The Housing Bubble

The Modesto Bee reports from California. “A buyer in the current market has several advantages, particularly if they have good credit, a sizable down payment and a willingness to shop thoroughly. When the market was at its peak, Kimiko Horiuchi avoided buying because prices were too high. Now, she and her husband are buying a 2,700-square-foot house in Patterson for $329,000.”

“She said her real estate agent told her that a few years ago the home was worth $600,000, because it’s a former model home with several upgrades.”

“‘We’re definitely getting a home for a good price,’ said Horiuchi. ‘You’re going from renting to paying on the mortgage, and if the economy comes back, then I’ll have a house that I bought for less than it’s worth.’”

“Horiuchi said she knows she may be taking advantage of someone else’s misfortune or bad loan. ‘I just feel bad that I’m taking someone’s house,’ she said.”

“Horiuchi’s house was owned by a bank, which many experts said is a niche that may allow buyers more opportunity to get homes at bargain prices. Banks don’t get involved in selling homes willingly, and those that own foreclosed properties want to quickly move them off the books, experts say.”

“That, said Michael Tedesco, a Realtor in Modesto, can make negotiations with a bank easier. ‘If buyers see something they like, they should throw an offer out there,’ he said. ‘You won’t insult the bank like you would an individual seller, and with a bank, they’re going to counter back.’”

“After two price adjustments, Realtor Ken Ernst said he still thinks the owners of a Salida home he’s listing will come out ahead. The couple bought the home when it was new, in 1994. Equity has soared since, even taking into account the recent drops, he said. The house is listed at $299,900, but the owners bought it for $133,000.”

“‘The biggest time of price depreciation has come about,’ Ernst said at an open house in September. Although they missed out on the boom, Ernst said, they will benefit because they can pay less for a new home in Manteca.”

“‘They held back during the high price time, and it definitely made a difference,’ Ernst said.”

The Orange County Register. “Metrostudy’s third-quarter look at SoCal’s new home market says Southern California recorded 8,470 single-family starts during the third quarter of 2007, a decline of 38 percent compared to the third quarter of 2006.”

“Single-family quarterly closings totaled 8,815 units, a decline of 47 percent compared to the third quarter of 2006.”

“Single-family inventory, which is composed of units under construction, finished vacant units and model homes, totaled 39,839 units at the end of the second quarter of 2007, declining by less than 1 percent to an 11.9-month supply.”

“Metrostudy’s Steve Johnson: ‘The region’s residential real estate market has been experiencing a decline that has affected all price segments. Some projects have had limited success by offering ’super discounts’ of up to 50 percent of original asking prices, even when such reductions price homes below cost. Unfortunately, the sales momentum has been short-lived, as there is no sense of urgency to buy a home.’”

The Daily News. “California faces a potentially grim economic outlook as the effects of growing foreclosures amid a faltering housing market ripple statewide, experts warned Monday.”

“Economist Ross DeVol of the Milken Institute, part of a panel examining the impact of problems in the subprime-mortgage industry, said a drop in home sales affects everything from employment and consumer confidence to retail sales and tax revenue. And he warned that if reduced consumer spending leads to a recession in California, the (problems) could spread nationwide.”

“Countrywide Financial Corp. CEO Angelo Mozilo, whose company has become a symbol for the problems in the housing market, said his firm has received no help from the government and is bearing the brunt of criticism for the current problems.”

“‘The problem we are seeing now is that first-time homebuyers can’t get into the market,’ Mozilo said. ‘This is the most expensive housing market in the country and the federal government has not done anything to help ease lending.’”

“‘Programs (like Freddie Mac and Fannie Mae) have the same limits for North Dakota as (they do) for Los Angeles. And no one here can buy a house with what they are offering,’ he said.”

“Mozilo said the problems stem from the loosened lending and credit rules in the late 1990s through 2004.”

“‘It was an easy market,’ Mozilo said. ‘People subscribed to the belief they couldn’t lose - and for a while they didn’t. Prices continued to go up. What created the problem we have now is that prices began to fall and panic set in.’”

The Mercury News. “Alameda Realtor David Gunderman said he’s seen home prices and sales soften. In general, he said, the softening market is affecting those buying homes for the first time. The reason is that lenders have tightened their lending standards.”

