The Housing Bubble

The Press Telegraph reports from California. “It would be hard to pick the best moment from the presidential inauguration at last week’s National Association of Realtors conference in Las Vegas. Incoming NAR President Richard ‘Dick’ Gaylord, a 30-year real estate veteran, was the centerpiece of a nightlong ceremony. He officially assumed the position as head of the nation’s largest trade organization Saturday.”

“Events before and after the installation were staged in Gaylord’s grandiose multi-room suite in the top penthouse of the Venetian Hotel, where several top ranking government officials and high ranking Realtors were on hand, including heads of many of state Realtors associations and real estate top producers from Manhattan Beach to the island of Manhattan.”

“As he headed to the stage, Gaylord was treated to a standing ovation. He continues to deliver a glass-is-half-full message even in the face of the current housing market, was filled with humility and it was more of a pep talk to Realtors and a thanks to everyone.”

“Gaylord went on to hail the accomplishments made by Realtors: ‘It is Realtors who have helped raise the homeownership rate to nearly 70 percent, by advocating for laws and policies that protect private property rights and make housing more affordable and accessible.’”

“‘Dick’s a genuine guy,’ said Randy Jeffers, incoming chairman for 2008 of the Texas Realtors Association. ‘Dick Gaylord is who he is every day. If Dick tells you something you can just bank on it. You can just take it to the bank.’”

The Bakersfield Californian. “Bankruptcy filings have shot up this year as desperate homeowners scramble to elude foreclosure, local attorneys say. During the first half of the year, 530 consumer bankruptcy cases were filed in Kern County, a near doubling of the 266 cases filed during the same period in 2006, according to Bakersfield bankruptcy attorney R. Scott Bell.”

“‘Every single day, someone will come to see me because they’re starting to lose their house, they’re getting behind on their payments,’ Bell said.”

“One recent morning at the public foreclosure auctions that take place on City Hall’s steps, seven of the 18 postponed home sales were halted by bankruptcy filings. But bankruptcy will not work for every homeowner in trouble.”

“‘If you have a payment of $5,000 a month, and you cannot pay that, then a bankruptcy won’t be able to save a house,’ said Phillip Gillet Jr., a local bankruptcy attorney.”

The County Sun. “An old wooden house along Genevieve Street in San Bernardino was the scene recently of a trash pickup for tenants who lost their home to a bank foreclosure.”

“On Thursday morning, the driveway was piled up with appliances, furniture and clothes that were littered everywhere - a telltale sign of a family that recently lived there. An old gas stove with a skillet full of dust was found. In the back yard, there were mattresses, a microwave, two mangled couches and a bulky refrigerator.”

“Foreclosed homes all over the Inland Empire are turning into what Lisa Carvalho calls ‘trash-outs’ - wooden and stucco carcasses with piles of junk left behind by former tenants.”

“The High Desert offers even more interesting tales. The area is full of tract homes in subdivisions that have stacks of furniture piled inside every room, she said.”

“‘These typically look like they’re occupied, but they’re not trashed,’ she said about these homes. ‘(The owners) just walk away and wash their hands of it.’”

The Daily Press. “Despite the large number of foreclosures and other struggles associated with the housing slump, Adelanto Mayor Pro Tem Charley B. Glasper thinks that the market will soon turn and the city will experience growth.”

“‘We are only 25 percent developed. We have the land mass to expand this city to something great,’ he said. ‘One of my biggest disappointments is that we don’t have a big, family-style dining restaurant.’”

“When Glasper drives down the streets of Adelanto, he said that he cannot help but notice the number of houses that have been boarded up and wonder where the people of his community are going to find relief from their financial burdens. ”

The Orange County Register. “Home market watcher Steve Thomas in Aliso Viejo reports that the number of O.C. distressed properties for sale (as defined by homes listed by agents as foreclosures or short sales) was 3,324 last week. That’s up 265 or vs. Thomas’ last report two weeks earlier, up 8.7%.”

“As a percent of all listed homes for sale, distressed properties were 19.3% of the market vs. 17.50% two weeks earlier.”

