The Housing Bubble

It’s Friday desk clearing time for this blogger. “Southern Utah homebuyers and sellers may both breathe a sigh of relief as a steady flow of houses are being listed and sold, said Vardell Curtis, CEO for the Washington County Board of Realtors. Curtis said buyers are listing homes for lower prices than before. ‘If you are not a motivated seller, it will seem like everything has come to a halt,’ Curtis said. ‘If your home is overpriced, absolutely, it won’t sell. It’s not 2005 anymore.’”

“The sky is not falling, Chicken Little. But home sales are. And while it’s not the end of the world, the housing industry has caused a lot of pain to the economy. According to an August report from the Arkansas Realtors Association, only eight of the ARA reporting 37 counties have sold more homes this year than in 2006.”

“The most time a house priced at more than $350,000 has been on the current market in Fort Smith is two years and three months. That house, located at 1900 Wheaton Trace, is priced at $895,000, has 6,400-square-feet, four bedrooms, four baths and two half-baths. Two others have been listed since the end of 2005, and nine have been on the market since 2006.”

“There’s a 22.5-month supply of homes priced at more than $350,000 on the market. ‘I think we’re going to see some surplus in these higher-end homes the further we go along,’ said broker Mont Sagely in Fort Smith.”

“Home resales on the Big Island and Kaua’i last month trailed year-ago levels by 24 percent to 56 percent, as Hawai’i’s residential real estate market continued to soften.”

“Kaua’i single-family home sales suffered the biggest decline, at 56 percent, according to Hawai’i Information Service.”

“According to a real estate consultancy, the real estate markets in Hanoi, HCM City, Da Nang, Binh Duong and Ba Ria-Vung Tau have seen the fastest development recently. In 2007, real estate prices have been dramatically increasing, especially in the last months of the year.”

“Though the demand for buying houses is increasing, VietRees said that it was not because of the increased demand for accommodation. It said that 60% of buyers bought houses and apartments to resell to make profit. The market in 2008 is believed will witness further increases in real estate prices.”

“Peak season for the property market in Shenzhen, the southern city neighboring Hong Kong is usually in the autumn months of September and October. But this year the number of transactions dropped sharply over that period, as banks tighten credit and the local government prepares to issue a new policy trying to curb rising prices.”

“Daily transactions from October 1 to 9 plunged almost 80 percent from September, according to the housing management authority. ‘Micro-control policies have begun working to cool down the overheated real estate market in Shenzhen,’ said Wang Feng, director of the Shenzhen Real Estate Research Center. ‘Both investors and homebuyers are taking a wait-and-see approach, and that’s creating a stagnant market,’ he said.”

“Home owners in Sydney’s south and west are paying more for less after eight interest rate rises and a drop in house values of up to 15 per cent since the end of the property boom in 2003. As median house prices in the Fairfield and Liverpool region fell by more than $60,000, the total 2 per cent rate rise added $5472 a year to repayments on a typical $350,000 mortgage.”

“In Canterbury-Bankstown values have fallen by 8.8 per cent, at an average $47,000, over the past four years while in Gosford-Wyong homeowners have lost an average $24,000, a drop of 6 per cent.”

“‘Prices overshot the market during growth between 2000 and the end of 2003 and many of the buyers in this market overstretched themselves, taking advantage of easy finance,’ said RP Data research director Tim Lawless.”

“Two union-affiliated pension groups critical of embattled Countrywide Financial Corp have demanded that Harley Snyder resign as lead director. CtW wants CEO Angelo Mozilo to resign, and AFSCME wants him to step down as chairman. Both groups said directors are also overpaid, and AFSCME demanded the resignations of Robert Donato and Oscar Robertson, the other compensation committee members.”

“‘Your excessive compensation, together with your aggressive divestment of your own Countrywide stock at the peak of the housing bubble, militates powerfully against any inclination you might have to lead your fellow independent directors or hold Mr. Mozilo accountable,’ CtW Executive Director William Patterson wrote in a November 7 letter to Snyder.”

“Some cause-and-effect riddles are easy to answer, like ‘which came first, the chicken or the egg?’ Other riddles are tougher, like ‘which came first, a social problem or the media’s yapping about it?’”

“Take for example the problem of housing prices. For several years, especially since the popping of the dot-com bubble, housing has grown steadily more expensive at a rate higher than inflation. That’s been the case throughout the country, and Connecticut’s no exception. But now, after a decade of increases, home prices — and sales — have stalled.”