“‘Those people (buyers) were taking a risk, and the lender was allowing them to do so,’ he said. ‘Those people are no longer in the market, which is good, responsible lending. It got irresponsible for a while there and that’s why we’re feeling the pinch right now. It’s a correction, a necessary correction.’”

“Broker Michael Studebaker said…Harbor Bay Isle home sales were suffering.”

“The whole ‘pie’ of home sales volume has shrunk this year by more than 20 percent compared with sales in 2006, said Leslie Appleton-Young, chief economist for the California Association of Realtors. But ‘the part of the pie that’s moderate and low-end housing has shrunk even more.’ With so many sales of lower-price homes out of the picture, the median price has been bumped up artificially.”

Inside Bay Area. “Foreclosures in San Mateo County shot up more than threefold in the third quarter compared to the same time last year, and there’s no relief in sight, according to a real estate report.”

“Some 155 homes were foreclosed on countywide, up 319 percent from 37 in the third quarter of 2006, according to DataQuick.”

“‘It’s just the start of it, and it’s going to continue on through next year,’ said Geoffrey Craighead, president of the San Mateo County Association of Realtors. ‘Borrowers seem to think a magic knight’s going to come in, but then the sheriff’s knocking at the door.’”

“The local areas hardest hit are lower-end neighborhoods in places like Daly City, South San Francisco, East Palo Alto, Redwood City, Pacifica and San Mateo, Craighead said.”

“‘People forget, because it looks pretty affluent around here, but there are a lot of areas where working people are working hard to stay here,’ said Brian McNamara, a lender in Half Moon Bay. ‘They took a loan to stay, and thought they could refinance, but they can’t.’ McNamara also sees foreclosures increasing in the next year countywide.”

“Other areas were hit even harder in the third quarter by foreclosures, with Santa Clara County up 704 percent, Contra Costa County up 874 percent and Alameda County up 486 percent.”

“Home sales fell 37 percent in September in San Mateo County. With home sales slumping and appreciation flat or slipping, many first-time home buyers are trapped.”

“‘There’s never been such a lax lending market,’ said John Gieseker, a real estate broker in San Bruno. ‘With no money down and adjustable loans, there was a big danger of getting in trouble.’”

“Gieseker said the foreclosure market is mostly affecting first-time buyers. ‘Consumers saw easy money, and they flocked to it,’ said Gieseker. ‘A lot of borrowers closed their eyes and went ahead.’”

The Press Democrat. “The sluggish economy, a sharp drop in foot traffic and a pull-out by a major investor are all being blamed for the tough times facing the Town Green Village. It’s a setback for a fast-growing project that has literally transformed the face of downtown Windsor in a few short years.”

“Politicians, planners and business groups have hailed the project as a model of smart, mixed-use urban redevelopment. But ‘For Lease’ signs now litter the colorful, historically inspired storefronts, and more may be on the way.”

“‘I have been living this nightmare for 17 months,’ said Kathy Flinn, owner of Creative Wick, a create-your-own candle studio. ‘I’ve got $100,000 invested here. I can’t afford to walk away.’”

“The town, which has invested millions of in redevelopment funds in the area, encouraged rapid growth in an effort to quickly get new residents living there so the new businesses would thrive, said Debra Fudge, Windsor mayor pro-tem.”

“Orrin Thiessen, the developer and general partner of Town Green Village, said he’s built about 200 residential and commercial units in buildings along the Town Green since 2002. The first few years were fantastic, but he acknowledged the slow housing market and a recent decision by a key investor have limited his ability to extend much help to ailing retailers.”

“‘We’ve got a little bit of a double whammy going on right now,’ Thiessen said.”

“The slow housing market has hit his project harder than other developments because of the way the retail and the residential components are intermingled, he said.”

“In 2005, when Flinn was considering opening her business, she scouted out the area and thought it couldn’t miss. But Flinn hasn’t turned a profit in any of the 17 months she’s been in business. She blames a bad location and poor marketing efforts by the developers. She said there is nothing wrong with her core business model, which involves hosting parties where people pay about $12 to make their own candles.”

