krein, president of Nevada Real Estate Services, which handles foreclosures for lenders, said 80 percent to 90 percent of the properties he’s handled so far have been investors but expects that to change when loans reset for many homeowners next year.”

The Review Journal Business Press from Nevada. “Las Vegas Valley land values softened in the third quarter amid concerns about a residential downturn, tightening credit markets, rising interest rates and increasing construction costs, reports Applied Analysis.”

“Median vacant land prices were $677,300 per acre at the end of September, or $41,200 less than the previous quarter. The average price per square foot was $15.55, which is a 5.7 percent drop from the second quarter.”

“‘It went from a buyer’s to a lender’s market,’ said Kyle Nagy, a director at CommCap Advisors, which specializes in commercial real estate financing. ‘Underwriting is more conservative from every funding source…people are taking a wait-and-see attitude.’”

“A dramatic drop in the volume of deals occurred in the third quarter with only 140 parcels totaling 484 acres changing hands. It marks a 45-percent year-to-year decline in activity, due, in part, to diminishing land supplies.”

“‘Despite a long-term limitation, shifts within the present housing market continue to place downward pressure on demand for raw residential land,’ said Brian Gordon, principal of Applied Analysis. ‘We expect this trend to continue through the third quarter of 2008 as housing inventory levels will likely remain elevated and pricing remains unstable.’”

“Many investors with a reasonable exit strategy may face tough times ahead.”

“‘The impacts associated with softening demand for land are partially offset by landowners’ unwillingness to sell at deep discounts, forcing property values to remain relatively stable,’ said Gordon. ‘If residential conditions materially worsen or growth slows down substantially, property price reductions may become a reality.’”

The Review Journal from Nevada. “Southern Nevada’s sluggish housing market is spilling over into its commercial market, as ailing companies in the housing sector retrench amid rising foreclosures and a real estate credit crunch. Local office brokers say home builders, real estate brokerages, title companies and mortgage businesses are scrapping expansion plans, chucking office space and subleasing empty suites.”

“‘All of a sudden, we’re noticing softening in the housing-related office market,’ said Brad Peterson, a VP with commercial real estate brokerage CB Richard Ellis in Las Vegas.”

“Based on his conversations with home builders and developers, David Scherer, a VP with Grubb & Ellis in Las Vegas, said doesn’t expect tenant rosters in the residential sector to bounce back before 2009 or 2010.”

The Douglas Times from Nevada. “Construction of new homes in Douglas County, Carson City and Lyon County has been in decline for several years, government and industry officials from the tri-county area said last week.”

“‘It will definitely take us a while to catch up,’ said Kevin Gattis, chief housing official for Carson City. ‘The area has been over-built so much. But things really aren’t as gloomy as people say.’”

“‘Two years ago the market was out of control and over-inflated in terms of home pricing and construction. Now, the market is correcting itself and coming back to a more normal state,’ said Matt Denio, Dayton Land Developers’ project manager on the development.”

“General contractor Steve Edelstein, bought a half-acre lot at Santa Maria in 2005 and began marketing it in December 2006. The response has been minimal and he doesn’t know when he will begin construction.”

“‘I’m optimistic about the market turning around, I just don’t know when,’ he said. Edelstein has plans for custom homes in the $600,000-$700,000 range.”

“New home permitting in Douglas County plunged to 133 in the first nine months of this year, compared to 442 in the same period of 2005, county Building Official David Lundergreen said. ‘The builders are definitely struggling,’ he said. ‘In (2003 and 2004), it was like we couldn’t build fast enough. Now a lot of guys are just holding a lot of inventory.’”

“While it’s generally bad for the market when debts go unpaid and residents go homeless, the government bailouts some politicians have suggested will do just as much harm, said Rick DeMar, CEO of the Builders Association of Western Nevada.”

“‘I’m not a panic guy,’ he said. ‘This is not a permanent crisis. This is all part of a circular economic environment. It’s not the time to short-sell your (property’s) value.’”

“While DeMar noted that many builders ‘have not made the best decisions’ in building ahead of demand, he also blamed consumers who purchased homes that were beyond their means.”