The North County Times. “The first local foreclosures auction in several years left dozens of buyers clucking happily, but it also revealed a lot about the depth and speed of the real estate market’s tumble, buyers and agents said.”

“A couple of houses that generated suspiciously large cash kickbacks to buyers two years ago topped out at just 40 percent of their most recent sale prices. One Murrieta house whose last sale was recorded at $719,000 in March 2006 was seized by a lender in January and cleared the gavel at $305,000.”

“Carolyn Tidmus, a local real estate agent who had three listings on the block, said she suspects many of the sellers will end up rejecting the winning bids, which were typically $100,000 to $200,000 less than the amounts they had to write off as bad loans and significantly lower than she had expected.”

“‘It was very depressing,’ Tidmus said.”

“A Hudson & Marshall executive estimated that sellers will approve 75 percent of the offers from the auction, compared to 90 percent in most of the auctions it runs.” “The one earlier this month was the first to be held locally. Several real estate experts interviewed last week said it would be only a slight exaggeration to call it the tip of an iceberg.”

“At the end of last month, some 4,000 mortgages in Southwest County were in default, according to a database that covers California. Real estate experts say the vast majority of those houses will be seized by financial institutions, which are beginning to slash prices and turn to auction houses in an effort to convert real estate back into money, their core business. ”

“About 500 are due to be seized by the end of this month.”

“Lou Klein, who bought his Temecula home in 1995, was one of many who had sat pat in their own houses while watching the run-up from 2000 to 2005 with amazement.”

“‘It just went crazy,’ Klein said. ‘I think it went a little too out of whack.’”

“Klein left the auction here with two winning bids, including a $240,000 bid on an 1,800-square-foot house near Murrieta Glen Arbor Park. A woman bought the house in October 2005, borrowing for the entire $420,000 price.”

“The lender seized the house in July, listed it for a month at $345,000, and cut the price to $328,000 at the end of August before giving Hudson & Marshall a crack at it.”

“Nelson Sales and Lyn Cunningham, a local mortgage broker and real estate agent, were hoping to snag their client a house for $200,000 to $250,000. The client owed $550,000 on a house in Wildomar that probably wouldn’t sell for more than $450,000, Sales said. The client…hadn’t defaulted on the mortgage, Sales said.”

“He was hoping to convince the lender to accept less than the outstanding balance. ‘I don’t want his home to be up there,’ Sales said, gesturing toward the podium.”

“Al Rivera had recently sold his own house in Wildomar and is using the $130,000-plus in equity to make down payments on two or three less expensive houses. With new monthly mortgage payments of just $600, Rivera figured he can easily come out ahead as a landlord.”

“Rivera walked away with a winning $131,000 bid on a three-bedroom house in Sun City. It last sold for $290,000 in June 2004. ‘I thought 131 (thousand dollars) was a good deal,’ Rivera said after the auction. ‘It’s completely a buyer’s market.’”

The Reporter. “They came, they saw, they bid. And when the proverbial smoke cleared following Sunday’s housing auction, 18 new homeowners emerged victorious while their existing neighbors in a luxurious Vacaville development were somewhat less enthused.”

“‘We welcome them to our neighborhood. We’re just upset that it’s affecting our property values,’ said Kris McLean, one of the original homeowners in the upscale Meadow Woods subdivision.”

“McLean and her husband paid top dollar for their $786,000 property in April. ‘We would’ve waited, but they told us we had to … buy now,’ she recalled, addling that there was no allowance for haggling over costs.”

“At auction on Sunday, a five-bedroom dwelling initially priced at $809,900 sold for $605,000 and a similar residence previously priced at $826,900 went for $606,000.”

“Scott and Kathy Reid of Vacaville walked away empty-handed. ‘We had a figure and we stuck to it,’ Scott Reid said.” “The couple’s next move was to have some fun before resuming a housing search. ‘(We’ll) go spend the money that we didn’t spend today,’ he joked.”

The Bend Bulletin reports from Oregon. “Frustrated by a season of sluggish sales, Brooks Resources Corp. put the last three unsold townhomes in its prime RiverWild subdivision at Mt. Bachelor Village up for auction Nov. 2. It was a bit of a bust. Only one of the three sold, and at the minimum bid — more than $200,000 below list price. The other two attracted not a single offer.”