“The buildings are comprised of street-level shops with residential units upstairs. Neither are selling as well as they were two years ago, Thiessen said. ‘I have the buyers,’ Thiessen said. ‘I have a big list that have already picked out their condominiums, but they have to sell their homes first.’”

The Business Journal reports from Indiana. “Melinda and Brooks Bertl know the ups and downs of the current real estate market—personally. They started looking for a home to buy this spring and it took them only two weeks to find one they liked in Carmel. In March, the couple put their Castleton-area home on the market, where it has languished ever since.”

“They’ve lowered the price 15 percent and recently installed new carpeting throughout the A-frame, tri-level house to make it more attractive to prospective buyers. Since listing the property, the Bertls have had two offers well below their asking price. Behold the down side.”

“Recent data from the Metropolitan Indianapolis Board of Realtors show they’re far from alone. The nine-county Indianapolis metropolitan area had 1,998 pending sales of single-family homes and condominiums in September, down 16.8 percent from the same month last year.”

“The more than 20,600 active listings in September were up 5 percent over the same month last year.”

“‘The thing we cannot control is consumer confidence,’ said James Litten, president of F.C. Tucker Co.’s Residential Real Estate Services Division. And when people worry, it has a ripple effect because they don’t spend money.”

“That’s something the Bertls know well. ‘It’s not a conducive market right now for people selling their homes,’ Melinda Bertl said. ‘Just lowering the price doesn’t entice people to buy.’”

The Courier News from Illinois. “Chances are that the people walking into Caroline Hernandez’s South Elgin office aren’t thrilled to be there. And Hernandez, a real estate attorney specializing in foreclosures, readily admits that her newfound popularity may be a little bittersweet.”

“‘People were given the wrong impression of what they could afford,’ she said. ‘As opposed to being frugal and saying, ‘I know how much I can afford,’ it became, ‘Why don’t I buy?’”

“Lenders may or may not have run a credit report on potential buyers, said Hugh Smeed, with Crown Community Development in Naperville., ‘but nobody called your employer or checks your tax return.’ Interest rates came down to almost historic lows, he added. ‘All of that contributed to people who were supremely unqualified to buy a house,’ doing just that.”

“‘So many of these people applied for loans stating income they didn’t have. Banks look at it now and say, ‘How did you afford this’ ’? Hernandez said.”

“Area developers and mortgage lenders are creating programs and offering deals to help ease the suffering that has come with the nation’s housing market slump.”

“Fountain Square in downtown Elgin, a mixed-use building with condominiums ranging in price from $229,900 to $474,900, is giving home shoppers the chance to live there for six months free. No mortgage payments, real estate taxes and homeowner association fees for six months provide homeowners with a ‘financial cushion that gives you time to sell your existing home,’ according to sales manager Katie Lange.”

“‘It isn’t desperation,’ she said. ‘It’s just to give an incentive.’”

“A mortgage licensee based in Crystal Lake is mailing out fliers proclaiming, ‘If you can prove your income, we have a home ownership solution for you, regardless of your current credit situation.’”

“The company has teamed up with Advantage Financial Partners and JP Realty to make buying a home ‘fast and easy.’ This is possible, according to their advertisement, because a ‘large inventory of homes priced under market value’ are available this very moment.”

The Chicago Tribune from Illinois. “One local housing snapshot says Chicago-area sales continue to decline, as do the numbers of homes under contract.”

“Headrick-Wagner Consulting reports that in the 12-month period ending Oct. 1, the Chicago region averaged about 5,000 sales per month, down from about 6,300 the previous year. In the 2005 period, sales averaged 7,300 a month.”

“The report said there were 1,649 fewer homes under contract Oct. 1, compared to a year earlier, and about 4,300 fewer than two years earlier, generally considered the very end of the boom.”

Business Week reports on Illinois. “Chicago…has the second-highest housing inventory level in the country. Inventory has shot up 17.2% in the past year, to 82,839, even though the area did not experience the housing boom and speculation buying that led to a market correction in much of the country.”

“It may be that even in Chicago, buyers and sellers have become wary because of all the negative national news about real estate, suggests ZipRealty CEO Pat Lashinsky.”

