The Housing Bubble

The Union Tribune reports from California. “San Diego County home prices fell to a 3 1/2-year low in October, while sales activity rose from September in spite of last month’s wildfires, DataQuick reported Tuesday. The overall median for October stood at $460,000, down $10,000 from September and 6.1 percent lower than October 2006’s $490,000. The latest figure represented an 11.1 percent decline from the peak of $517,500, reached in November 2005.”

“The last time the median was this low was in April 2004. October sales totaled 2,327…still 32.5 percent lower than year-ago levels, and marked the 41st consecutive month of year-over-year declines.”

“There were 1,085 houses resold, down 40.1 percent from a year ago. Condo resales totaled 529, down 14.8 percent from a year ago.”

The Wall Street Journal. “As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell?”

“Lennar Corp., for one, has joined the ‘not to sell’ camp at its development in Orange County, Calif. The Miami company plans to finish building 259 homes, the first phase of a 1,100-unit development in Irvine, but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves.”

“‘We are better off holding off on sales at this asset and not discounting as steeply as the market is discounting right now,’ says Emile Haddad, Lennar’s chief investment officer, who oversees the company’s large West Coast projects.”

“Analysts expect more builders to mothball projects in the coming months, as they decide that the losses from selling homes at huge discounts are greater than the costs of carrying properties on their books.”

“But it’s not an easy decision. Builders are facing increasing pressure from lenders to service their debt and also have overhead expenses to support.”

“‘It’s the next natural step in the evolution’ of the housing downturn, says Nishu Sood, a home-builder analyst at Deutsche Bank. ‘This normally happens during a recession when you just don’t have a base of demand. But it’s like that now. In some of these locations, you just can’t give a house away.’”

“Standard Pacific Corp., of Irvine, Calif., has been offering discounts and other incentives of as much as 25% on certain homes.”

“Lennar CEO Stuart Miller recently called some price cuts ‘unrealistic and maybe even ridiculous.’ ‘The market has just deteriorated more and more. We don’t want to go below a certain floor, and that is the floor of reasonableness,’ Mr. Miller told analysts on a conference call in late September.”

“Lennar’s move in Orange County is unusual in that the company is mothballing homes. Builders typically mothball partially developed or undeveloped land because vacant homes require watching. One alternative would be for builders to sell their land instead, but that market is even more dismal than the one for housing.”

“Recent land transactions in California, Phoenix and Southeast Florida, while few in number, have fetched discounts of 70% and 80% on finished lots, according to Zelman & Associates.”

“‘They have all this land that they need to turn over, so they keep building,’ says Paul Puryear, an analyst at Raymond James & Associates. ‘We would recover so much quicker if you could just turn it off, but you can’t turn it off.’”

“Considering there are too many houses already looking for buyers, it might seem surprising that builders are building at all. But…it can take years for a housing development to makes its way through the development pipeline. By the time the builder has spent money putting in roads and sidewalks, the housing market may have turned.”

“‘Many builders are stuck between a rock and hard place,’ says Jonathan Dienhart, director of published research at a housing research firm in Costa Mesa, Calif. ‘They can’t make money by building, and they can’t make money by not building. They have to choose the lesser of two evils.’”

“Lennar’s Mr. Haddad says the builder had to finish constructing the first phase of its Irvine project, called Central Park West, where the mix of condos and town homes had an average price of $700,000.”

“‘You create a stigma for a community if it’s only half built,’ Mr. Haddad says. The 14 buyers who signed contracts for the 259 homes got their deposits back.”

The Contra Costa Times. “The mortgage morass has engulfed E-Loan, an online loan firm that said Monday it intends to chop more than 400 jobs from its Pleasanton headquarters as part of a wrenching and broad restructuring.”

“Employees were notified they would be dismissed at the end of last week. E-Loan intends to cut 410 of the roughly 925 jobs at its headquarters in the East Bay, said Laurie Azzano, a spokeswoman for Pleasanton-based E-Loan.”

“‘It’s a challenging mortgage climate for all of us right now,’ Azzano said.”

“In the past year, 8,100 East Bay jobs in four key industries tied directly to housing — residential construction, specialty trades construction, real estate and credit intermediation — have vanished.”

“‘E-Loan is not a subprime lender,’ Azzano said. ‘The company has a higher quality borrower. These layoffs are not a result of the subprime in particular but the mortgage problems as a whole.’”

“Industry veterans said the E-Loan job reductions epitomize the misery in the housing and mortgage industries. ‘Every lender I know of has laid off dramatic numbers of people,’ said John Holmgren, president of an East Bay mortgage group.”

“East Bay loan agents routinely find fresh evidence that the problems in the industry haven’t started to decrease. ‘We hear from agents all the time that they go out to call on broker clients and find when they get there the office was closed,’ Holmgren said.”

