The Housing Bubble

The Recordnet reports from California. “When Consuelo Magat bought a Mossdale Landing home in Lathrop three years ago, she had no idea she was buying into an area that would emerge as one of the hotbeds of foreclosure activity in California. Magat said she bought the Lathrop house for $636,000 as a residence but then had to buy a home in another area when it turned out that a daughter was unable to get into a nearby Catholic school.”

“Magat rented out the Lathrop house in April, she said, but was in mortgage trouble by June because she became unable to carry the monthly payments on two houses. Her lender was unsympathetic to her plight and declined to refinance because there was no equity in the house and its valuation was less than the loan balance, Magat said.”

“She wanted to sell the Lathrop house, she said, but in this slow market, ‘nobody wants to buy it.’”

“Nearly 3,000 households in San Joaquin County received a notice of default in the third quarter, DataQuick reported. That jumped by nearly 1,000 from the second quarter and represents a nearly 230 percent from 898 notices issued in the third quarter of last year.”

“There were 431 homes repossessed last month in San Joaquin County. There were, though, six other counties with greater repo totals for September: Los Angeles, 1,476; Riverside, 1,070; San Diego, 866; San Bernardino, 860; Sacramento, 721; and Contra Costa, 524.”

“Real-estate agent Dave Harmon (has) foreclosures now accounting for 80 percent of his listings, said that over the past six months, the number of foreclosures quadrupled and then doubled again.”

“There are plenty of investors who are willing to take a chance on the Central Valley again and count on the long-term upswing, he said, but many of the offers on foreclosure homes are ridiculous low-ball pitches.”

The Modesto Bee. “The region’s top real estate pros warned us a couple of years ago that home values in the Northern San Joaquin Valley were overinflated.”

“One of those who identified in early 2005 that the market was headed for a fall, Mike Zagaris, president of PMZ Real Estate in Modesto, said the current slide shouldn’t be a shock, given the market’s previous peak.”

“‘In our industry, you tend to pay to the extent to which you were rewarded,’ Zagaris said. ‘If you have a hot cycle at which you are increasing at double-digit rates, when the market turns, it tends to turn more dramatically.’”

“Zagaris said people got caught up in the easy credit terms, which created a spend-now, pay-later attitude. ‘So the availability of money to, in effect, take what was a historically conservative investment asset and convert it into an ATM that can be used for current expenses, has undermined the basic security that investment has had in the past for many people.’”

“One of the things driving the downward spiral these days is people’s attitudes. But don’t blame the messenger, that’s just an easy out; the numbers are the numbers.”

“For those who can’t lower the price enough to be competitive in today’s market, finding a way to hang on is critical. If all else fails, selling that sweet SUV, hot ski boat or radical motorcycle just might generate some needed revenue and reduce the debt load. There’s also the option of taking on a second job, putting the kids to work to help pay bills or renting out a room.”

“Right now it’s a buyer’s market, said Larry Matos, co-owner of Century 21 M&M and Associates of Modesto. ‘There’s an abundance of selection, prices continue to decline, sellers are willing to negotiate, and you can get a very favorable loan.’”

The Ventura County Star. “Citing slumping market conditions, a developer has abruptly halted construction of a 66-unit condominium development near what is known as Happy Face Hill in Simi Valley, city officials said Tuesday.”

“‘I know the council’s very concerned that they would stop at the point they’re at,’ said City Manager Mike Sedell.”

“At the site, on Kuehner Drive from the west side of Highway 118 to Mount Sinai Drive, trucks were spraying water to control dust Tuesday. Since the project is on the edge of the highway…it has high visibility in the community, Sedell said.”

“‘There are just so many questions that need to be asked,’ Williamson said. ‘My concern is that the city of Simi Valley and the residents aren’t left with a big mess over there.’”

“Encino-based Larwin Co. said it also is putting a separate condo development on hold in the city, Sedell said. The 12-unit condo project is further along in construction, city officials said.”