The Des Moines Register from Iowa. “As some downtown Des Moines developers are shifting from condos to apartments, Hubbell Realty says it will spend nearly $6 million to turn the former Mitchell Transmission building into 31 condominiums.”

“Jarad Bernstein, a Hubbell spokesman, said the company knows the downtown market, it has condo and townhouse projects on Court and Grand avenues, and expects the West End Lofts to sell well.”

“‘Housing may not be selling as fast developers wish, but it’s not a soft market,’ Bernstein said.”

“Forty-eight condos and lofts were sold downtown from January to September, totaling $10.4 million, records from the Des Moines Area Association of Realtors show. For the same nine months a year ago, 69 downtown condos sold, totaling $12 million.”

“The average sale price of downtown housing climbed from $174,587 to $215,728 last year.”

“The Des Moines real estate group shows 352 townhouses and condos on the market, the same as a year ago. Downtown housing took 277 days to sell this year, compared with 161 days a year ago. The association said time on market is high because developers often list homes before construction is completed.”

“‘The downtown market has gotten a bit of a bad rap,’ said B.J. Knapp, an Iowa Realty agent. ‘It has more to do with the overall market slowing than with the downtown market. But it’s nothing catastrophic. This isn’t South Florida or Las Vegas.’”

The Detroit News from Michigan. “Thousands of Michigan real estate agents, some with decades of experience, are getting squeezed out of the business, casualties of one of the worst housing slumps in state history.”

“Michigan agents say a lack of home buyers for the glut of houses on the market is driving them from the business. Those who do manage to move a property are realizing lower commissions as a result of dampened real estate prices.”

“In the last year alone, the Michigan Association of Realtors has lost 10 percent of its membership, or about 3,500 agents. An untold number of agents have taken second jobs to weather the slump or have put their licenses in ‘escrow,’ basically not using them until the market turns around.”

“John Kurczak, now an agent in Sterling Heights, said his current job is one that’s only gotten harder as friends and even family members have fled the real estate business while he’s tried to hold on.”

“Both of his brothers got their real estate licenses within the last year. But after seeing Kurczak struggle, including a situation last winter in which Kurczak was dropped by a couple looking for a home after he took them on 70 private showings, both brothers have decided to wait to get in the business until the market.”

“Sandy Covert said she wishes she had done just that. Lured by tales of plump paychecks and the allure of a job that came with a business card and no uniform, Covert decided in November 2005 to ditch her merry-go-round of low-wage retail jobs for the world of Metro Detroit real estate.”

“But after thousands of dollars spent on preparation and six months working every angle of the market she could, Covert had sold only one home.”

“‘It was a complete embarrassment,’ Covert said of the dilapidated structure a few blocks from her own Dearborn flat that she sold for a mere $4,500. ‘That was all I could sell. I tried harder at this than anything before in my life and I couldn’t make it work.’”

“‘It’s not as if we’re not working hard,’ said Kurczak. ‘But you can’t make people buy houses, which is unfortunate. I’d be a very rich man if I sold everything there is to sell in Metro Detroit.’”

Some housing bubble news from Wall Street and Washington. MarketWatch, “The 13-month-long decline in home prices in 20 major U.S. cities accelerated in August, with prices dropping a record 0.7% in the month, according to the Case-Shiller price index. Prices were down 4.4% in the past year, the fastest decline in the seven-year history of the 20-city index. In the original 10-city index, prices have fallen 5% in the past year, the biggest decline since 1991.”

“‘The fall in home prices is showing no real signs of a slowdown or turnaround,’ said economist Robert Shiller.”

“Prices could fall much further. In a separate report, analysts at Goldman Sachs figured that prices in California are about 35% to 40% overvalued, compared with past relationships between home prices and income growth. The median sales price of a home in California was $589,000 in August, Goldman said, but should be around $375,000, they said.”

“In the Case-Shiller index, fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with a 10.1% decline, followed by Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in August.”

From Bloomberg. “The price measure from the Realtors group can be influenced by changes in the types of homes sold. Because the S&P/Case- Shiller index tracks the same home over time, economists say these more accurately reflect price trends.”

The New York Times. “UBS on Tuesday reported a net loss of 830 Swiss francs ($713 million) in the third quarter, its first quarterly loss in nearly five years, as troubles in the United States subprime mortgage market led to big writedowns and losses in its investment banking unit.”