The Press Democrat. “The postmortem on how the housing bubble burst has exposed the precarious relationship between homebuyers and the people who helped them get a mortgage.”

“Angry disputes are erupting between struggling homeowners, who claim they didn’t understand the terms of their loan or the risk they were taking, and lenders and loan brokers, who say they fully informed all their clients and point with pride to the many homeowners they helped get a loan.”

“‘In so many ways, what we’re seeing today was caused by all this crazy borrowing and lending,’ said economist Christopher Thornberg, who has repeatedly warned of a looming real estate crisis. ‘I can’t emphasize this enough. This was imminently predictable.’”

“Brokers and lenders say the criticism is unfair. They maintain that they provided an important service, plowing through scores of arcane loans to find the best one their client could qualify for. They say they were under pressure from borrowers and from real estate agents who could take their business elsewhere.”

“They say it was the lender’s job to decide if the borrowers were qualified and able to repay the loan.”

“No one takes responsibility for the inflated incomes that many borrowers submitted to justify a mortgage, especially in 2005 and 2006 after three years of soaring home prices. One lender’s review of 100 loans made without proof of income found that nine out of 10 applications overstated the borrower’s income.”

“While some borrowers may have been misled, others were eager to get a loan regardless of the cost or the risk, several real estate and loan brokers said. ‘I know a lot of lenders who suggested to people not to proceed with the loans. Sometimes they’d go somewhere else, to someone who would give them the loan,’ said Bob Accornero, a real estate broker in Santa Rosa.”

“‘Those are the same individuals coming back and saying, ‘We should have listened. Is there anything we can do?’ said Anna Macias De Leon, owner of a First Priority Financial office in Santa Rosa.”

“‘Lenders had a fiduciary duty to do the right thing for their people,’ said Accornero. ‘Lenders needed to get warm and fuzzy with their people and say, ‘Can you really do this?’’ That’s what they didn’t do.’”

“Homebuyers need to make sure they understand the terms of a loan before they sign on the dotted line, Harper said.”

“‘The lenders are trying to make the biggest mortgages they can. It’s up to you to say, ‘Wait a minute. I don’t think that makes sense for me to bite off this much,’ said Harper, whose service has seen a 300 percent increase in demand for housing counseling this year.”

“People don’t ask enough questions, he said. ‘Simply because a lender tells you that you qualify for a certain amount doesn’t mean you can afford it,’ he said.”

The Times Delta. “Dozens of foreclosed homes are flooding the Visalia-area market — many of them suddenly owned by Fannie Mae because owners could no longer make mortgage-loan payments.”

“But just because these homes have been taken back by Fannie Mae and its various lending partners, don’t look for bargain-basement fire sales — even in a down real estate market, local real estate professionals say.”

“‘We had eight offers on [Fannie Mae-] foreclosed homes in August,’ said Sherrie Weece, a licensed agent for the past eight years in Visalia. ‘All were turned away by Fannie Mae and came back to us.’”

“The reason? The offers came in at an average of $60,000 less than the ‘market price’ set by Fannie Mae, not enough for the mammoth privately owned mortgage conglomerate, even in a sluggish market where prices are declining, Weece said.”

“‘We’ve tightened [Fannie Mae's] underwriting and pricing,’ said Daniel Mudd, Fannie Mae’s CEO, during the Friday briefing from Fannie Mae headquarters. That’s the reason why the August sales fell through in Visalia, Weece said.”

“Weece said that her company currently has 45 foreclosed homes in its inventory. ‘Sixty more are on the way,’ Weece said. ‘This is a good thing for prospective buyers.’”

“Nine of the 11 homes in the Visalia sample were located on the edges of the city, with only two homes located in established neighborhoods. An eviction was served on one of the homes in Visalia. A fresh foreclosure noticed was taped on another home, along with dead strips of black straw that used to be fresh sod.”

“‘Some of these homes haven’t been occupied for four or five months,’ Weece said.”

“Visalia City Councilman Greg Collins has warned for years that development far from Visalia’s core areas might have downsides…in the event of an economic downturn.”

“‘But [foreclosures are] a separate issue,’ Collins said. ‘Even a well-funded infill project in the middle of Visalia would have a hard time selling in this market.’”

The Gazette Times reports from Oregon. “Despite national headlines warning of shaky ground in the mortgage lending industry, home buyers shouldn’t necessarily assume that owning a home in Corvallis is out of their reach. ‘Just because it’s raining in Florida doesn’t mean it’s flooding in Oregon,’ said Van Melick, senior loan officer for Corvallis Metro Mortgage. ‘Anybody with reasonable credit who has a job and can qualify for the payment amount can qualify.’”