“Which brings us back to that tough-to-answer riddle. ‘The media’s saying nationally, prices are dropping,’ Evan Berman, a Realtor in West Hartford, said to explain the current slump. ‘Buyers are coming in with lower prices because the media says [the market's] bad.’”

“Sorry. Actually, this particular member of the media hasn’t said much about the housing market one way or the other. But Ben Jones surely has. He says that housing prices are in a bubble unsustained by basic market fundamentals.”

“‘Homes historically haven’t been more than 120 times [monthly] rent,’ Jones said in a phone interview with the Advocate. ‘If you’re paying 1,000 dollars in rent, you shouldn’t be paying more than 120 [or] 125 thousand for a house.’”

“When times get tough, everyone looks for someone to blame, and for the housing industry, the glut of unsold homes must be the media’s fault. Officials from the National Association of Realtors and Realogy (the nation’s largest broker) have suggested that things would be just fine if not for the nattering nabobs of negativism in the media.”

“Intriguingly enough, we never hear Wall Street types blame the media for bear markets, and we don’t hear Wayne Huizenga blaming the media for the Dolphins’ dismal season. But somehow, falling home prices are always the media’s fault.”

“Everyone knows that the business cycle hasn’t been repealed, and so another recession is inevitable. Some indicators suggest that it might be sooner rather than later.”

“Economist Richard Berner of Morgan Stanley notes that sales of new and existing homes have dropped 42 percent and 30 percent, respectively, from their peaks of more than two years ago. As supplies of unsold homes grow, real estate prices continue to fall. One index finds that prices in August were down 4.4 percent nationally from a year earlier.”

“Recessions have often-overlooked benefits. They dampen inflation. Similarly, recessions punish reckless financial speculation and poor corporate investments. These disciplining effects contribute to the economy’s long-term strength.”

“In the 1960s and 1970s, the Fed followed easy-credit policies on the belief that government could end recessions and constantly keep the economy close to ‘full employment.’ The bad behavior thus encouraged was inflationary wage and price increases by firms and workers relieved of the fear of recession.”

“The experiment boomeranged: Double-digit inflation ensued along with the savage 1973-75 and 1981-82 recessions (peak unemployment: 9 percent, 10.8 percent). The real ‘moral hazard’ problem today is not starting down that path again.”

“In response to your editorial on the pending mortgage reform, I say oh, bosh.”

“Lenders recklessly wrote mortgages on houses at above their sustainable price, taking advantage of capital fleeing the dot-com bust and fueling a price bubble. Reality is now reasserting itself.”

“If community lending laws were to blame, the problem would have arisen in the 1980s and 1990s as well. It didn’t. And mortgage failures would be confined to the sort of houses the poor live in. They aren’t.”

“Granted, federal action will probably make things worse, and for the wrong people, but that’s the government for you. That doesn’t change the fact that lenders were greedy, shortsighted and reckless and did fail their fiduciary duty to borrowers.”

The San Mateo County Times reports from California. “Sales of single-family homes in San Mateo County plummeted in October, falling 32 percent as the housing slump deepened on the Peninsula, according to a new report. Median prices slipped by 10 percent or more compared to October 2006 in many working-class neighborhoods of the North County cities and East Palo Alto.”

“For example, the median price fell 14 percent in Daly City to $639,000. It dropped more than 20 percent to $475,000 in East Palo Alto and dipped 10 percent to $687,500 in San Bruno.”

“‘Homes have to be priced right, or they’re not going to sell,’ said John Gieseker, real estate broker in San Bruno. ‘We don’t see sales picking up anytime soon.’”

The Sacramento Bee. “On a perfect Saturday in June the lemonade flowed, cookies abounded and cheerful crowds flowed through Pardee Homes’ eight model homes in Natomas. It was a memorable opening day in Natomas for a Los Angeles builder launching the first of its 660 houses near downtown.”

“Now, just five months later, Pardee has closed the project. Building crews have been laid off and deals made with only four buyers canceled. Three other regional builders have done the same in recent weeks.”

“For companies like Pardee that arrived at the height of the boom, bought land at inflated 2004 prices and started sales in a slumping market, it’s especially tough. ‘We have the eight models and poured eight foundations,’ said David Ragland, chief of Pardee’s Sacramento division. ‘Sales were slow, and we never started any houses.’”

“‘Pricing has continued to erode through specials and incentives,’ said Ragland. ‘It probably makes more sense to wait while KB Home, K. Hovnanian and Lennar slug it out” in Natomas.’”