“Switzerland-based UBS, Europe’s largest bank by assets, is just one of many large financial institutions to suffer the effects of the recent credit crunch, which sent values of many mortgage-related securities sharply lower. Marcel Rohner, who took over as UBS’s CEO earlier this year, called the results ‘unquestionably disappointing.’”

From The Age. “Rohner, who replaced Peter Wuffli four months ago after the in-house hedge fund Dillon Read Capital Management collapsed, aims to restore profit by slashing 1500 jobs and reducing risk-taking.”

“‘They didn’t have very good control over what was happening at their investment bank,’ said Mark Glazener, a fund manager at Rotterdam-based Robeco. ‘It’s still not very clear what is going on.’”

From Reuters. “UBS repeated warnings of further writedowns, but CEO Rohner declined to give any detailed forecasts. ‘The range of possible outcomes is widening,’ he said.”

“UBS’s Chief Financial Officer Marco Suter later told Reuters in an interview that any writedowns UBS may have to make on subprime-related exposures in the fourth quarter were ‘highly unlikely’ to be on the same scale as in the third quarter. ‘Nothing is inconceivable,’ Suter said when asked if fourth quarter writedowns could be as big as in the previous three months.”

“Bank of China, the country’s flagship foreign exchange lender, booked $322 million in provisions to account for its exposure to U.S. subprime mortgage-backed bonds.”

“The state-run lender reported on Aug 23 that it held $9.65 billion worth of U.S. subprime-related bonds and collateralized debt obligations, the largest exposure revealed by a Chinese bank.”

“In the first half of the year it booked subprime-related charges totaling about $153 million. To reflect the depreciation in fair value of the related subprime securities, the lender also set aside $321 million of reserves against the balance sheet.”

Dow Jones Newswires. “Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund’s operations, said a person involved with the effort.”

“Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party.”

“By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said.”

“Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse.”

“Treasury Secretary Henry Paulson said it’s too soon to call an end to the U.S. housing slump. ‘We haven’t hit the bottom yet in housing,’ Paulson said.”

“The fallout from the U.S. subprime market has cost the world’s biggest securities firms and banks more than $30 billion in bad loans and trading losses in the third quarter.”

“The U.S. administration is studying what went wrong, with an emphasis on the role of credit-rating companies and accounting rules related to structured investment vehicles, Paulson said.” “‘We need to shed light on it and make the policy adjustments so this doesn’t happen again,’ Paulson said.”

From Business Week. “After three decades of stability, the national rate of homeownership suddenly began rising in the mid-1990s, going from 64% in 1994 to 69% in 2004.”

“But new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by looser mortgage-lending practices rather than demographic factors such as more households of home-buying age.”

“In an Oct. 23 e-mail to BusinessWeek, Goldman Sachs chief U.S. economist Jan Hatzius wrote: ‘The key issue is the potential for a vicious cycle’ in which falling homeownership hurts housing prices and forces more defaults, causing ownership to decline even more. That’s because falling prices make it more difficult for holders of certain types of mortgages to refinance and hang on to their homes.”

“Added Hatzius: ‘What the Atlanta Fed paper does is illustrate how important changes in access to credit can be in this cycle.’”

“One warning sign: The rate of homeownership has already begun to drop. It was 68.2% in the second quarter of 2007, down a full percentage point from its peak. The third-quarter number was scheduled for release on Oct. 26.”

“Many analysts have pointed to easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy macroeconomic analysis, the authors conclude that the availability of new mortgage options accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31%.”

“Although the paper cites lowered downpayment requirements as the biggest factor in raising ownership, co-author Carlos Garriga of the St. Louis Fed says a forthcoming paper will attribute more of the effect to ‘teaser’ loans with low introductory payments that appeal to young and lower-income buyers.”

“Nevertheless, the homeownership rate could fall well below the level it reached in 2004, at least temporarily, because the mortgage market is in such turmoil.”

“In a recent report, Goldman’s Hatzius wrote: ‘Given the current number of U.S. households of 110 million, the change in the homeownership rate over the past two years has already subtracted almost 500,000 from the underlying demand for new homes.’”