The Press Enterprise. “Inland Southern California’s consumers don’t seem panicked about declining home values and rising gas prices. But they say they’re being careful, and that could affect how much they spend in November and December.”

“Housing is an issue for Rich Thomas. He recently moved to Lake Elsinore from San Jose and hopes to buy a home. He has a potential buyer for his Bay Area home, but that buyer also needs to sell an existing home.”

“‘I try to take a Zen approach to this and not let things I can’t control bother me,’ said Thomas.”

“He’s said he is also concerned about the job market. As a sales representative for a company that makes building materials, he’s seen some industry-wide cutbacks. His own position seems safe, he added.”

“Sharon Way can’t help but notice that problem. She said there are ‘for sale’ signs all over her Corona neighborhood. ‘I know people who are trying to sell and can’t,’ Way said. ‘It’s a mess.’”

From KPBS. “The Index of Leading Economic Indicators for San Diego County fell 1 percent in September, the 17th decline in the past 18 months, a University of San Diego economist reported today.”

“According to Alan Gin, who compiles the index, the outlook for the local economy continues to be weak at least through the first half of next year.”

“Big drops in building permits, consumer confidence and help-wanted advertising along with an increase in the number of people who applied for unemployment insurance offset positive news, according to Gin.”

“The weak housing market continues to be the dominant strain on the local economy, according to Gin’s index.”

Inside Bay Area. “San Mateo County supervisors issued a call Tuesday for a three-month halt of foreclosure proceedings in the county, but industry experts say that’s unlikely to happen.”

“The county board of supervisors unanimously passed a resolution asking mortgage lenders to voluntarily suspend foreclosure activities.”

“Supervisor Rose Jacobs Gibson, who wrote the resolution, said residents who find themselves trapped by subprime mortgages should be able to reach out to lenders and renegotiate interest rates or the loan’s principal.”

“‘Subprime loans have turned the dreams of home ownership into nightmares,’ Jacobs Gibson said. ‘This three-month window will help people keep the dream of home ownership alive.’

“But real estate observers said lenders have shown no signs that they’re willing to suspend foreclosures, which have skyrocketed nationwide as consumers have found themselves unable to make rapidly increasing payments on adjustable-rate mortgages.”

“‘We can certainly tell (the resolution is) well-meaning, but I don’t know what kind of an effect it’s going to have,’ said Geoff Craighead, president of the San Mateo County Association of Realtors. ‘Another three months isn’t going to bail them out, because it’s just going to give them three more months of free rent.’”

“A report released last week by DataQuick Information Services found 155 homes in San Mateo County were foreclosed on during the third quarter this year compared to only 37 during that time frame last year.”

“Notices of default, issued if a borrower stops making payments, also jumped from 290 in third-quarter 2006 to 581 this year.” “One member of the community group ACORN, Estela Baldovinos, told the board she went from paying $2,700 a month at 6.5 percent interest in 2004 to facing a payment of $8,200 at 12.5 percent interest next month.”

“She is now four months behind on her payments but is trying to renegotiate the loan with her lender. ‘We can’t even concentrate on our personal lives,’ she said. ‘We have no vacations, no weekends, nothing.’”

KPVI reports from Idaho. “In Bonneville County in September, the number of offers to reduce a price in order to induce a sale tripled over the same month last year. The number that could prevent an overall record year in sales is the number of homes sold lately, in September and October, 189 this year, versus almost 100 more in 2006.”

“Jim Windmiller: ‘I don’t have the California and Nevada people buying many homes here anymore.’”

“And Californians and others were the ones buying homes of more than $300,000. Jim Windmiller: ‘Their market has come down a lot, so those people are not selling out, moving to Idaho and buying our bigger units.’”

The Gazette Times from Oregon. “Last August Lori DeBord sat down with a mortgage broker and stretched, taking out a subprime loan to buy her first home, a modest 1,200-square-foot condo in southeast Albany. The interest rate was high, 9.75 percent, but she figured she could swing the monthly payments.”