“Milwaukee-based Homes by Towne also has mothballed its 145-home project in Natomas called Sky Park at Natomas Field and a 50-home project in Elk Grove called Spring Gardens. The builder has stopped construction at its 227-home Yuba County project called River Landing at Plumas Lakes.”

“Rocklin-based Nouveau Homes has taken similar action with a 51-home project in Lincoln called Crystalwood. ‘They can’t compete with the likes of the public builders out there who are slashing prices and taking whatever losses they need to hit their corporate numbers,’ said Ron Mancuso, with the Sacramento-based Advantage Group, which markets Crystalwood for Nouveau.”

“For KB Home, one of the nation’s largest home builders, the plan is simple. ‘The strongest and most capable operators are going to be the ones left at the end of the day,’ said the Sacramento territory president, Barry Grant. ‘As public home builders we’ve shown a willingness to sharpen our pencils. It’s unfortunate that it’s to the demise of smaller builders.’”

“‘All these builders, they aren’t making any money on any of these homes,’ said Kathryn Boyce, analyst for Hanley Wood Market Intelligence. ‘They’re losing money on all the homes they’re selling right now.’”

“Ironically, Boyce said, it’s the aggressive price cuts and deals that builders are using to woo buyers that are making more buyers leery. She said many fear their houses will be worth less a week after they unpack.”

The Modesto Bee. “It’s been a tough year for builders, and those who attended Thursday’s Central California Housing Summit heard little cheery news about the near future.”

“New-home sales have plummeted 62 percent in Stanislaus, San Joaquin and Merced counties since their 2004 peak, said Rick Baldonado, regional director of Hanley Wood Market Intelligence. He said sales in the region’s 248 subdivisions are so slow that, at the current pace, it would take nearly four years to fill all the empty lots.”

“This fall, subdivisions on average have been selling only one home per month, compared with about six per month in 2005. What’s worse, Baldonado said, is that more than 650 finished new homes are sitting vacant, waiting for buyers.”

“He asked audience members to tell him when they thought the market would turn around, and the majority there predicted 2010.”

“To increase sales, the speakers agreed homes need to cost less.”

“‘Improved lot prices got up so ridiculously high that the only way you could make it work was to build McMansions,’ said Alan Nevin, the California Building Industry Association’s chief economist. Such homes, however, were too expensive for most Northern San Joaquin Valley residents.”

“Nevin predicted that empty lots in many large-home subdivisions will be sold at significantly reduced prices to other builders, who then may be able to build houses priced below $250,000. ‘There’s a whole new wave of people sitting waiting to buy…homes that are smaller and cost less,’ Nevin said.”

The Daily Press. “Assessor Bill Postmus said San Bernardino County is seeing between 30 to 40 foreclosures a day. About 77,000 homes in California have started the foreclosure process and half of those are in the Inland Empire, the assessor said.”

“Postmus said in conversations in his office his professional staff expects the current housing slump to continue and likely to end up being one of the worst in recent years.”

“Housing prices have dropped almost 20 percent in the past year.”

The Press Enterprise. “Due to slowing enrollment, more middle school-aged students will attend Lisa J. Mails Elementary next year. Murrieta, like many other districts in the Inland area and throughout California, is feeling the financial effects of a slowing housing market.”

“‘We have a significant amount of people who are upside down in mortgages and have left our area,’ said Chuck Jones, facilities planning director for the district.”

“For many years, Murrieta showed strong and steady growth. ‘Then all of a sudden, bam. Everything stopped,’ said Stacy Coleman, assistant superintendent of business services. ‘It’s very dramatic.’”

The Associated Press. “Residential homebuilder Dunmore Homes Inc. filed for Chapter 11 protection in New York, the latest victim of the faltering U.S. housing market.”

“The privately owned builder, based Granite Bay, Calif., near Sacramento, listed assets and debts each of more than $100 million in its bankruptcy petition filed Thursday with the U.S. Bankruptcy Court in Manhattan.”

“Dunmore Homes, founded in 1953, built more than 22,000 homes throughout California and Nevada.”

“Michael A. Kane of Granite Bay, the sole owner of Dunmore, according to the bankruptcy filing, said in court papers that the Chapter 11 filing was in the ‘best interests’ of the company, its employees and its creditors.”

The Press Democrat. “Christopherson Homes is selling its Santa Rosa headquarters and has laid off a third of its work force in recent months as Sonoma County’s largest home builder struggles to downsize its business in the face of the stagnant housing market.”