“That doesn’t mean that the housing market hasn’t changed from a year ago. From October 2006 to last month, just 3,859 homes sold, compared to 4,504 during the same period a year ago. And more than 2,250 homes were listed on the market during October in the mid-valley.”

“What has changed, Melick said, is freewheeling lending to people whose financial situations fit colorful acronyms: NINA (No Income, No Assets) and NINJA (No Income, No Job, No Assets).”

“‘The problem was that as the housing boom started to rumble up, there was improper use of (subprime loan programs) and that got people into programs that were inappropriate,’ he said.”

“Melick said the housing market seems to be straddling a buyer’s and seller’s market, with many buyers expecting to find great deals, but a fair amount of sellers hanging on for a better price despite the conventional wisdom.”

The Mail Tribune from Oregon. “There could be more belt-tightening among Southern Oregon wood-products companies after layoffs were announced at a pair of mills last week.”

“‘The decline of new construction has had a huge impact on wood products, including us,’ said Roger Rutan, VP of marketing (for) Springfield-based Timber Products.”

“Glendale-based Swanson Group announced 150 layoffs in several mills in the region and others around the state have seen cuts as well, said David Schott, executive director of the Southern Oregon Timber Industries Association.”

“‘We’re seeing lumber at or below prices we’ve seen at any time in 50 years, when you factor in inflation,’ Schott said. ‘A year and a half ago, studs were running $320 to $340 per thousand board feet for green Doug fir. It’s averaging $150 to $160 now. It’s the most ugly pricing I’ve seen since 1980-81.’”

“He said new housing starts nationally will decline to between 1.1 million and 1.2 million by year’s end, roughly half of what they were a year ago.”

“‘The economy is not strong and job creation is mostly service sector and government jobs when we need more created in the manufacturing sector,’ Schott said. ‘When you look at the $320 billion trade deficit, you know we’re not creating wealth in this country.’”

The Columbia Basin Herald from Washington. “Several local housing industry members are nearly unanimous in the sentiment that now is the perfect time to buy a house in the Columbia Basin.”

“In looking over statistics from the Grant County Assessor’s Office and the Northwest MLS, Susan Alsted-Fanning, owner of Alsted Real Estate, said Grant County was one of seven counties in Washington to register double-digit gains over 12 months ago.”

“‘That’s exciting in itself,’ she said. ‘Our median price home is up from $132,000 to $152,000 this time last year.’”

“‘Which is exciting to me, because there’s more and more condos being built and sold,’ she said. ‘In 2006, the average price of a condo was $206,000, and this year it was $286,000. Condos have not been good over the years. They just took off.’”

“‘If you were a buyer, you’re still going to end up being a seller in most cases, and I don’t see any of these prices dropping,’ she said. ‘Interest rates are low, there’s choices, there’s new homes in all different directions and that always helps. We have plenty of supply, and we’re not overbuilt.’”

“It appears most buyers of condominiums, which are raising the market, are coming from out of the area and using their properties as second homes in most cases. In Moses Lake, Alsted-Fanning’s office has seen two buyers from Alaska.”

“‘If you drive around Moses Lake, you see new construction everywhere,’ she said. ‘North, south, east, west - there’s more coming in. There’s hundreds and hundreds of new construction (projects) being planned right now, and I don’t see a lot of empty homes out there.’”

“She advises people who are presently renting to purchase now. ‘Take this opportunity and buy now, because it will favor you,’ she said. ‘The buyers, if they’re on the sideline just watching right now and waiting for the right time, I don’t think there’s a better time than right now.’”

“Alsted-Fanning urges sellers to consider the fact that buyers are savvy.”

“‘They will not put up with previewing overpriced homes,’ she said. ‘For the sellers, I say state your home, make your repairs, clean your clutter out and don’t overprice, because we do have a lot of competition with these new homes.’”

“John L. Scott Real Estate Owner Alan Heroux said the national housing trend is ‘basically tanking right now.’”

“That’s because the national real estate market was treated as any large investment concept, Heroux explained, appreciating at a high level for several years until, like any investment, the actual value was much lower than the perceived value.”

“‘People went, ‘Wait a second, we’re paying more for this than what it’s really worth,’ and it kind of started to unravel from the top down,’ Heroux said. ‘Nationally, that has a lot to do with the subprime market for mortgages. They were giving credit to people who should never have had gotten credit.’”

“Locally, the market has returned to more of a normal market, Heroux noted. In the last few years, sellers were essentially able to demand what they wanted for their homes, and buyers had no choice but to pay it, he said.”

“Negotiations are going on, he said. ‘We are a little bit above what we probably should be value-wise on homes, but we’re not like the national market where it’s 50 percent overvalued,’ he said. ‘Our prices are a little bit on the high side, but sellers are starting to negotiate now. It’s actually a normal real estate market, which we’ve needed to do.’”