“‘If you’re making $10 an hour, there are probably some houses you can’t afford,’ he said. ‘But you bought one anyway. Before this is over, some people are going to have to bite a very bitter bullet.’”

The Deseret News from Utah. “Real estate agents and developers are often known for their creative marketing strategies to sell houses, which is why one newly constructed home in Plain City is going on the auction block.”

“‘It (the home) appraises for $370,000, and realistically I think fair market is between $345,000 to $350,000,’ said William Velazquez, co-owner of a construction and land investment firm based in Layton.”

“Home auctions by owners are becoming more common in many areas around the country but remain relatively new to Utah. Velazquez said his property will begin with a minimum bid of $50,000 with no reserve, meaning it could go for far below the market value.”

“‘I think there are a lot of people in our situation that are realistically don’t want to leave the sale to question with the market letting it sit with all the other properties in the neighborhood for months,’ he said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “UBS said Monday that the slumping U.S. housing market may lead to further write-downs on debt securities following the company’s first quarterly loss in almost five years. UBS, the largest bank by assets in Europe, is at risk from ‘further deterioration in the U.S. housing and mortgage markets as well as rating downgrades’ on mortgage-related securities, the bank, based in Zurich, said in a statement.”

“UBS reiterated that its third-quarter loss was between 600 million francs, or $516 million, and 800 million francs.”

From MarketWatch. “‘UBS is not assuming that the quarter will continue as positively as it has begun, or that the current difficulties will be resolved in the short term,’ the group said in a statement.”

From Reuters. “The UBS statement was highly unusual, coming only one day before the formal announcement of its third-quarter results.”

“‘They have not squashed it (the rumours of more writedowns), they have confirmed it,’ said one London-based analyst, who asked not to be identified.”

“UBS said the fixed income business ‘remains exposed to further deterioration in the U.S. housing and mortgage markets as well as ratings downgrades for mortgage-related securities.’”

From Forbes. “Japan’s biggest bank, Mitsubishi UFJ Financial Group, revealed Monday that its losses in the U.S. subprime mortgage market had ballooned to 30 billion yen ($263 million) over two months, six times more than previously announced.”

The Evening Standard. “Wall Street is bracing itself for a further $5 billion of losses at Merrill Lynch as the beleaguered bank tries to steady itself in the wake of the ousting of CEO Stan O’Neal.”

From Business Week. “Merrill sure prospered while the revelry lasted, raking in $800 million in CDO underwriting fees (more than any other firm) since the beginning of 2006, according to Thomson Financial/Freeman.”

“Now that the boom has gone bust, Merrill is left holding billions of dollars in less attractive pieces of CDOs that haven’t been sold to investors. Merrill was sitting on a lot of CDO tranches by virtue of its prime underwriting role, up to $32 billion in exposure as of June 29, the company says.”

“Now, Merrill has written down the value of those hard-to-trade securities by $5.8 billion and says it has cut its overall holdings by half. Is a future write-off looming? It’s a worry, especially if ratings agencies downgrade Merrill’s remaining CDO securities.”

From BBC Two. “The crisis in US subprime mortgages has fallen hard on the city of Cleveland, Ohio, where as many as one in six households have been affected.”

“Five years ago Eleanor Hall bought a house. What she didn’t realise was that her mortgage was a subprime. Now, she is unable to pay and left facing homelessness. ‘I’m truly at rock bottom,’ she says.”

“‘This was the Wild West of lending but there was no sheriff in town,’ says Jim Rokakis, County Treasurer for the Cleveland area. ‘There has been blood flowing on the streets of Cleveland but nobody cared. The only time anyone listened was when blood flowed on the only street that matters in this country, and that’s Wall Street.’”

The LA Times. “Despite the mortgage meltdown, the blizzard of advertising for home loans continues. Lenders struggling to remain profitable now are targeting people who have good credit and plenty of home equity.”

“Critics say the offers often appeal to the same inclination that led many sub-prime borrowers astray, the tendency of people to live beyond their means by using their home equity as an ATM.”

“‘It’s all the art of distraction,’ said Bruce D. Miller, CEO of Dailey & Associates Advertising. ‘For some people, all they care about is the monthly payment. And that keeps them from digging in and concentrating on the hidden elements.’”