“The company has shed 35 percent of its workforce since the summer, cut its Roseville operations and recently put its Santa Rosa headquarters on the market for $5.4 million.”

“The company that two years ago employed 204 people now has just 47, a 77 percent reduction in staff.”

“‘Obviously, we didn’t have a crystal ball, and no one would have had any idea that this would turn into the circus that it has,’ said said Brenda Christopherson, who founded the company with her husband, Keith.”

“‘The housing industry right now is just really on its knees,’ said Charlie Carson, executive director of the Home Builders Association of Northern California.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Fannie Mae, the biggest source of money for U.S. home loans, reported that its third-quarter loss doubled and said credit costs will increase as the housing slump deepens. The net loss of $1.39 billion, or $1.56 a share, was caused by a $2.24 billion decline in the value of derivatives contracts used to protect against defaults linked to its $723.2 billion of home-loan and mortgage-bond holdings, the Washington-based company said today.”

“CEO Daniel Mudd said the housing market will worsen. Fannie Mae confronts ‘one of the most challenging mortgage and housing markets in recent history,’ Mudd said. The company ‘is not immune to the challenges facing the mortgage markets.’”

“Credit losses this year have risen to as much as 6 basis points from about 2 basis points, Mudd said in a Sept. 27 interview. Fannie Mae, which owns or guarantees about 20 percent of the nation’s $11.5 trillion residential mortgage market.”

The Associated Press. “The results also marked a significant milestone for Fannie Mae: They brought the company current in its financial reporting for the first time since 2004, when a massive accounting crisis tarnished its reputation and swept the top executives from office.”

“New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual.”

“The subpoenas also seek to find out how the government-sponsored companies handle appraisals. ‘If true, the appraisal practices described in the complaint would violate Fannie Mae’s requirements for loans we purchase from lenders or securitizers,’ said Brian Faith of Fannie Mae.”

“Fannie Mae and Freddie Mac were created by Congress to make home ownership affordable for low- and middle-income people.”

From CNBC. “At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE’s are allowed to purchase (the limit now stands at $437,000).”

“Bernanke replied simply, ‘A million.’”

“So when did a million-dollar home become low, moderate, or even God-forbid middle income?? According to the National Association of Realtors, the median price of a home is around $220,000, and I know I don’t have to explain the meaning of median to an economist, but come on!”

“Apparently Mr. Bernanke thinks that instead of letting the housing market correct itself, that we should just take one of the most trusted types of lending institutions out there and let them play with the big boys and their big bad mortgage backed securities.”

“Never mind that the market went completely haywire during the recent housing boom, and was fed by often negligent mortgage products, and that perhaps the focus should be on bringing affordability back at least into the nearest stratosphere.”

“Have we learned nothing these past few months?”

“In a letter to Cuomo, sent today, Office of Federal Housing Enterprise Oversight Director James Lockhart said Fannie and Freddie should not have to stop these purchases from Washington Mutual, ‘which you have not charged or subpoenaed, unless certain conditions stipulated by you are met.’”

“Lockhart also said Fannie and Freddie both retain the credit risk of the mortgages it buys and securitizes, unlike private label issuers of mortgage-backed securities. ‘Consequently, they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals,’ Lockhart wrote.”

“Wachovia Corp., the second-largest regional bank, said mortgage-related losses total $1.7 billion so far this quarter, more than the lender reported for the previous three months.”

“The value of the bank’s holdings have continued declining in November, with all asset classes ‘extraordinarily volatile,’ the company said in a filing with the U.S. SEC.”

“The weakening markets, which Wachovia estimates could get worse over the last two months of the quarter, cut the value of the bank’s CDO holdings by more than 60 percent. As of Sept. 30, Wachovia had $1.8 billion in CDO exposure; after the writedowns, the exposure is now $676 million.”

“Wachovia has an additional $2.1 billion of exposure to more traditional subprime mortgage-backed bonds. The value of those holdings remained steady in October as hedging strategies offset losses.”

From Forbes. “Germany’s Allianz, Europe’s largest insurer reported heavy subprime losses at its subsidiary Dresdner Bank. The company said that that the credit market turmoil had a 575 million euro ($846.1 million) negative impact, including 350 million euros ($515.1 million) in adjustments to the valuation of asset-backed securities.”

“‘If the market turbulence continues we cannot rule out further write downs or the necessity to draw on liquidity facilities,’ said the company.”