“It was a proud moment, but it didn’t last. First she lost her second job, then her son’s disability benefits. Now she’s six months behind on her mortgage payments and on the verge of losing her home to foreclosure. ‘I gave up,’ she said. ‘I just went, ‘I don’t have the money.’”

“Thousands of Oregonians have subprime mortgages, the kind that have been making bad-news headlines nationwide. In Oregon, subprime loans are 11 times more likely to be in foreclosure than prime rate loans, according to a recent study.”

“‘Oregon has actually fared better than many other states, and we believe it is in large part due to continued appreciation of home values in our state,’ said Berri Leslie, the mortgage lending program manager for the state Division of Finance & Corporate Securities.”

“But, she added, there are ‘pockets of concern’ in places such as Medford and Bend, where home prices shot up rapidly in recent years. In the mid-valley, the problem is worse in some places than in others.”

“‘It’s a little harder hit in Albany, Lebanon and Sweet Home, where incomes tend to be a little lower,’ said Tom Kosta, a senior loan officer with the Corvallis office of Meridian Mortgage.”

“Linn County, however, has 255 properties either in arrears, scheduled for auction or already foreclosed by the lender. Counselors at Willamette Neighborhood Housing Services say…they are getting more calls on the matter than they used to.”

“‘Most people don’t realize what they’re getting into until they’re at the closing table,’ said Ken Smith, homeownership program coordinator for the Corvallis-based nonprofit. ‘Yeah, people should know better. But people don’t.’”

“In Oregon, said Angela Martin of Our Oregon, there are roughly 40,000 families with ‘exploding ARM’ loans that will reset to a higher rate this year or next. ‘We’re looking at a large number of borrowers — who are about to face their first payment shock,’ she said.”

“‘A lot of folks went into this believing the person that was representing them to get a loan was representing their best interests,’ Martin said. ‘The market was going well. Homes were sold on the promise that, yeah, you can’t afford this now, but in a few years you’ll be able to refinance.’”

The Register Guard from Oregon. “Rather than selling the lots in his latest subdivision to builders, developer David Corey is looking to individual buyers to purchase the upscale home sites in Legacy Estates, south of the Mc­Kenzie River in the Hayden Bridge area of north Springfield.”

“‘Most of the time, developers sell lots in subdivisions like Legacy Estates to builders, but with the housing market the way it is now, too many builders have too much inventory, and they’re not looking for more,’ Corey said.”

“‘Most of the time, I’d be selling all 20 of these lots to builders — in fact, at one point I had all 20 reserved by three builders, but now only one of them’s still planning to go ahead,’ he said. ‘I’m prepared that things may move slowly over the winter and not pick up until spring, but that’s just the way it is.’”

“Meanwhile, the slower housing market notwithstanding, other developers in the Eugene-Springfield area also continue to bring new subdivisions to the market.”

The Seattle Times from Washington. “Puget Sound-area new-home developers, motivated by an increasingly soft real-estate market, are resorting to something they haven’t done in years. They’re enticing buyers with big TVs, motorcycles and other inducements.”

“Now there’s a four- to 13-month inventory in King and Snohomish counties of new houses, town houses and condominiums available, according to New Home Trends, a Bothell data-research firm. That’s spawned a goody-laden battle for buyers.”

“‘We got the mortgage flu, and got a few more homes on the books than we’d like to be carrying right now,’ confesses a local home builder who declined to be named because he’s prohibited from talking to the media. ‘There have been an awful lot of homes that came back to us’ after the initial buyers backed out.’”

“A Pierce County builder learned that when he tried to lure buyers to a $489,000 new house with a plasma-screen TV. There were no takers, so he lowered the price and threw in a new $23,000 Harley-Davidson motorcycle.”

“‘We didn’t get any bites, any low-ball offers, nothing,’ recounts real-estate agent Jeff Jensen.”