“Countrywide Financial Corp., the nation’s largest mortgage lender, regularly barrages existing customers with pitches for new loans, encouraging them to cash out some of their home equity and saying they may not need to get an appraisal or prove their income.”

“‘There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements and other expenditures, such as education investment, small-business development and retirement spending,’ said David Sambol, Countrywide’s president.”

From Yahoo Finance. “If I had an adjustable rate mortgage (ARM) and I didn’t know when or how my mortgage would adjust, or how that would affect my monthly payment, I might be a little worried. After all, the media is now littered with nightmarish tales of mortgages gone bad.”

“According to a study recently released by the AFL-CIO. It found that nearly half of homeowners with ARMs don’t know how their loans adjust or reset, and nearly three-quarters don’t know by how much their monthly mortgage payments will increase when they do readjust.”

“Just 18 percent said they were worried about making their monthly mortgage payments over the next few years. It turns out that reality can be a real downer: Among homeowners who had already faced their first readjustment, 41 percent said they were worried about meeting their loan obligations.”

“U.K. banks approved the fewest mortgages in 26 months in September as borrowing costs increased. Lenders granted 102,000 loans for house purchase, the fewest since July 2005 and down from 108,000 in August, the Bank of England said in London today.”

“A tripling of house prices since 1997 has encouraged borrowing. Britons’ debts held at a record 1.4 trillion pounds ($2.9 trillion) in September, the central bank said today.”

“U.K. house prices fell for the first time in two years in October, led by central London and the financial district, a report by Hometrack showed today. Prices dropped for a second month in September, with the number of potential homebuyers dropping to the lowest since 2003, the Royal Institution of Chartered Surveyors said.”

The Daily Mail. “Like so many young professionals hoping to cash in on Britain’s property boom, 26-year-old Paula Collins, a recruitment consultant from London, thought her money would be safe. The buy-to-let market was booming and the deal from a Manchester developer seemed too good to pass on.”

“The two-bedroom flat in the Castlefield area was valued at £175,950, but the developer was offering a 15 per cent discount, taking the price down to £149,500, and best of all, no downpayment was required.”

“After 18 months, in which Manchester, like many northern cities, has seen a massive oversupply of new city centre apartments, Paula’s flat is now worth just £140,000.”

“Her mortgage costs her £900 a month, but she receives only £600 a month in rent. That’s when she could find a tenant. Now the flat is lying empty, so Paula has to stump up £900 a month just to cover costs.”

“‘The offer seemed too good to refuse at the time. I decided to do this one as a long-term investment, but I hadn’t anticipated that the property would be so debilitating,’ says Paula. ‘I paid such a high price, partly because independent valuers told us it was worth a lot more, and now I can’t sell because there are so many apartments in the area.’”

“‘I’m at a desperate stage. I’ve lost an enormous amount of money - about £14,000,’ she said.”

“There are 900,000 buy-to-let landlords in Britain, many spurred on in the past few years by rising house prices and the accessibility of mortgages tailored for buy-to-let investors. Many saw it as a get-rich- quick scheme in a buoyant market.”

The Guardian. “The number of repossessed homes looks set to soar next year to levels not seen since the 1990s house price crash…according to the Council of Mortgage Lenders (UK).”

“The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 in 2008. It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would also reduce.”

From CNN Money. “Since the subprime crisis erupted earlier this year, vulture investors looking for bargains have been circling battered securities backed by mortgages. But the feeding has not yet begun in earnest, and that’s not a good sign for the housing and credit markets.”

“A recently created ’superfund’ designed to buy bonds and other debt backed by home loans could deter distressed investors from entering the market. Some critics, including former Federal Reserve chairman Alan Greenspan, have warned that the fund could do more harm than good by propping up prices.”

“‘If you intervene in the system, the vultures stay away,’ Greenspan said in a recent interview. ‘The vultures sometimes are very useful.’”

“The uncertainty leaves distressed debt investors with the tricky task of ‘catching a falling knife,’ said Daniel Alpert, a partner at New York-based boutique investment bank which specializes in mortgage and related securities.”

“‘You could argue this is a good time to go in,’ Alpert said. ‘But my view is that a good portion of the market thinks the knife hasn’t even started to plummet yet.’”