From CBC News. “Canadian Imperial Bank of Commerce said Friday it expects to take a charge of $463 million in the fourth quarter related to exposure to the U.S. subprime mortgage market. In mid-August, CIBC said it had about $1.7 billion US in the troubled U.S. mortgage market — as much as $1 billion of it relating to subprime mortgages.”

“Standard & Poor’s said Thursday that a collateralized debt obligation, or CDO, managed by State Street Corp. began liquidating its assets, prompting the ratings firm to slash the investment vehicle’s credit grades as much as 18 levels.”

“Carina was originally a $1.5-billion CDO issued in September 2006, according to data compiled by Bloomberg News. Senior note holders of the CDO decided to liquidate, S&P said. The firm didn’t identify the senior investors.”

“The securities will be sold at ‘what will most assuredly be depressed prices,’ S&P said.”

“More than $350 billion of CDOs comprising asset-backed securities might become ‘distressed’ because of credit-rating downgrades, Morgan Stanley said in a report Thursday.”

“Country Garden Holdings Co. and South Korea’s Hyundai Capital Services Inc. were among six global borrowers that delayed at least $3.5 billion in sales of U.S. corporate bonds in the last two days.”

“Country Garden, China’s most profitable builder, failed to attract investors for its proposed sale of $1.5 billion in notes even after offering yields of as much as 10%, according to people familiar with the deal, who declined to be identified because no announcement had been made.”

The Wall Street Journal. “Investors are fast losing confidence that bond insurers, who provide a financial anchor for roughly a trillion dollars in debt, will weather the credit-market storm.”

“Rising defaults on subprime mortgages and downgrades to bonds’ credit ratings are intensifying the fear that insurers of mortgage-related securities will be hit. Bond insurers agree to cover interest and principal payments in the event of default.”

“Analysts and investors expressed frustration with what they feel is a lack of detail about the complex securities known as collateralized debt obligations, or CDOs, that Financial Group Inc. insures. ‘They won’t tell you what deals they own,’ said Ann Rutledge, a principal at a structured-credit consulting company. ‘It’s the granular information that matters.’”

“Historically, Ambac and other bond insurers have been a conservative bunch. Like many on Wall Street, however, bond insurers got caught up in the mortgage frenzy and strayed from their roots.”

“Ambac insured $29 billion of CDOs backed by subprime mortgages, the most among U.S. guarantors, according to J.P. Morgan research, which expects the company to take a loss of $4.4 billion on that exposure.”

“According to Fitch Ratings, guarantors have written insurance on more than $80 billion of CDOs that pooled subprime-mortgage bonds.”

“‘They did it very aggressively, and a lot of it was underwritten in the last few years’ when loan underwriting standards were poor, said Thomas Abruzzo, a managing director at the ratings company.”

The Street.com. “Real estate vulture funds are scouring the U.S. for distressed housing developments and land sites being sold at cheap prices by homebuilders looking to clean up their balance sheets.”

“‘The market changed in the last 90 days,’ says Rich Knowland, a partner with a Seal Beach, Calif.-based fund that is looking for land opportunities on the West Coast. Distressed opportunities are starting to emerge in California and other overheated housing markets.”

“They’re seeing profit in buying the housing sites today –many of which are selling at 50% or greater below their peak 2005 values — with the aim of flipping them or selling homes at the projects in two years or more.”

“Today, finished home sites and raw land are now being sold by homebuilders for 50% to 75% discounts off peak 2005 values in the formerly hot regions, says John Peshkin, CEO of Starwood Land Ventures. For urban markets, prices have generally dropped about 25% in these states; the peripheral areas may have had 80% to 90% declines.”

“In some peripheral areas, sellers can’t even catch bids on communities under development and raw land, he says. ‘We’re not seeing too much competition. Everyone is getting ready and is afraid to catch a falling knife,’ Peshkin says.”

“‘We see in certain situations where that is loosening up, not by choice. Many deals have debt. Prices have to go down to be moved,’ says Knowland, who joined Pacific Terra earlier this year after leaving his post as regional VP of Lennar’s Orange County, Calif., division.”

The Courier Times. “Toll Brothers’ homebuilding revenue fell 36 percent in the fourth quarter, and its cancellation rate on new home contracts rose as the housing market slump continued. Robert Toll, CEO of the Horsham-based luxury homebuilder, said October was a slower month than September.”

“Cancellations for the quarter totaled 417 homes, or 38.9 percent, compared to 23.8 percent in the third-quarter of the year and 36.7 percent in the fourth quarter 2006.”