“That, for Central Oregon’s largest land developer, was a sign of the times.”

“Now, with an overhang of unsold inventory glutting the housing market — the aftermath of a three-year boom run amok — Brooks, along with some of the region’s other large builders and developers, is trying to adjust to a slump that Brooks CEO Mike Hollern believes may last another two years.”

“Whether the downturn lasts that long, or is shorter or longer, of course, is anyone’s guess. Hollern’s 40 years of experience in the local housing market is telling him to tread cautiously through the minefields.”

“‘I wouldn’t be about to predict that we’re at a bottom,’ Hollern said. ‘I know that’s not what the real estate community likes to hear. But the problem is, you don’t know when the top occurred until after it’s there, and you don’t know the bottom has occurred until after you’ve been through it.’”

“Buena Vista Custom Homes, a Lake Oswego-based company that billed itself as one of the nation’s fastest-growing builders when it moved into the Bend market in early 2006, announced Thursday that it will put all 200 of its unsold homes in Oregon up for auction next month, including 29 in its brand-new east-Bend subdivision.”

“‘We were overaggressive and too slow to react to the changes in the market, and that has created an oversupply of finished homes,’ Buena Vista President Roger Pollock said in a company press release. ‘Buyers are going to get amazing deals, but we simply have to reduce our inventory.’”

“Many of the speculators and investors who accounted for up to a third of purchases in subdivisions like NorthWest Crossing during the boom years have fled the ‘buy’ side and become sellers, inflating inventory levels and forcing the region’s developers and builders to change course.”

“When NorthWest Crossing started six years ago…lot prices that started ’slightly below market’ in the early years in the $50,000 to $70,000 range ballooned to $200,000 in the peak boom years for the best lots, Hollern said. At the same time, the subdivision’s designated builders built ever-larger homes with ever-more-expensive amenities in the subdivision’s neighborhoods because they could sell them.”

“The price escalation has pulled into reverse, Hollern said. Last year, the prices on lots sold in NorthWest Crossing averaged $218,000, the subdivision’s general manager, David Ford, said. This year, they’re averaging about $189,000.”

“‘Nobody quite knows where the price is going to settle down,’ Hollern said. ‘If you bought something in 2002 for $250,000 or $300,000 and you missed selling it for $750,000 two years ago, and now you have to sell it for $400,000, is that a bad deal? There was a peak there that some people missed if they didn’t sell. And if they bought on a peak, that’s kind of tough. So prices have to come back to, I think, to a somewhat more normal level.’”

“Are they there yet? ‘No,’ he said. ‘I don’t think so. I think there are more adjustments.’”

The Oregonian. “The Portland region remained a rare star in the gloomy U.S. housing market by reporting yet another annual price increase in October…despite a bloated inventory of unsold homes that would typically drive down prices. So far, sellers have refused to reduce their prices dramatically even though (the) wait is up by more than one-third from a year earlier.”

“Some sellers haven’t had much luck. Broker Terry Stewart listed a 1966 ranch house for $250,000 in May. It’s (in) a working-class neighborhood where crime is a growing concern. She got one offer — which wasn’t acceptable — and then the buyer pool went dry. The owners dropped the price to $245,000, then $240,000.”

“In September, the price fell again to $229,000. On Friday, the couple who owned the home closed on a sale at $223,000.”

“Stewart said that sale was typical for what she’s seeing. Home sales she works on are off about 10 percent from what they were a year ago.”

“The couple found a bigger place in Happy Valley that had been through similar price drops, Stewart said. The 2,170-square-foot home started at $409,000 in April. Stewart’s clients bought it for $355,000 in October. She said buyers remain out there, but ‘if you’re overpriced, you’re sitting and sitting.’”

The Columbian from Washington. “Clark County home sellers seemed to be backing down from a long face-off with buyers over asking prices, an October real estate report suggests.”

“The median selling price of houses sold in Clark County dropped sharply last month. At $245,000, the October median price of new and pre-owned homes sold was 7.5 percent lower than the $265,000 median price for the same month a year ago, according to appraisers in Vancouver.”