“Sellers do need to understand the difference between perceived value and actual value, Heroux advised.”

“‘The reality is if they bought their house for $100,000 and thought it was worth $200,000, but it turns out it’s only worth $175,000, people think they lost $25,000 in value,’ he said. ‘They didn’t; that value was never there, it was a paper value.’”

The Daily News from Washington. “For five months, Les Campbell waited for his three-story house on Curtis Drive north of Longview to sell. As many as 25 people came to look, but Campbell soon realized few were serious about buying.”

“They’d show up just to take a tour of his home to see what was available, but only one or two people were ready to make the commitment to pay close to the asking price of $340,000. So Campbell decided to wait until next spring to try to sell the 2,800-square-foot home.”

“‘I think it’s just a slow market,’ the retired General Motors manager said.”

“Campbell is not alone. Recent statistics released from the Northwest MLS, which tracks home sales in Western Washington, show far more houses on the market than a year ago.”

“In October this year, 759 houses were listed on the market in Cowlitz County, up 27.6 percent from a year ago, according to the listing service. The inventory of available homes has fallen 6.1 percent since August, which some local brokers saw as a record-breaking month in Cowlitz County.”

“Across the 20 Washington counties included in the listing service study, the number of homes listed for sale increased by 31 percent from October 2006.”

“Despite the glut of homes, local real estate agents are insisting that Cowlitz County remains a good place to buy. The market has slowed, they say, but it’s part of a natural cooling following the local housing boom of the past two years.”

“In fact, a group of brokers and mortgage lenders have launched an advertising campaign reminding people that Cowlitz County has good things to offer.”

“Agent Shirley Nelson said she’s seeing a lot of low offers from buyers. That’s part of the reason, she said, that sellers are waiting longer for offers close to their asking price.”

“‘Our sellers are saying, ‘Nope, we want what we want for our home,’ said Nelson, who was a co-sponsor of the ad campaign.”

“The recent house-flipping craze, spurred by popular television shows such as ‘Flip That House,’ has also contributed to the glut of buyers looking for a deal, Nelson said.”

“Shirley Little, incoming president of the Cowlitz County Association of Realtors, added that the wave of low-interest loans that had grown popular during the housing boom are taking their toll. After paying a small down payment, some home owners came to realize they couldn’t afford the high rates down the road and have been forced to give up their homes, she said.”

“‘The same buyers six months ago, a year ago, can no longer buy homes,’ Little said.”

The Kitsap Sun from Washington. “Kitsap real estate prices leveled off in October while the number of homes on the market continued to rise, according to statistics released last week by the Northwest MLS.”

“There were 453 more homes for sale in Kitsap in October 2007 than in the past year, and those that did sell went more cheaply than in previous years.”

“The bottom line on the new stats, according to Mike Eliason, executive of the Kitsap Association of Realtors, is a supply-and-demand story.”

“The real estate boom of the early 2000s fueled a boom in construction of homes, Eliason said. But the red hot market also contributed to money lenders’ willingness to get anyone into a home who wanted one —regardless of credit.”

“When the overall U.S. housing market finally turned south this year, it caused a flooding of foreclosures, and made even more homes available.”

“Central Kitsap experienced the highest rise in number of homes on the market. The Seabeck and Holly areas, for example, had 80 homes on the market in October 2006. In the same month this year, there were 142.”

“Demand, meanwhile, as lenders tighten restrictions on attaining mortgages due to fears of more foreclosures, has decreased. Eliason said that the market is entering its ‘winter cycle,’ where real estate activity is less.”

“Eliason predicts a downturn of the median home price in Kitsap County, one that will be more accurately aligned with Kitsap’s wage earners. ‘We’ve pushed people out of the housing market,’ Eliason said. ‘Now we’re going to start to see people coming back.’”

The Columbian from Washington. “At a time when more Clark County homeowners are faced with the threat of foreclosure, a local agency has discontinued counseling services that help with mortgage default.”

“The Vancouver-based Community Housing Resource Center’s four-person staff has been unable to handle the rising caseload after its full-time foreclosure counselor resigned two months ago. The center is referring foreclosure calls to two informational Web sites and a foreclosure advice line.”

“The loss of default counseling comes at a time when local foreclosures have more than doubled, according to RealtyTrac, which showed 374 foreclosure filings in Clark County during the third quarter, which ended Sept. 30, up from 180 foreclosures filed during the same period a year ago.”

“In the meantime, an increasing number of phone calls to the center reflect the problem of rising foreclosures, said Kevin Gillette, program manager. ‘We’re getting quite a few inquiries regarding this, and we hope to hire someone’ to continue the counseling, he said.”