“Looks like there’s more bust left in the housing bust.”

From USA Today. “In hindsight, it’s not hard to see why so many home buyers got burned in the subprime mortgage meltdown. They might not have fully grasped the risks they were taking. Or perhaps they refused to believe housing prices could actually fall, or were desperate to keep up with others and achieve the goal of homeownership.”

“But what explains Stanley O’Neal? He was CEO of Merrill Lynch as it lost a staggering $8 billion on mortgage-backed investment products.”

“Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September.”

“They borrow in the bond market and lend the money to their members. Federal Home Loan Bank obligations, when combined with the $1.5 trillion debt and $4.7 trillion in bond guarantees of Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, are 46 percent more than the $5.04 trillion of Treasury debt held by the public.”

The Financial Times. “Angelo Mozilo, CEO of Countrywide Financial, on Monday strongly criticised the US government’s response to the collapse of the subprime lending market, saying there had been ‘zero’ effort to tackle the crisis.”

“‘In terms of tangible effort from the federal government…there has been no programme, no federal effort, no legislative assistance – zero,’ he said.”

“‘First-time buyers cannot buy a home now. Only the wealthy and privileged can afford to buy homes,’ he said.”

“Mr Mozilo blamed the subprime crisis on ‘easy, low-cost money’ that drove up house prices and ‘exotic loans and diminished underwriting standards.’”

“‘People stretched themselves,’ he said, though he implied that the blame for the crisis should be shared. ‘It takes a village to do this. As long as [house] values keep falling, the subprime situation will get worse.’”

The Associated Press. “Alan Greenspan issued bearish comments about the U.S. housing industry Monday, saying that ‘prices of homes will continue to go down’ until housing inventory starts to shrink.”

“The former Federal Reserve Board chairman, speaking at an investment conference in Bermuda, said ‘we’re nowhere near’ the point where inventories of new homes are set to drop, noting that home builders continue to discount new homes and add other inducements in a bid to cut their inventory.”

“‘We’ve got a way to go, and I’m not sure where that leaves’ the housing industry in the next year, he said.”

“Former Federal Reserve Chairman Alan Greenspan said on Monday securitized assets backed by subprime loans were unlikely to become a problem in the future because markets have lost their enthusiasm for them.”

“‘Markets have made the decision that subprime securitization is much too risky, so problem solved,’ Greenspan told a conference.”

NBC 2 reports from Florida. “The NBC2 Investigators looked into the real estate market slump and uncovered one thing sellers could do to turn the market around. Although the buyers are there, some home prices are at 2002 levels. Many buyers are waiting for the prices to drop. ‘What we have are lurkers. Lurking on the sidelines,’ said Lee County Realtor Brett Ellis”

“Ellis agrees with his high-profile competitor Denny Grimes. ‘We don’t have a demand problem. We have a supply problem,’ said Grimes.”

“There are 15,000 homes and 9,000 condos listed for sale in Lee County. Thousands of them are priced out of the current real estate market and are putting a downward pressure on prices.”

“‘We tell them here’s where the market is- if you’re not prepared to bring your property to the market, we can’t help you. Because nobody is going to be able to sell your property for more than it’s worth, especially in today’s market,’ said Ellis.”

“The NBC2 investigators discovered realtors are telling clients to drop their prices to a reasonable level. ‘We’re seeing people coming in crying uncle, waving the white flag, saying we’re not going to get what we thought. We’ve got to get serious to move this thing,’ said Grimes.”

“Jenny Marinescu and her husband just bought in a gated community. The house had been on the market at one point for $370,000. They paid $245,000 not wanting to look a gift horse in the mouth.”

“‘Unless you’re psychic, it’s the only way to predict when the market will bottom and what it will do. You just have to look back at history. If you do your research just a little bit, you’ll see that now is a good time to buy,’ said Marinescu.”

The Herald Tribune. “After eight months of legislative wrangling over property tax reform, the uncertainty of the process itself is taking a toll on an already depressed real estate market.”

“‘There are a number of Northeastern baby boomers who are literally waiting to see what we do with tax reform,’ said Kelly Ann Ayer, an agent in Venice. ‘It certainly has kept people on the fence, without question.’”