“‘It looks like sellers are finally yielding,’ said Tim Duy, an economics professor at the University of Oregon.”

“The volume of homes sold last month also continued to be lower than 2006, but that trend has been under way for several months. Kathy Rylander, an associate broker in Vancouver said she’s been most surprised to see slowing sales among inventory that was once considered somewhat affordable, priced between $200,000 and $500,000.”

“‘It’s shocking to me. That’s usually a pretty good price range,’ she said.”

“Locally, ‘it’s a good time to buy,’ Rylander said. ‘Now that we see sellers are reducing their prices, that should be an incentive.’”

The Heraldnet from Washington. “Tom Callaghan remembers when Snohomish County developers couldn’t build houses fast enough. And Callaghan, a real estate agent, couldn’t sell them fast enough. But in the space of a year, he has watched a once sizzling market smolder.”

“Those who are buying have more than 50 percent more homes and condominiums throughout the county to choose from than last year, according to the Northwest MLS. It’s a boon for buyers and a burden for builders who are stuck with too many finished houses.”

“Some builders are lowering prices and some are offering upgrades, cars and flat-screen televisions. The most common come-on is buyers’ bonuses that range from a few thousand dollars to $100,000 in at least one south Everett development.”

“‘Builders are being beaten up so badly,’ said Callaghan, an agent in Lynnwood. ‘It’s like having a gun pointed to their head. They just need to get out of that standing inventory, step back and regroup.’”

“Drive 35th Avenue SE from Everett to Mill Creek and see a glut of new developments, most offering enticements to potential buyers. For several miles, nearly every cross street and side road contains two or three signs plunked in the ground advertising new homes in the area.”

“In a healthy market there is usually about a year’s supply of vacant lots. Right now there are 22 months of inventory in the county, according to New Home Trends. The inventory of homes under construction has doubled since last year to about a 61/2-month supply.”

“Competition for buildable land had been stiff. Developers paid top dollar for vacant land, and in order to make a profit, they have to build and sell a house for a certain price.”

“‘It got to the point property kept going so high it began shutting out a lot of people,’ said Vern Holden, a broker in Mill Creek. ‘When an entry level home is $500,000 — come on, half a million for a newly married couple to buy a house? It could only go up so far and it did.’”

“Buyers, however, shouldn’t expect those deals to stick around much longer, said Todd Britsch, president of New Home Trends. For buyers, now may be the best time, he said. Many of the incentives will likely disappear after the first of the year. Sales typically slump in the fall and pick up each spring.”

“‘Builders are very, very nervous,’ he said. ‘Buyers are sitting on the fence waiting on the shoe to drop and the market to absolutely collapse. It’s not going to happen.’”

The Juneau Empire from Alaska. “Alaskans are worried about the extensive media coverage of housing problems in the Lower 48, and that is undercutting confidence here.”

“‘Folks want to know if Alaska is heading for another market crises like the one we experienced in the mid-1980s. The answer is no,’ Dan Fauske, AHFC’s CEO told the Alaska HomeBuilders Association at the group’s annual meeting. ‘The 1980s crises was an economic crisis, not a housing crises. Today what we have is a cooling off of the overheated housing market from the past several years.’”

“Fauske said that Alaska has only 11,000 of 92,000 total mortgages that are considered sub-prime and only 2.7 percent of current mortgages have adjustable interest rates.”

“Housing prices in the Matanuska-Susitna Borough have dipped 4 percent to 5 percent, and the growth in Anchorage home prices has slowed to about 5 percent over last year. But those are adjustments to an overheated market over the past two to three years in both areas, Fauske said.”

“‘We’re…coming off peaks in the market. Until about a year ago, our state’s housing market was chugging along extremely well, too well. In many areas of the state it was a seller’s market,’ he said. ‘Now more housing units are on the market for sale or rent, they’re staying on the market a little longer, and depending on how urgently an owner wants to sell, prices are likely to be adjusted downward.’”