National Mortgage News. “A few weeks ago, former FHLB Chicago president Alex Pollock handed me a ‘reading list’ of that might shed some light on the current subprime mess/bubble/panic. None of these books, of course, are about the current crisis because, well, no one has written one yet (at least not for the layman).”

“At the top of Mr. Pollock’s list? ‘Lombard Street’ by Walter Baeghot, a book penned back in 1873. That’s right, 1873.”

“Anyway, 10 days ago Federal Reserve chairman Ben Bernanke spoke before the Economic Club of New York. And what book did he reference? Answer: ‘Lombard Street.’ Chairman Bernanke quoted from the book, saying, Baeghot believed a panic is a ’species of neuralgia.’ Confused? Type those words into Google and see what turns up…”

The Times News reports from North Carolina. “Hendersonville’s downtown condominium market may be a casualty of a nationwide housing slump as several upscale condominium complexes announced over the past two years have stalled. The condominiums were all proposed for downtown when the housing market here was hot. ‘Obviously, the real estate market has slowed down,’ said Ed Hernando, who has proposed two downtown condo projects. ‘That’s kind of what has affected us slightly because people can’t sell their homes and move into this market.’”

“‘Buyers are on the sidelines waiting for sellers to reduce their prices so they can get better deals,’ he said.’”

From WJZ.com in Maryland. “Seventy houses in Baltimore City are foreclosed every week. ‘It seems as though the American dream has now become the American nightmare,’ said Baltimore resident Joanna Smith-Ramani. ‘With the market going soft, you can’t sell to get out anymore, so you’re stuck with this mortgage and this house you really could never afford to begin with.’”

“The leading cause of foreclosures are adjustable-rate mortgages adjusting so high that some Marylanders find they can’t make the payments. ‘It’s scary to think what will happen. The ultimate thing that will happen is foreclosure; they will drag me from my house bloody and screaming before I give up,’ said homeowner Ray Dawkins.”

“The investors who bought properties to make money are caught up in the bust as well. They make up a third of the foreclosures in Baltimore.”

The Herald Mail in Maryland. “When Donald Shumaker II refinanced his home in 2004, he knew the interest rate would stay the same for three years, after which it would become adjustable. But he didn’t expect what happened.”

“‘I was paying $910 a month,’ he said. In one month, the rate went from 7 1/4 percent to 10 1/4 percent, or $1,375 a month.” “‘Then, they sent me another letter, and my mortgage went up to $1,540,’ Schumaker said. ‘I’d have to have three jobs and no time with my family,’ he said.”

“Last Tuesday, less than 24 hours before his home was to be sold in a foreclosure auction on the steps of the Washington County Courthouse, Shumaker’s attorney filed on his behalf for bankruptcy protection.”

“‘I guess it’s my only option,’ Shumaker said. ‘I’m just going to have to go under, and that’s a sad thing to say.’”

“In the past 12 months, a total of 516 foreclosure notices have been filed at the courthouse. By comparison, 294 were filed during the same period in 2005 through 2006.”

“‘I’m seeing a significant increase. I’ve never seen it this bad. I’ve been doing it over 30 years,’ said William O’Brien, a Martinsburg, W.Va., attorney who handles such cases in West Virginia and Maryland. The number of resulting bankruptcies is ‘going completely crazy,’ he said.”

“A major problem, several attorneys and a local mortgage broker agreed, is that, like Shumaker, many borrowers don’t know what is in the loan agreements they sign.”

“Those agreements are ‘18 to 20 pages long, typically … but nobody reads that stuff,’ said a local mortgage broker, who didn’t want to be identified.”

“Friday a week ago, it was becoming clear to Donald Shumaker what he would have to do. He had tried to refinance with another lender, but was refused. He thought about trying to sell the house, but realized the market is so depressed, he couldn’t get near what he owed.”

“He had stopped trying to make payments to EMC because the debt was snowballing. Sale notices were published in the newspaper. The auction was to begin Wednesday.”

“‘More or less, they give me no choice,’ Shumaker said.”

“Tuesday afternoon, Hagerstown attorney Alex Bognar filed papers with U.S. Bankruptcy Court in Greenbelt, Md., seeking bankruptcy protection for Shumaker.”