“‘We do think this is worse than it was in ‘88,’ the last time the market slumped, Toll said.”

The New York Times. “The housing market is horrible in most parts of the country, says the chief executive of the luxury home builder Toll Brothers, and he fears it will not get better until the newspapers stop saying how bad it is.”

“Toll Brothers, which has operations in 22 states, said yesterday that it expected to take a write-down of $250 million to $450 million because of declining land values when it reports results for the quarter that ended Oct. 31.”

“Robert I. Toll, the CEO, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla.”

“‘The fact that I differentiate between F, F-minus and F-minus-minus’ shows just how bad things are, he told analysts during a conference call. He said those grades ‘go from miserable to outright purgatory.’”

“The company said many of the canceled home purchases were for its more expensive homes. The average price of new orders in the quarter was $646,000, but the average price of canceled orders was $788,000.”

“He said a survey of Toll customers who canceled contracts showed that only 11 percent reported trouble getting mortgages. More either had personal financial problems or were unable to sell the homes they already owned. ‘People who just wanted to walk’ accounted for 17 percent of the cancellations, he said.”

“‘Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,’ he said.”

The Ellsworth American reports from Maine. “The state’s consumer credit office says it already is receiving almost daily phone calls from Mainers who can’t repay their loans. ‘We know there’s a problem because of the phone calls we are getting nearly every day from consumers who are unable to make their mortgage payments,’ said Will Lund, head of the Office of Consumer Credit Protection.”

“Lund said his office initially underestimated the problem. ‘There was a perception that Mainers would be conservative and would only opt for fixed-rate loans, and Maine lenders were conservative and would only offer loans Mainers could afford,’ Lund said. ‘That perception turned out to be myth.’”

“Mainers had a higher percentage of subprime loans for cash-out refinancing than any other state in the country from 2004 through May of 2005, according to a report done in 2006 by Coastal Enterprise Inc. in Wiscasset.”

“And the subprime market just continued to grow through 2005 and 2006.”

The Boston Herald from Massachusetts. “Desperate homeowners trying to unload properties face a new obstacle: appraisers who are increasingly coming in with lower-than-expected estimates of home values.”

“David Reznikow, a mortgage planner in Boston’s South End, said he’s had two sales deals nixed at the last minute due to appraisals that came in lower than anticipated. He said some appraisals are coming in 20 percent below what sellers thought their homes were worth.”

USA Today reports on Massachusetts. “Foreclosures and pre-foreclosure sales are weighing down the real estate market in Worcester, Mass. ‘About 20% of the sales we’re doing are short sales,’ says broker David Shortsleeve.”

“He estimates that lenders are accepting losses of about 10%, on average, in the short sales. Worst hit are buyers who bought homes in the past three years with little or no money down. ‘There is no room for error,’ he says.”

The Providence Journal from Rhode Island. “Rhode Island’s housing market showed signs of quickening deterioration during the third quarter as single-family house prices dipped, sales sank and selling time lengthened.”

“Patrick Newport, a housing economist at Global Insight, said that nationwide house prices are ’starting to drop at faster rates,’ especially in areas that have been hard hit by foreclosures on risky, or ’subprime,’ mortgages.”

“‘It’s a bigger problem in Rhode Island … than in other New England states,’ Newport said. ‘Houses [are] going into foreclosure in a market already saturated with unsold homes … so you’re probably going to have steeper price declines coming up.’”

The Connecticut Post. “This is Monday in foreclosure court, and confusion, shame and heartbreak chase around the faces of debtors. Such was the case with Javier and Denise Ramirez.”

“Denise Ramirez said they moved into a single-family house in Bridgeport in December 2005. Their monthly mortgage payment was $1,789, she said. She had a mortgage with a fixed two-year introductory rate that would then reset to an adjustable rate.”

“Many first-time homebuyers,, and people with less-than-perfect credit, called subprime borrowers, took out these loans after being told they would be able to refinance before the reset to the higher rate. That strategy assumes the value of the property would rise between the original purchase and the refinance.”

“‘We were making the payments for a year and a half,’ Denise Ramirez said.”

“Denise Ramirez told the judge they had found a potential buyer who was offering them $190,000 for the home they paid $211,500 for in 2005. The judge explained they owed almost $230,000 to the bank; he set the law date for Jan. 29. ‘So it’s not enough,’ Denise Ramirez said.”