“Bankers may have been less diligent than they arguably should be because they wanted to help their customers. New generations of younger bank officers don’t remember the 1980s. ‘In those days the only new home that a builder could finance was a pre-sold,’ Fauske said.”

“‘It is not likely that Alaska will escape scot-free from the economic squeeze being felt across the nation. Like in other states, we’ll see adverse consequences of the national housing market, which is shaking the confidence of consumers and the mortgage industry,’ Fauske said.”

Some housing bubble news from Wall Street and Washington. MarketWatch, “Swiss Re on Monday said it was taking a $1.1 billion loss after insuring a client’s portfolio exposed to the U.S. subprime mortgage meltdown and related credit-market turmoil. Swiss Re’s credit solutions division had put together protection to insure an unnamed company against a ‘remote risk of loss.’”

“The loss is one of the first major subprime-related hits reported by a reinsurance company. ‘The full effect of the U.S. subprime crisis is finally washing on the shores of Continental Europe,’ said analyst Catherine Stagg-Macey. ‘Up to this point, the U.K. financial services firms had taken the brunt of this storm.’”

From Forbes. “Swiss Re refused to give details about the client it had been underwriting, but it did say that the client’s portfolio was made up of mortgage-backed securities and asset-backed collateralized debt obligations whose value had fallen to zero.”

“The client’s entire portfolio, underwritten by Swiss Re, saw its value fall by 31.6%…because of the ratings downgrades in October.”

From Reuters. “Swiss Re faces a risk of further downgrades, said Chief Financial Officer George Quinn on Monday. ‘There are no similar transactions elsewhere in our portfolio,’ Quinn said. ‘There is a risk of further downgrades in the portfolio,’ he said.”

“National Bank of Canada said on Monday it expects to record a fourth-quarter pre-tax charge of $587 million on its holdings in non-bank asset-backed commercial paper, a higher-than-anticipated hit and the largest by a Canadian big bank for exposure to these troubled debt investments.”

“Canada’s non-bank ABCP market, worth about C$35 billion, broke down in August when investors suddenly stopped buying the interest-paying securities on concern their underlying assets were exposed to the default-hit U.S. subprime mortgage market.”

“Several other Canadian big banks, as well as a number of companies invested in the paper, have already announced write-downs of up to 15 percent in the value of their ABCP as it remains unclear what the non-trading instruments are worth.”

“‘National Bank’s provisioning represents more than 25 percent of its exposure, one of the highest levels that we have seen to date,’ Dundee Securities analyst John Aiken said.”

“Impac Mortgage Holdings Inc, a struggling mortgage lender, said on Monday it expects to report a larger third-quarter loss, and its chief executive said the company’s viability was a concern.”

“Impac projected a greater quarterly loss than the $127.7 million it posted a year earlier, but could not estimate the size. It also said the value of liabilities on its books will exceed assets, creating a shareholder deficit.”

“‘We are truly disheartened by the chain of events that, despite our arduous efforts, has led to the significant and abrupt loss of our stockholders equity,’ CEO Joseph Tomkinson said in a statement.”

“‘As we continue to manage through this unprecedented real estate and mortgage business environment, which historically has never seen this magnitude of losses or lack of liquidity in the capital markets, we will do what is necessary to maintain the viability of the company,’ he added.”

From Bloomberg. “Impac specialized in Alt-A mortgages, which fall between prime loans given to the most creditworthy borrowers and subprime loans.”

“‘As a result of continued deterioration in the real estate market during the third quarter, the company expects to significantly add to its loan-loss provisions primarily due to increased delinquencies in our long term investment portfolio and increased loss severities related to the sale and liquidation of real-estate owned properties,’ Tomkinson said.”

“Northern Rock Plc’s 25 billion-pound ($51 billion) loan from the Bank of England won’t be extended indefinitely, limiting the value of potential bids for the U.K. bank that was bailed out in September.”

“Interested parties ’should not assume at this stage that the current Bank of England loan facilities will be available’ beyond February, the Treasury said in a statement.”

“All offers for the Newcastle, England-based lender are ‘materially below the market price’ on Nov. 16, Northern Rock said in a statement today.”