“He added that foreclosure is a highly emotional issue for clients. ‘There’s so much in the way of emotion, depression and anger,’ Gillette said, because homeowners in default face limited options now that home sales have slowed and prices have softened.”

“‘Quite frankly, you’ve got a lot of people owing more than what the houses are worth,’ he said.”

Some housing bubble news from Wall Street and Washington. MarketWatch, “Countrywide Financial Corp. said Tuesday its total October mortgage-loan fundings fell 48% from a year earlier as the lender continues to struggle against a slumping housing market and the credit crunch.”

“In Countrywide’s $1.47 trillion loan servicing portfolio, delinquencies as a percentage of unpaid principal rose to 5.94 percent from September’s 5.85 percent and 3.97 percent a year earlier.”

From Reuters. “Countrywide said it funded $22 billion of home loans in October, down from $41.9 billion a year earlier. Adjustable-rate lending totaled $3.1 billion, down 81 percent from a year earlier and 19 percent from September.”

“Subprime loans totaled just $42 million in October, down 84 percent from September, and 99 percent from $3.3 billion a year earlier. Home equity loans totaled $1.36 billion in October, down 15 percent from September and 68 percent from a year earlier.”

The Street.com. “‘October’s operating results continue to be indicative of current market trends,’ said David Sambol, Countrywide’s president and chief operating officer. ‘Total fundings were down substantially on a year-over-year basis…and production funded through the Bank has now surpassed 90% of total fundings.’”

The Investment Executive. “Royal Bank of Canada today announced it expects to record a charge in its capital markets segment in the fourth quarter associated with the valuation of subprime collateralized debt obligations and subprime residential mortgage-backed securities of approximately $360 million pre-tax.”

From Bloomberg. “Legg Mason Inc. invested $100 million in one of its money-market funds and arranged $238 million in credit for two others as a cushion against potential losses on commercial paper linked to subprime mortgages.”

“Legg Mason holds about $10.7 billion in debt issued by structured investment vehicles, the company said in a Nov. 9 filing with the U.S. Securities and Exchange Commission.”

“‘The investments have not affected the $1 per share net asset value of the funds and Legg Mason does not expect that they will, although no guarantees are given,’ the company said in the filing.”

“German bank WestLB has warned that it expects a loss this year instead of a profit. The bank is the latest victim of a global credit crisis set off by US sub-prime mortgage lending.”

“WestLB says it expects to report a full-year pretax loss in the low, triple-digit, million-euro range. ‘The substantial price losses of structured securities in the past weeks are the main reason for this development,’ the bank said in a statement.”

The Irish Times. “Several of the country’s leading business figures are nursing losses on their investments in a Dublin finance firm which yesterday said it was writing off at least €70 million in assets due to the global credit crunch.”

“International Securities Trading Corporation, which was set up in 2005 by former Anglo Irish Bank executive Tiarnan O’Mahoney, yesterday suspended trading in its shares, postponed its results and scrapped plans to raise €150 million through a bond issue.”

“The highly specialised firm, which raises money on international markets to lend to banks, made the decision after writing off at least €70 million on investments totalling €210 million in high-risk financial units called structured investment vehicles (SIVs).”

“O’Mahoney previously described the share register as ‘a who’s who of Irish business.’ ISTC said in a statement yesterday: ‘The turmoil experienced in financial markets since July last is unprecedented, and has represented one of the most difficult and challenging market environments experienced by the banking sector over the past 30 years.’”

“Mr O’Mahoney said, ‘We can weather this storm. It will need a lot of work and agreement from our banks.’”

“Most of the company’s estimated 250 shareholders are sitting on losses, given that they bought the company’s shares above the €100-a-share mark. ISTC shares traded at €60 in an unofficial market operated by Goodbody Stockbrokers, down from a high of €345 earlier this year, before their suspension yesterday. The company is now valued at about €115 million, down 83 per cent from its peak.”

From Forbes. “According to a recent E*Trade’s Securities and Exchange Commission filing, 70% of the firm’s total assets are related to residential real estate loans and mortgage-backed and asset-backed securities.”

“According to Citi analyst Prashant Bhatia, there is a high risk that the company will lose its high-end clients, who have accounts with more than $100,000 (the investment limit that is insured by the government’s Federal Deposit Insurance Corporation). These accounts represent $15 billion, and make up 50% of deposits or roughly 25% of E*Trade’s funding.”

“The mass exodus of clients, could force the company to sell-offs assets. The liquidation could total $5 billion in losses, ‘more than wiping out tangible equity,’ Bhatia said.”

“The U.S. credit crisis deepened on Friday as Wachovia Corp…lost as much as $1.7 billion related to mortgages in October. Wachovia also expects to boost loan losses by $500 million to $600 million this quarter, largely because of ‘dramatic declines’ in housing values.”