“‘As a first-time buyer in this market,’ says Brandon Smith, ‘not only would I expect an incentive to help pay closing costs, but I would also need to feel I wasn’t paying a price based on the real-estate frenzy of the last few years.’”

“That feeling caused Smith to cancel a recent deal on a new Everett condo. The developer offered a $7,000 buyer bonus, but Smith decided the asking price was too high.”

“‘Sure enough, just days after I backed out of the sale, the asking price of all units in the complex were dropped by 7 or 8 percent,’ Smith says.”

The News Tribune from Washington. “An ambitious deal between the City of Tacoma and a Seattle developer to create affordable housing for artists on a downtown parking lot site is crumbling.”

“The city has told Catapult Community Developers that it’s in default on its development agreement to create a 76-unit, 150,000-square-foot housing, retail and parking structure across Market Street from the Tacoma Municipal Building.”

“Catapult principal Michael Trower said the development company is discussing options with the city, including return of the land to city ownership. Trower said an oversupply of new housing units in downtown Tacoma, coupled with rapidly rising construction costs, put the project in deep freeze.”

“On the same block as the Art Lofts project, developers turned the former Tacoma YMCA into a condominium project and are selling units in the Roberson Condominiums next door. Nearby, the Walker Condominiums are also for sale.”

“Trower said Catapult caught the first wave of buyer interest with the other projects, but a surge in condominium and apartment construction, combined with a credit crunch, is slowing the market.” “‘There are some developers who are building now who wish they weren’t,’ Trower said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Defaults by U.S. homeowners with private mortgage insurance jumped by 22 percent last month after house prices fell the most in at least six years, an industry report said. The number of insured borrowers more than 60 days late on their payments climbed to 54,699 in September from 44,791 a year earlier, according to the Washington-based Mortgage Insurance Companies of America.”

“‘The speed and the depth of the deterioration we saw in the third quarter, and in particular the month of September, was greater than we had expected,’ said PMI CEO Stephen Smith in a conference call after reporting a net loss of $86.8 million.”

“Total U.S. losses, including money set aside for future claims, increased fivefold to $348.3 million in the third quarter, the Walnut Creek, California-based insurer said”

“‘Things are going from bad to worse,’ said Ajay Rajadhyaksha, head of fixed-income strategy in New York at Barclays Capital Inc. ‘Overleveraged borrowers are meeting falling home prices.’”

The Associated Press. “Mitsubishi UFJ Financial Group Inc. on Wednesday slashed the outlook for its net profit by 25 percent for the current fiscal year due to subprime-related losses and sluggish domestic lending business.”

“The banking group said estimated losses on investments, including some related to subprime loans, stood around 20 billion yen ($173.91 million) at the end of last month. Its write-down of investments with subprime loan components fiscal first half will be about 5.0 billion yen ($43.48 million), it said.”

From MarketWatch. “The Bank of Japan trimmed Wednesday its forecast for the Asian nation’s economic growth this year and slashed inflation estimates to zero, dashing hopes that Japan had won its long bout with deflation and raising doubts that its longest expansion since World War II is running out of steam.”

“‘The environment overseas has changed, and uncertainty over the global economy persists,’ media reports cited Bank of Japan Governor Toshihiko Fukui as saying at a Tokyo news conference.”

“Fukui also said global growth could be crimped by the ongoing problems gripping the U.S. mortgage market.”

The Sydney Morning Herald. “Borrowers in NSW marginal electorates are defaulting on ‘dramatically’ more loans than they did last year, indicating a rising tide of financial stress, credit check figures show.”

“The biggest increases in borrowers not being able to meet credit card, personal loan and mortgage payments are in drought-affected rural regions and the ‘mortgage belt’ in Sydney’s west.”

“In the federal seat of Calare in the central west, there were 77 per cent more defaults than last year, the figures, released by credit check company Veda Advantage yesterday, show.”

“‘This study demonstrates that a significant number of people living in regional NSW are struggling to repay the credit they owe - a rise in defaults of almost 60 per cent over the previous year indicates the situation is getting desperate for some,’ said general manager Erica Hughes.”