The Philadelphia Inquirer from Pennsylvania. “Sales of existing homes in the eight-county Philadelphia region were down about 10 percent in the third quarter from the same period in 2006, data from HomExpert Market Report show.”

“HomExpert’s pending-sales index for August showed a substantial decrease in activity from July that was not unexpected. ‘We had anticipated a decrease in the region’s activity due to the heightened awareness of the credit crisis and mortgage availability,’ said Steve Storti, senior VP of marketing for Prudential Fox & Roach.”

“On the positive side, Lawrence Yun, senior economist for the National Association of Realtors, said, ’speculative excesses have been removed from the market, and prices remain near record highs, reflecting favorable mortgage rates and positive job gains.’”

“‘All real estate is local,’ he noted.”

“Some local observers have questioned HomExpert’s days-on-market averages, which in the third quarter ranged from 53 to 75. To ‘freshen’ a listing, they say, some agents and brokers remove houses from the MLS for a few days, then re-list them at lower prices, to give them the appearance of being new to the market.”

“Tim Crann, a veteran appraiser who handles properties in the five Pennsylvania counties, said he has seen many examples of this ‘resetting the DOM clock,’ and believed that the actual days-on-market figure for many houses was much higher.”

“Storti said he discussed the issue with the firm that analyzes data for HomExpert. ‘Their analysis tells them that manipulation at the broker level of re-listing does not have a significant effect…on days on market,’ he said. Some local Realtors agreed.”

The Associated Press on Connecticut. “Mortgage defaults and foreclosures in Connecticut’s cities have skyrocketed over the past year, a real estate tracking company has found. RealtyTrac said the number of foreclosures increased 547 percent in the New Haven-Milford area, 522 percent in the Bridgeport-Norwalk-Stamford region and 446 percent in the Hartford area in the first half of this year, compared with the same period in 2006.”

“State Attorney General Richard Blumenthal told the Connecticut Post that his office has been inundated with calls from homeowners seeking help.”

“‘We may be on the cusp of a huge wave breaking over Connecticut. People are very understandably upset,’ Blumenthal said.”

“U.S. Rep. Christopher Shays, R-Conn said he is focusing on who is being foreclosed upon and why. He said many subprime borrowers did not put any money down on their loans and ‘never really owned a home in the first place.’”

“‘I can’t imagine helping people who should not have gotten a loan in the first place,’ he said.”

The New York Times. “In neighborhoods in Brooklyn, Queens and the Bronx hit hard by the subprime lending crisis, mortgages had the shortest of life spans, taking about a year to go from approval to notice of foreclosure, and many of those home loans were originated by the same few lenders, according to a report released yesterday by State Senator Jeffrey D. Klein.”

“There were 19,729 foreclosure notices filed in New York City and Westchester and Nassau Counties from July 1, 2006, to July 31, 2007.”

“In the Jamaica and South Jamaica sections of Queens, the average time from mortgage origination to notice of foreclosure was 11 months. In Wakefield and Baychester in the Bronx, it was 14 months, the report said.”

“Jay Rosado said he and his wife, Ana, had been locked into two subprime mortgages from Fremont Investment and Loan on their Throgs Neck home. Their payment increased after two years by about $700, to $4,000 a month. After a long ordeal, the couple refinanced both loans at a lower, fixed interest rate.”

“‘It’s horrible what they’re doing to people,’ Ana Rosado said of subprime lenders.”

The New York Post. “State Sen. Jeff Klein yesterday released a ‘Sub Prime Hall of Shame’ report outside the New York Stock Exchange yesterday, naming the banks with the highest foreclosure rates in the city and Westchester County.”

“‘These banks grew rich off of defrauding the American Dream,’ said Klein.”

“According to Klein’s report, the state’s foreclosure rate for 2007 is on track to exceed last year’s by a staggering 60 percent.”

“Army Staff Sgt. Sandra Rolon came back from Iraq and hoped to have the American dream of owning her own home in The Bronx. Instead, the veteran has become one of an estimated 19,000 New Yorkers swept up in the collapse of the subprime mortgage market.”

“‘I feel suckered,’ said Rolon, who’s lost her house.”

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