“The bank paid $24.2 billion in October 2006 for Golden West Financial Corp, a California adjustable-rate mortgage lender.”

“‘It now becomes even more obvious that Wachovia purchased the thrift at the wrong time of the cycle,’ Deutsche Bank Securities analyst Mike Mayo wrote.”

“‘This is now worse than Long-Term Capital (Management),’ said Jack Malvey, chief global fixed-income strategist at Lehman Brothers Inc., referring to the hedge fund whose 1998 collapse threatened to unhinge global financial markets. ‘This is a painful lesson in financial engineering.’”

“There’s a greater than 50 percent probability that the financial system ‘will come to a grinding halt’ because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.”

“‘You have the SIVs, you have the conduits, you have the money-market funds, you have future losses still in the dealer’s balance sheet in the banks,’ Peters said in an interview in New York. ‘That’s all toppling at once.’”

From The BBC. “The slowdown in the housing market is becoming more pronounced, says the Royal Institution of Chartered Surveyors. Almost all surveys have suggested the market has been cooling since the summer.”

“‘The housing market is seeing the awaited slowdown that many had been expecting, with modest falls reported across most UK regions,’ said Rics spokesman Ian Perry. ‘Credit market turmoil has yet to put downward pressure on prices in the capital, although prices have now stabilised even here,’ he added.”

The Star Telegram. “Fort Worth-based D.R. Horton, struggling with falling home sales amid the national housing slump, sold nearly 7,000 acres in Arizona for $70 million to two real estate firms. The property is zoned for 23,050 residential lots, which will be sold to home builders.”

“Horton, which reported its first quarterly loss in its nearly 30-year history this year, said last month that sales of its homes nationwide fell 39 percent in the third quarter of the year, and that nearly half its customers backed out of purchases.”

“Home prices in Arizona, as well as in California, Nevada and Florida, are declining after years of strong demand that sent prices soaring.”

“In July, Horton, the largest U.S. home builder, said it owned 252,000 lots as of June 30, representing a 5.4-year supply.”

From Builder Online. “If the normal industry cycle had run its course, there would have been a correction in 2001 and 2002, and, says real estate consultant John Burns, builders would be in the middle of another cycle.”

“But as Larry Mizel, CEO of M.D.C. Holdings, put it, ‘Everyone forgot that there are cycles in housing.’ Since builders have ‘borrowed demand from the future,’ says Burns, the industry is in the second year of a 3-to-5-year correction.”

“When the downturn ends, he says sales activity will correct back to 1995 levels. But when will that be? Burns says it will hinge on…downpayments. ‘When [current] renters can save up a downpayment, [to buy a home] then we will see the end.’”

The Edmonton Journal. “I’m sitting in the sun-splashed boardroom of a small real estate office, chatting with a friendly young realtor named Kacey Fotopoulos about the state of Calgary’s housing market.”

“Since local house prices peaked earlier this year after a record-busting run, buyers have dried up, prices have slid and new listings have soared. With some residents cashing out and heading home to Saskatchewan or the Maritimes, Calgary’s once-torrid housing market has stalled.”

“‘From January to June I felt like a rock star,’ says Fotopoulos. ‘Now, there’s so much to choose from, buyers can take their time. It’s not unheard of for people to offer $100,000 under list.’”

“After sitting on the market for 111 days, one new two-bedroom condo in northwest Calgary recently sold for $255,000 — $64,000 below the initial list price. A luxury executive condo in trendy Eau Claire recently sold for $450,000 — $150,000 below the asking price.”

“For Fotopoulos, who was born and raised in Calgary, Canada’s perennial boomtown, these are uncharted waters. After four years in the real estate game, she has only seen local house prices go in one direction: straight up. Until now. Ditto for her friends. For most, it’s their first taste of anything vaguely resembling a slowdown.”

“‘Calgarians just aren’t used to this,’ she says. ‘They got very greedy. Now, they have to realize if they want a nice, balanced market, they have to price more appropriately, they need patience, and their realtor has to work a lot harder.’”

The Seattle PI. “The housing market really is quite good. That pretty much sums up what members of the National Association of Realtors had to say at the opening session of their annual convention in Las Vegas Monday.”

“It was a stage show of ‘Realtor Scene Investigation’ (after a show with a similar name set in Las Vegas) complete with association Chief Economist Lawrence Yun sitting in a ‘crime lab’ wearing a white coat.”

“‘While 2007 is not a record-setting market, it still has strong fundamentals,’ Yun said.”

“But, Yun said, there are problems: High foreclosures brought on by ‘toxic’ loans and, in reaction, tighter credit making it harder to get mortgages.”