“Theirs was one of many cases handled that day. The load the courts is dealing with is so large that Connecticut Supreme Court Chief Justice Chase T. Rodgers announced the formation of the Bench-Bar Foreclosure Committee to study the issue.”

“‘The number of foreclosure cases added in court during the 2005-06 fiscal years totaled 11,764,’ the Chief Justice wrote in a news release. ‘That number increased to 15,773 for the 2006-07 fiscal year.’”

The Hartford Courant from Connecticut. “Home sales plunged in Connecticut in September by the largest percentage in a year, and the median sale price dropped by several thousand dollars.”

“The picture is getting dangerously worse for home-sellers such as Linda and Erwin Flewelling, who first listed their four-bedroom home in East Hampton for sale late last year. After several price cuts, the 2,200-square-foot house is now listed for $289,900, down from $369,900.”

“‘I am frustrated. I thought it would sell faster than it has,’ Linda Flewelling said.”

“Other numbers create cause for concern, as well. The number of houses on the market in Greater Hartford was 6,035 in September, up by 9 percent from a year earlier, and up a whopping 45 percent from 2002.”

“‘The subprime market for less-than-credit-worthy buyers has disappeared, and that was a major portion of the lending market in Connecticut,’ said Ron Van Winkle, a West Hartford economist. ‘Houses that went on the market this summer didn’t sell, and now these numbers reflect those closings. It’s a big drop.’”

“‘I guess it is going to take the right person to come in, but we really don’t want to take it off the market, and I don’t want to go lower on the price,’ Linda Flewelling said. ‘We’ve done a lot of work here. There’s plenty of activity, but why isn’t someone buying it?’”

The New York Sun. “Much has been said about Manhattan’s perceived real estate invincibility in the aftermath of the subprime meltdown, but lawyers representing dozens of condominium boards in some of the city’s wealthiest neighborhoods say they are seeing these default cases increase as much as 25% this year.”

“‘There has been a very substantial increase of cases involving condominiums,’ a lawyer who is the president of the Council of New York Cooperatives and Condominiums, Marc Luxemburg, said.”

“During the last housing downturn in the early 1990s, there was a similar increase in defaults preceding numerous foreclosures, Mr. Luxemburg said.”

“‘This could be an indication that something larger is going on,’ a partner at Breier Deutschmeister Urban & Fromme, Lisa Urban, said. Last year at this time, she had one such case of a default on common charges; now, she has seven.”

The Staten Island “Staten Island saw a nearly 4 percent dip in the cost of one- to three-family homes during the third quarter of the year, according to a report released yesterday by the Real Estate Board of New York.”

“The number of single-family homes sold in the borough dropped 40 percent from September 2005 to September 2007, from 295 to 166 homes for the monthly period, according to figures from the New York State Association of Realtors.”

“Realtor Robert Kelly in Oakwood said buyers are sitting on the fence, despite bargains and low interest rates.”

“‘I don’t think the message is getting out there that it’s still an excellent time to buy,’ he said. ‘You can take your time to find the house that’s perfect for you. If you want a house with an oak bar or a 24-foot pool in the yard, it’s out there.’”

The Express Times on Pennsylvania. “Home sales in the Lehigh Valley fell 18 percent in October compared with last year’s pace, the latest in a yearlong pattern of declining sales.”
“‘What is selling is the cream of the crop,’ said Nick Kavounas, a managing partner at Coldwell Banker Heritage Real Estate in Bethlehem. ‘If a listing is not cream of the crop, it’s going to be a frustrating experience for the seller and the listing agent.’”

“Pending sales also declined. For October, 397 pending sales were reported, 27 percent less than the 545 pending sales LVAR listed in the same month last year.”

“The drop in pending sales, Kavounas said, reveals that homes for sale are not being bought as quickly as in past years. It’s another reason sellers need to be realistic in their expectations, he said.”

“‘To me, this shows that there are sellers in denial and more importantly there are real estate agents in denial,’ Kavounas said. ‘Things are on the market that shouldn’t be.’”

The Courier Times from Pennsylvania. “Bensalem-based Orleans Homebuilders continued to feel the pain from a slumping housing market and reported a $2.1 million loss in the first quarter of its fiscal year.”

“‘We remain in difficult times for both the economy and our industry,’ CEO Jeffrey Orleans said in a conference call. ‘After numerous consecutive years of industry growth, the homebuilding market continues its dramatic downturn.’”