“Fence-sitting, in fact, has helped freeze an already stagnant market. In September, Realtors sold just 8,688 single-family homes statewide, down 37 percent from a year ago and the lowest since the Florida Association of Realtors started keeping a statewide record in 1993, when 9,300 homes sold.”

“Sarasota home builder Lee Wetherington, who has downsized his own home-building company to wait out the current slowdown in sales, said that reduced property values are going to prove more important in limiting taxes on non-homesteaded buyers than is the proposed 10 percent cap.”

“‘Over the next five to seven years, you are not going to see that much appreciation in property,’ Wetherington said. ‘I suspect you are going to continue to see valuations decrease. I think most homeowners will have the ammunition to go to the tax assessors and say, ‘This is what my new tax base should be.’”

The News Press. “First Home Builders in Fort Myers, which two years ago was on top of the world as Lee County’s biggest residential contractor with almost 1,200 employees, is down to about 50 today following its layoff of 200 workers.”

“The move was done in response to the current sluggish real estate market, said Ray Casas, spokesman for Red Bank, N.J.-based Hovnanian Enterprises, which acquired the assets of First Home in August 2005.”

“‘We will see ya all Monday morning for business as the ‘new normal,’ First Home president Fred Hermann told employees in an e-mail. ‘If asked by anyone…assure everyone we are not closing our doors…just ‘right sizing.’ Thank you for helping us all get through the day.’”

“The layoffs come as the low-end home sector, First Home’s specialty, is in dire straits in Lee County with a huge inventory of vacant houses caused by waves of speculation and failed loans.”

“There were 1,220 foreclosures filed in the county in September, 915 of them for single-family houses. That’s more than five times the 237 from a year earlier. Meanwhile, the number of building permits issued fell to 121 from 698 in the same time period.”

“‘It’s going to be like going through some quicksand for a couple years’ for low-end builders, said Naples-based real estate consultant Michael Timmerman.”

“The median price of a single-family home in Lee County has fallen to $231,600 in September, the latest month available, down 28 percent from an all-time high of $322,300 in December 2005, according to the Florida Association of Realtors.”

“Besides a slow market, First Home has been beset over the past year by numerous lawsuits by people alleging fraud in the terms under which they bought homes from the company with little money down, some of them through a program by real estate firm D’Alessandro & Woodyard, which brought in investors to purchase the houses.”

“Many of the purchasers refused or were unable to close on the houses when they were completed, often because falling prices had made the deals infeasible.”

“Norlarco Credit Union and Ann Arbor, Mich.-based Huron River Area Credit Union collapsed earlier this year, mainly because loans they made to build houses, many of them built by First Home in Lee County, ran into problems when property values plummeted. Both are being run by the National Credit Union Administration.”

The Miami Herald. “The saga of Nicky Hilton’s would-be South Beach hotel continues, with its bankrupt owners set to auction off the Ocean Drive property under court order.”

“After a failed condo conversion, the combined Breakwater and Edison property will be sold to the highest bidder under the supervision of a federal bankruptcy judge. Construction has stopped midway through completion of a rooftop penthouse, and a lawyer close to the case expects debts to far exceed what the hotel can command on the real estate market.”

“The bankruptcy-court auction marks a dramatic turn of events for a property that only a year ago won favorable mentions by David Letterman and from writers in People and Vanity Fair magazines.”

“‘It’s such an awesome piece of property,’ said Michael Ehrenstein, a lawyer for co-owner Jonas Mimoun. ‘But it’s been so thoroughly mismanaged.’”

“Hilton signed a licensing deal with developer Robert Falor to brand the two properties the Nicky O. She was promoted as the guiding force in designing the condo-hotel, and her tabloid cachet brought waves of publicity to the project.”

“But the partnership dissolved into litigation, just one in a string of disputes involving Falor’s once formidable portfolio of condo-hotel projects.”

“Construction stopped at the Breakwater and Edison this summer; Miami Beach declared the tarp-draped hotel abandoned on Sept. 17 and issued a stop-work order at the construction site.”

“Though construction crews have already done about $5 million in work converting the rooms into condominium units, broker Christian Charr expects a buyer would probably opt just to operate the property as a traditional hotel.”

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