“So, who’s to blame? Suspects include the Federal Deposit Insurance Corp., the Treasury Department, the Federal Reserve, Fannie Mae and Freddie Mac.”

“‘They let some baaaad people into the (mortgage) business,’ one of the Realtor ‘investigators’ reported. Investigators also faulted federal officials.”

“At the same time, the Realtors said they had ‘a DNA match,’ with 2007 looking a lot like 2002, when the market was good, but not spectacular. One difference they did not note is that 2007 comes after several of the craziest years ever in American real estate.”

The Boston Herald reports from Massachusetts. “Bank of America, Wells Fargo, Lehman Brothers and other financial powerhouses are threatening to pull out of the wholesale mortgage-lending market in Massachusetts because of Attorney General Martha Coakley’s proposed new mortgage-broker regulations, the Herald has learned.”

“Such lenders account for about one-third of all mortgage loans issued in Massachusetts.”

The Boston Globe from Massachusetts. “This is what real estate fever looks like in a down market. Almost 300 foreclosed Massachusetts houses will be auctioned at the Hynes Veterans Memorial Convention Center this weekend.”

“The properties for sale are mostly remainders. ‘They don’t tend to be in the best condition,’ said Terryanne St. Pierre, an associate broker in Salem. ‘They’ve been abused more often than not,’ St. Pierre said.”

“But the 2,000 or so people who attended yesterday’s auction were undeterred.After each property was introduced, men in tuxedos rushed around encouraging people to spend money.”

“‘Hey, that guy is about to buy your home!’ one auctioneer told a hesitant couple. ‘What’s another $10,000?’”

“Properties sold in a few minutes. Winners were escorted to a roped-off area to make a 5 percent down payment, for example, on a $300,000 house - the cashier’s check plus a personal check for $10,000. They were then escorted to an area behind curtains to qualify for a mortgage loan from Countrywide Home Loans.”

“Melissa Ferreira came to Hynes yesterday morning to buy her first house. The 28-year-old newlywed raised her paddle repeatedly as the price rose to $330,000. When the auctioneer stopped rapping and Ferreira realized she had won, she wept.”

“‘I’m an emotional wreck,’ she said. ‘I cried because I almost didn’t get this house and this is my dream house. I paid a little more than I wanted to spend, but it was worth it.’”

“A Victorian-era house on Washington Street in Norwood sold for $585,000 in July 2004. It sold yesterday for $350,000 to a group of four friends, investors who said none of them had seen it. They bought it, they said, because it seemed like a good deal.”

“The house has 2,800 square feet of space, with five bedrooms and a large backyard. Now, however, the polished wood of the living room floor is ruptured in several places, perhaps by burst pipes. The smell of a moldy basement permeates the house. Something with sharp teeth savaged the woodwork. The fire alarm chirps endlessly.”

“Chris Willis and Eli Sanchez were willing to pay $100,000 for a West Yarmouth ranch they considered a teardown. The bidding soared past $100,000 in a matter of seconds. The place eventually sold for $200,000, leaving Willis shaking his head. ‘They’re basically buying land,’ he said. ‘It makes no sense.’”

“Mike Gubla, a New Bedford contractor, also decided that the prices were too high. ‘There’s civilians bidding here,’ he said, explaining that inexperienced buyers were paying more than properties were worth. ‘I’ll come back next year, and the prices will be better,’ he said.”

“Ferreira saw her dream house for the first time last Sunday. She said she spent the rest of the week nearly paralyzed by nervous anticipation. Yesterday afternoon, her bid accepted on the house, she paced the financing room in high spirits, waiting for permission to leave.”

“She said she planned to drive to the house directly. ‘And when I get there,’ she said, ‘I’m going to throw up my hands and tell anyone, ‘This is mine!’”

Hartford Business from Connecticut. “Connecticut’s perceived immunity to the nation’s housing market slump and credit crunch is over. Reports published last week by Boston-based Warren Group reveal…a double-digit decrease in home sales along with an alarming number of foreclosures — at 2,948 — in Hartford County alone, reflect the state’s fractured housing market.”

“Statewide, there have been 12,575 foreclosures, with New Haven County hardest hit with 3,914 foreclosures.”

“While home sales have plummeted in the past, state officials do not recall when the number of foreclosures has been so great. ‘We’re concerned because this is not a typical situation,’ said Howard Pitkin, commissioner of the state’s Department of Banking. ‘This is not something that has happened frequently in the state, and we need to address it.’”

“Although foreclosures are now exploding in Hartford County, the writing was on the wall for several months. ‘We saw it coming. I should say, we dreaded it coming for a while,’ Pitkin said.”

“There are an estimated 71,000 subprime mortgages in Connecticut worth approximately $15 billion, and it is possible that up to 8 percent of those loans are delinquent, he said.”