“Nick Collins, an independent London real estate broker who’s had record profits every year since 2003, took a hit in September, and that may be bad news for a U.K. economy built on a housing bubble.”

“Five of his 50 buyers pulled out of purchases, spooked by a run on mortgage lender Northern Rock Plc that left it 2 billion pounds ($4.1 billion) poorer.”

“‘It’s undermined people’s confidence,’ says Collins, who sells homes worth as much as 5 million pounds. ‘The market’s not as frothy and competitive as it was.’”

“Now, with mortgage lending cooling and house prices falling for the first time this year in September, the economy may be in the early stages of a slowdown. ‘U.K. house prices are significantly overvalued and extremely vulnerable to a correction,’ said Danny Gabay, a former Bank of England economist.”

“Consumers have spent some of these gains and loans on goods such as new kitchens and cars they otherwise couldn’t afford, said Alan Clarke, a London-based economist for BNP Paribas SA, France’s biggest bank. ‘The only thing that has been supporting consumer spending growth is wealth gains from house price inflation,’ Clarke says. ‘This is about to disappear.’”

“Gabay says so-called buy-to-let properties, which investors acquire for rental income, are more vulnerable to a fall in prices. The value of new buy-to-let mortgages soared more than 12-fold from 1999 to 2006 to 38.4 billion pounds, or 11 percent of new property loans, according to the Council of Mortgage Lenders.’

From Reuters. “Equity Residential, one of the largest U.S. apartment owners, on Tuesday reported weaker quarterly funds from operations…fell partly because of competition from single-family homes and condominiums for rent.”

“Some markets, such as Florida, Phoenix and Las Vegas, have seen many condominiums or single-family homes appear on the market as rentals, competing with traditional apartments.”

The Consumerist. “Foreclosure tracking firm RealtyTrac has been delivering lots of bad news this year, not least of which is some sobering numbers on Real Estate Owned properties or REOs.”

“And there have been a lot of them. 255,129, according to RealtyTrac’s records.”

“Just how many homes are we talking about? 255,129 is more housing units than the entire city of New Orleans. 255,129 is enough housing to hold about 790,900 people, according to the average family size reported in the 2000 U.S. Census.”

“If those 790,900 people formed a city, ‘Bank Repossessionville’ would be the 13th largest city in the U.S. Right in between Jacksonville, Florida and Indianapolis, Indiana.”

“The 13,674 houses owned by just one lender, Countrywide, are valued at 2,867,767,788.”

The Star Bulletin. “Three months ago, Central Pacific Financial Corp. assured investors it had no exposure to the subprime lending market. But what a difference a quarter makes.”

“The parent of Hawaii’s fourth-largest bank, Central Pacific Bank, said today that third-quarter net income plunged 55.8 percent after it took a $21.2 million provision for loan and lease losses due to a rapid downturn in California residential construction.”

“‘What happened is the national homebuilders took the strategy of just unloading inventory and they discounted it significantly from 10 to 30 percent, and many of our projects were located next to projects that national homebuilders have,’ said Clint Arnoldus, president and chief executive of Central Pacific. ‘All that happened in a very short time.’”

“Arnoldus said he had never seen a downturn occur so quickly. ‘In this case, it’s a rifle shot right into the housing industry because the other economic indicators in California are still relatively strong. What happened in this case is the market got overheated by the subprime mortgages that were created, and that came to a grinding halt. Then the national homebuilders dumped inventory,’ he said.”

“Home prices have further to drop as builders become increasingly concerned about turning over their inventory, former Federal Reserve Chairman Alan Greenspan said.”

“‘We’ve got this huge overhang of newly constructed homes … which are vacant and deteriorating,’ Greenspan told a financial services trade association. ‘You cannot keep a very large inventory of single homes for sale because their value declines. There is very considerable pressure for home builders to unload these on the market and they’re starting to do that.’”