“‘Starting in September, we have observed increased nationwide discounting, particularly by some of the largest companies in our industry,’ Orleans said. ‘I believe they are hurting the stronger markets in an attempt to offset negative order trends in some of their regional markets. We have been forced to follow suit, and have increased our discounts and incentives. We must remain competitive.’”

The Record from New Jersey. “Monday morning Jodi Riley, payroll manager for the now-closed Hoboken Wood Flooring in Wayne, handed out what paychecks she had left to about 50 employees gathered at its Demarest Drive headquarters and advised them to file claims with the state’s Department of Labor for unpaid wages.”

“Sales were down 25 percent each month for the past year, said commercial business development manager Jerry Pryor, because of the downward spiral in the housing industry, competition from manufacturers shipping directly to retailers, and the company’s push to expand nationally and eventually go public.”

“‘New York City was carrying the majority of the company, and we were selling commercially,’ said Pryor. But, he added, ‘residentially we were dying for a good year. I think we got too large, too quick.’”

The Star Ledger from New Jersey. “When Red Bank-based home builder Hovnanian slashed its prices by as much as $100,000 during its three-day ‘Deal of the Century’ fire sale last month, customers packed the company’s sales centers and kicked home sales into overdrive.”

“More than 2,100 contracts were signed in 72 hours, a flood of activity that convinced company executives the end of the housing bust was near. Well, perhaps Hovnanian jumped the gun a bit.”

“The largest home builder in New Jersey and the sixth-largest in the nation reported a 10 percent drop in quarterly new-home orders and said sales significantly deteriorated in October.”

“Faced with a glut of unsold homes and canceled contracts, some analysts now predict Hovnanian may have to resort to yet another round of Crazy Eddie-type price cuts to clear its large inventory of houses.”

“‘Sales likely fizzled after Hovnanian attempted to pull away incentives from its ‘Deal of the Century’ promotions the weekend of Sept. 14-16,’ said Bank of America analyst Daniel Oppenheim.”

“More than half of Hovnanian’s orders in the recent quarter came during the company’s heavily hyped ‘Deal of the Century’ weekend sales blitz.”

“For the fourth quarter ended Oct. 31, Hovnanian’s contracts totaled 2,781 homes, down 10 percent from a year ago, the company said yesterday. Meanwhile, cancellations rose to 40 percent of gross contracts, up from a 35 percent cancellation rate for both the third quarter of 2007 and the fourth quarter of 2006.”

“Hovnanian attributed the increase in cancellations primarily to tighter mortgage underwriting standards. Indeed, according to the October Senior Loan Officer Survey released by the Federal Reserve this week, the credit squeeze is no longer just a ’subprime’ story. Prime borrowers are also feeling the pinch.”

“According to the Fed report, 48 percent of banks tightened lending standards on mortgages in October, and 40 percent of those surveyed said they tightened standards on prime mortgages, up sharply from 15 percent when lenders were polled in April.”

“‘This is the sharpest increase in lending standards on record,’ said Aaron Smith, an analyst at Moody’s Economy.com in West Chester, Pa. ‘It suggests the subprime mess is becoming more contagious, restricting prime borrowers’ access to credit.’”

“Some real estate experts believe there may be more to the October pull back in sales than just tight-fisted lenders turning away borrowers. While Hovnanian’s banner sale got a ton of media coverage, the fact is new home builders have been busy cutting prices and staging blow out sales since early summer.”

“And Dani Babb, a real estate author and consultant, said these types of campaigns may have done more harm than good. Homes near the ones where Hovnanian slashed prices are now effectively worth less. And this essentially deflates the price of the market and devalues existing home prices even more.”

“The result: homebuyers may be even more reluctant to buy homes because they are worried lower prices may be offered in the near future, she said.”

“Jeffrey Otteau, president of East Brunswick-based Otteau Valuation Group, said yesterday the New Jersey housing market took a turn for the worse in September for just this very reason.”

“According to Otteau, home purchase activity in September…declined 23 percent from the prior month and was 17 percent below the year-ago level in September 2006.”

“‘This negative performance provides compelling evidence that homebuyers continue to take a wait-and-see approach out of concern that home prices will continue to drift lower,’ he said.”

“Given the pace of home sales is declining, the inventory of unsold homes now represents a 13 month supply on the market, up from 7 months in March and 10 months in August.”

“‘What you have is a public that has been told over and over again, ‘Don’t buy,’” Otteau said. “Just three weeks ago, Jim Cramer says on CNBC, don’t you dare buy a house now or you will lose money … and so we have paralysis. Homebuyers are frozen like deers in the headlights

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