“The seeds that started the current financing fiasco were created during the fiscal climate that followed the Sept. 11 terrorist attacks, Pitkin said. ‘It happened because the Federal Reserve brought about a credit scenario that had been unheard of,’ he explained. ‘Wall Street showed a willingness to buy pooled obligations, and mortgage brokers could borrow money cheap.’”

“Another contributing factor, according to Realtor Nicholle Dagata in Berlin, is that buyers also borrowed their closing costs. ‘These are people who saw their mortgage payment go from $1,200 to more than $2,000,’ she said. ‘This has happened in Farmington, New Britain and Berlin. It’s not just isolated in the big cities.’”

From Newsday in New York. “As Long Island’s economy and housing market boomed, tens of thousands of area residents saddled themselves with expensive mortgages, borrowing billions of dollars and counting on the equity in their homes to help pay their bills and build their wealth for them.”

“Now, that foundation of home ownership for many is crumbling, and the Long Island economy could pay the price. Nearly a third of the 107,000 mortgages given to Long Islanders in 2006 were high-cost loans…and are far more likely to go into foreclosure than their conventional counterparts, a Newsday analysis has shown.”

“Already across the region, home foreclosures are sharply on the rise, often doubling in the last two years in communities from Roosevelt to Westbury and Brentwood to Deer Park, Newsday found. In Brentwood, the number of initial foreclosure notices rose to 227 in the first six months of 2007, from 98 in the first half of 2005, while Glen Cove went from 10 to 24 filings in the same period.”

“Kari Sessa refinanced her childhood home in Huntington Station in 2005 and now may lose it. Kari and her husband, Keith, have owned the cape since 2002, when they bought it from her mother’s estate for $301,000. At the time, they had a mortgage payment of $2,100 a month, which they said they could manage.”

“But after a call from a now-defunct Melville mortgage broker, the Sessas decided to refinance to consolidate their debt. While acknowledging that they made their own mistakes, such as not carefully reading paperwork or bringing an attorney to the closing, they said they thought the mortgage would be one 30-year fixed rate loan.”

“But instead, they received two loans. That left them with a new monthly payment of $3,354, about $500 more a month than it would have been with a conventional, 6 percent rate loan. To make the payments, both Kari and Keith began working two jobs. Yet, the couple is still paying nearly half their income toward the mortgages. And, come March, their larger mortgage payment will rise sharply, adding another $800 a month.”

“All told, over the life of their 30-year loans, the Sessas will pay $500,000 more than if they had gotten one 30-year prime, fixed-rate loan.”

“Twice in the last year, the couple has fallen behind on their payments, only to dip into retirement savings to catch up. ‘We should have left it the way it was,’ said Kari Sessa. ‘We didn’t know this was going to happen.’”

“Business owners across Long Island have long depended on the cash flow of the local consumer. Now, because of the housing slump and subprime loan crisis, there’s less money for homeowners to spend.”

“Even the loss of two regular customers can make a difference, Americo Araujo said. Middle Island residents Rita and Larry Schel used to frequent Araujo’s Italian restaurant as many as five or six times a week. When Larry Schel became ill and the couple began to fall behind on their mortgage payments, they stopped coming.”

“‘When you lose a customer like this, it’s no good,’ Araujo said. But it’s more than just the Schels. Araujo reported that business is off 40 percent compared with last year, and he sees a direct link between the rise in foreclosures and his restaurant’s downturn.”

“‘People aren’t spending money like they used to be,’ he said.”

The Courier Times from Pennsylvania. “Brad Elliott said weeks ago that he’d learn the value of the bankrupt Elliott Building Group’s assets at an auction for its 14 planned developments, including The Preserve at Hilltown and Abington’s Rydal Waters.”

“Now he knows. ‘It was a bust,’ said Elliott, whose Falls development company filed for Chapter 11 protection in June.”

“Elliott said Monday that only two of the projects sold; Glen Meadow in Gloucester County, N.J., and the Ridings at Brandywine in Chester County. The others now belong to banks, which could choose to sell them or finish construction.”

“‘The bids were coming in, most had more than one, but the highest bids were 50 cents on the dollar,’ Elliott said. ‘They were bidding half of what the debt was…The current building community has enough inventory.’”

“Infrastructure improvements were 80 percent finished at Rydal Waters, he said. Both developments were slated to sell homes for $600,000 or more.”

“Elliott said some buyers made deposits on the Hilltown and Abington homes. Most who made deposits have been unable to get that money back because it wasn’t put in escrow accounts, the developer said. He would not say how many but added they have been added to the list of creditors in the bankruptcy proceeding”

“‘The Elliott Building Group will be liquidated and shut down and [I'll] be looking for a new venture after I get through this mess,’ said Elliott.”

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