“He said that housing prices will be key to whether the economy begins to contract and will be more of an influence than the turmoil in the credit markets.”

“‘It’s going to depend more on the issue of prices of homes than it will be on the resolution of what has been a fairly significant credit crunch,’ Greenspan said. ‘If we didn’t have the house price problem, we’d be well along on the way of getting out from under this.’”

“The former Fed chief indicated there was more pain coming, even after home prices in 10 major U.S cities showed a 5 percent year-over-year drop in single-family homes in August.”

“‘There is very little evidence that we’re making much progress because sales were falling almost as rapidly as new construction,’ Greenspan said.”

“A Federal Reserve interest rate cut this week won’t be enough to save the reeling housing sector, overwhelmed by unsold homes. ‘We think the more significant problem in the housing sector is the inventory. It’s not just the affordability of the credit, it’s even the access to the credit, which is a question today,’ says Nicolas Retsinas, director of the joint center for housing studies at Harvard University.”

“Order cancellations are escalating as lenders crack down after being burned by mounting defaults and foreclosures. ‘If mortgage rates go down, they still have to make it through the hurdle of credit quality,’ said Gregory Miller, chief economist at SunTrust Banks Inc.”

“‘Banks have been very scorched, very burned by the quality of, in particular, subprime ARMs,” or adjustable-rate mortgages made to borrowers with weak credit histories. “You could end up at that market-clearing, inventory-reducing price, but not be able to get financing. This one’s getting rough,’ he said.”

“The interest rate cut Wall Street believes will buffer the economy from housing market woes is unlikely to boost hard-hit banks and homebuilders much in the near term, analysts say.”

“‘The problems in the housing market, the problems in the credit markets are not easily solved by the Fed cutting rates,’ said Steve East, chief economist for investment bank Friedman Billings, Ramsey & Co.”

“Struggling homebuilders, such as D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc., are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower.”

“Lower interest rates are ‘certainly not the panacea’ for getting the housing market back on track, said UBS homebuilding analyst David Goldberg.”

“Jefferson Harralson, a banking analyst…who follows banks such as Bank of America Corp. and Wachovia Corp., said an acceleration in losses from defaults .seems to be a given, whether or not a rate cut occurs..”

“He says home equity lines of credit will be less likely to default if rates are lower. But that’s hardly a revenue cure for banks in an environment in which housing prices continue to fall and foreclosures continue to rise.”

“‘The home equity business isn’t going to be a growth business,’ Harralson said.”

The Washington Post. “Remember all those stories about how the nose dive in financial markets was the first big test for Federal Reserve Chairman Ben Bernanke, the academic economist who was still developing his feel for the interplay between the central bank and Wall Street?”

“Well, it turns out that was only a midterm. The final exam begins today, when Bernanke will either show that he is capable of standing up to the insatiable demands of Wall Street, or that he is so spooked by the prospect of being blamed (unfairly) for triggering a financial meltdown that he puts the short-term interests of big banks and investment houses before the long-term interests of the global economy.”

“Even if you believe, as some of us do, that the bursting of the housing and credit bubbles will eventually drag the economy into recession, there is little evidence that this is happening yet. And when the economy does begin to hit the wall, there is little the Fed will be able to do, or should do, to prevent it: It is part of the economy’s natural self-correcting process.”

“But what a rate cut surely would do is to encourage investors and bankers in their belief that the Fed is so desperate to avoid a credit crunch that it is willing to reinflate the bubbles and keep the party going anyway it can.”

The Montgomery Advertiser reports from Alabama. “There may be more houses on the Montgomery market than at any time in its history, and this glut of homes has led to the average price of existing homes in the area dropping about $20,000 in the past two months. The 3,629 homes on the Montgomery market was by far the highest number since the University of Alabama began its tracking of them in 2000.”

“Despite the large number of homes on the market, just 369 of them sold. The number of homes on the market is about twice what it was 18 months ago, and the monthly sales total from last month was the area’s lowest since January 2005.”

“That soft market pushed the average price of an existing home in Montgomery down to $156,418. It was $176,368 in August and $163,661 in September 2006.”

“Real estate veterans, they said, will recognize the current trend as part of a long-term cycle. Taylor Jernigan, president of the Montgomery Area Association of Realtors, said it was just the nature of the market. ‘I think all of it is cyclical,’ he said. ‘We have had five record years in a row, so certainly there is going to be a correction in the market.’”

From Online Athens in Georgia. “Owners of some units in the Georgia Traditions, a high-rise luxury condominium complex on the east end of downtown Athens, began using their condos recently, and the nine-story residential building should be completely ready for occupancy by the middle of November, the developer said.”

“Three more condominiums at 412 Thomas must be sold before financing will become available for construction, said Judy McDonald, a real estate agent.”

“The luxury condos, priced between $250,000 for the smaller units to $850,000 for the largest, were marketed to wealthy people with ties to the University of Georgia and the UGA Athletic Association, said Mark Jennings, the developer.”

“So far residential sales have not been robust, but once the buildings start rising, more interest should come, said Mike Travis with the Atlanta company developing the project.. ‘Most people are kind of waiting until we get out of the ground,’ Travis said.”

“Regarding the high prices on these downtown condominiums, the location dictates the market, said Barbara Dooley, the real estate agent overseeing sales of the Georgia Traditions condominiums. ‘They’re only pricey because of the location and convenience and everything else we’re offering,’ Dooley said. ‘A place like this in Atlanta you couldn’t touch for what we’re selling them for.’”

“For a project tied with UGA sports, winning seasons also help, Dooley added. ‘This market depends on Georgia football,’ Dooley said. ‘They need to keep winning so we can sell these.’”

The Herald Tribune from Florida. “As condo owners across the state bemoan a downward slide in values, an unusual situation is taking place at the Bermuda on Osprey condominium complex near downtown Sarasota.”

“A group of Californians — two of whom were arrested in March on charges of running a brothel in the Anaheim area — have been snapping up units at prices that are hundreds of thousands of dollars higher than those paid during the boom.”

“The buyers say they will convert the 46-unit complex into a senior-living center complete with a luxurious clubhouse, communal dining room and limo service. They believe the high prices they are paying are justified by all the improvements they plan for the flesh-colored, two-story walk-up built in 1969.”

“Since November, group members have paid an average of $566,667 each, for 15 of the units, and they have received an average of $480,000 per unit, in loans from a variety of lenders, Sarasota County Clerk of Court records show.”

“But the owners of the complex say they have received only about $300,000 for each unit, explaining that the remaining $250,000 or so from each sale has been placed in an ‘amenity fund’ controlled by the buyers to be used for future improvements.”

“Local appraisers, real estate experts and community leaders say they have never seen deals in which banks are willing to lend more than 50 percent of a condo’s purchase price on the promise that the extra cash will be placed in an amenity fund.”

“‘These are the kinds of deals that ruined the market in the first place,’ said Kerry Kirschner, executive director of a business-centered public watchdog group. ‘They are phony transactions that artificially inflate the value of property and lead to the fact that people are having to pay higher taxes.’”

“Dennis Black, a Port Charlotte appraiser instructor, agreed: ‘No one in this market is doing deals in which 50 percent of the purchase price is given back to buyers and placed in some sort of amenity fund. Speaking as a person with 25 years’ experience, this stinks like a five-day-old fish.’”

“Neither the buyers nor the sellers seem to know where that amenity fund is. Bryan Bond, whose Newport Beach, Calif., mortgage company made seven loans totaling $2.7 million, was so concerned about the amenity fund that he promptly canceled an eighth loan his firm had been processing.”

“After reviewing the HUD statements, Bond acknowledged that they contained a line item about amenity fund payments, but he said he did not know what an amenity fund was. ‘I’ve never heard of one.’”

“Appraiser…Terrie Moore in Brandon, said she was initially squeamish about appraising the Bermuda units when she saw that other appraisers were coming in with values of $700,000 to $900,000 per unit.”

“‘Other appraisers were trying to appraise the units as if some sort of exclusive club existed,’ Moore said. Moore said she insisted on appraising the units on an ‘as is’ basis, and ultimately presented a value of $525,000 for one. Critics say that number is still way too high.”

“‘When they told me about the prices being paid there, I was taken aback,’ said Richard Dear, a Siesta Key hotelier and real estate developer familiar with the Bermuda on Osprey project. ‘I don’t think the units are worth more than $400,000.’”

“Buyers who purchased units before the Californians got involved at Bermuda agree. ‘The market dropped after we purchased,’ said Dona Norton, who paid $359,857 for a unit in May 2006. ‘We took a loss on our investment. Everyone did.’”

“‘If Coldwell Banker sells one unit for $300,000, we’re dead,’ said Christopher Woods, brother-in-law of the leader of the California buyers group. ‘All our units would lose value.’”

The Tampa Bay Business Journal from Florida. “Prices of existing family homes continue to slide nationally and especially in the Tampa area where prices are down 10.1 percent over the previous year, according to a new report from Standard & Poor’s S&P/Case-Shiller Home Price Indices.”

“Prices of existing family homes continue to slide nationally and especially in the Tampa area where prices are down 10.1 percent over the previous year, according to a new report from Standard & Poor’s S&P/Case-Shiller Home Price Indices.”

The Tampa Tribune. “A federal judge has granted Tampa-based SimDag LLC up to 65 more days to respond to a lawsuit Donald Trump filed in May seeking to terminate his licensing agreement with the developer. The agreement allows the developer to market the building as a Trump property.”

“That comes a week after SimDag representatives told a group of 80 buyers it hopes to secure financing from an unidentified New York hedge fund by early January. The order is the latest twist for a developer that refuses to give up on its dream to build the 52-story waterfront tower in downtown Tampa despite financing problems, construction liens and lawsuits from buyers wanting their money back.”

“Florida’s housing funk already has battered the state’s single-family home and condo markets. Now, signs are appearing that the once-hot ‘rackaminium’ industry - basically condominiums for boats - is beginning to feel the heat.”

“Sales at Tampa Harbour Yacht Club in South Tampa, which might be the area’s highest-profile rackaminium project, are 50 percent behind schedule, said project developer Steeven Knight.”

“Meanwhile, Kirby Cay Scheimann, a managing director of Marinas International, which owns and manages marinas nationwide, said some of the momentum in the entire rackaminium industry has been lost, as banks tighten their lending practices and some investors put their money elsewhere.”

“‘There are some site-specific locations where rackaminiums work, but it’s no where near the broad-based appeal people thought it would be,’ said Scheimann, whose company owns Harborage Marina in downtown St. Petersburg.”

“In recent years, dozens of marinas across the state have stopped renting boat slips to boaters and began selling slips instead. Knight said the sluggish real estate market is creating challenges for rackaminium and dockominium projects. The slips don’t come cheap, running from $125,000 to $600,000.”

“But Knight is marketing the yacht club as part of a prestigious boating lifestyle, instead of just a place to store boats.”

“So far, he has sold 114 dry rackaminiums and one wet dockominium, which is about half of what he had expected to sell by this time, Knight said. To save on expenses, he has cut some of his in-house sales staff and outsourced sales to a local real estate firm.”

“For now, the slumping real estate market is giving potential rackaminium buyers the jitters and causing them to hold off on purchases, Knight said.”

“Overall, the industry faces new challenges, such as tighter lending standards by banks. Also, the industry had been counting on purchases by investors, who were betting the slips would continue to rise in value.”

“However, ‘the investors aren’t there like they were before,’ Scheimann said.”

Here is the Clear Channel Radio program I did this past weekend. Right click / save link to disk. Save the audio to your hard drive. Only takes 45 seconds.

Please post off-topic ideas, links and Craigslist finds here.