“‘Materially below’ could mean half the market value,’ said Colin Morton, a fund manager at Leeds-based Rensburg Sheppards, which oversees about 13 billion pounds. ‘Anyone who owns this stock is taking a complete gamble.’”

“A jump in credit costs in August and September left Northern Rock, which specializes in mortgage lending, unable to write new loans, forcing it to seek aid from the Bank of England. That announcement sparked depositors to stand in line to withdraw their savings in scenes that caused Richard Lambert, the country’s chief business lobbyist, to liken the country to a ‘banana republic.’”

“‘The value to shareholders from any of the proposals…remains highly uncertain and will be dependent, among other things, on when and if there is an improvement in market conditions…’ the company said a statement.”

“Separately on Monday, rating agency Moody’s downgraded Northern Rock’s financial strength rating to D+ from C-, citing the delay in finding a corporate solution to its situation.”

“As banks disclose more multibillion dollar write-downs spurred by the collapse of the subprime mortgage market, investors increasingly want to know what the banks knew, and when they knew it.”

“‘When we are talking about numbers of this magnitude, there really is no excuse for people to suddenly discover that they are confronting potential risks many billions of dollars higher than what they anticipated,’ said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission.”

“‘The problem really relates to the internal capacity at any of these banks to identify with some degree of accuracy what their true risk profile is,’ he said.”

“The banks could also face legal liabilities for not disclosing these issues fast enough. Under U.S. Securities and Exchange Commission rules, banks are supposed to notify shareholders of a material event within four days of learning about it.”

“‘(The banks) didn’t know until four days ago they had a big problem?’ said Mary Beth Kissane, head of investor relations at corporate public relations firm Walek & Associates. ‘Either they don’t know, which is a competence issue, or they do, which is a criminal issue.’”

“At least nine shareholder suits have been filed against Citigroup Inc and Merrill Lynch & Co Inc executives in the last month, after the firms announced big write downs.”

“‘Citigroup’s credibility with investors is in shambles,’ shareholder Jeffrey Harris, claimed in one such suit filed last week in U.S. District Court in Manhattan.”

The Wall Street Journal. “Chinese authorities are slamming the brakes on bank lending, in their latest attempt to curb the runaway investment threatening to overheat what is soon to be the world’s third-largest economy.”

“In recent weeks, regulators have quietly ordered China’s commercial banks to freeze lending through the end of the year, according to bankers in several cities. The bankers say that to comply, they are canceling loans and credit lines with businesses and individuals.”

“The lending freeze shows how the slowing U.S. economy may be complicating Chinese policy making. Lower interest rates in the U.S. give Beijing less room to push up rates…as China already has done four times this year… without creating a ripple effect.”

“By raising rates further China could risk boosting the value of its currency, the yuan, too much for the comfort of its exporters, a critical part of the Chinese economy.”

The Orlando Sentinel reports from Florida. “Linda Rovetto is a property-title agent in west Orlandohasn’t taken a salary since the summer. She’s working fewer hours because there’s simply less business to handle. ‘We used to do anywhere from 13 to 20 [closings] a month,’ said Rovetto, who owns Florida Lakes Title & Closing in MetroWest. ‘In September, I did two.’”

“‘I sit here and I play solitaire’ on the office computer, she said. ‘Even the junk work that everyone hates to do is done.’”

“Cancellations have doubled or even tripled during the slump, Rovetto said. Some people change their minds about refinancing property; others can’t get approval for a mortgage.”

“Joe Ramirez used to have a dozen workers, but these days he works with a skeleton crew: his parents, his sister and himself. His company, One Stop Affordable Hurricane Shutters, has taken a hit from the housing slowdown.”

“‘I held on to my boys as long as I could, hoping there would be a turnaround,’ Ramirez said. ‘In reality, I should have let them go earlier.’”

The News Press. “Dennis Cantwell spent the Lee County housing boom putting up expensive houses in Bonita Springs — now he’s renovating them as the demand for new ones fades away.”

“‘Half our business is remodeling while a couple of years ago when things were going well, I’d say, ‘I don’t have time,’ Cantwell said.”

“The number of single-family-home permits issued by the county fell to 91 in October from 444 a year earlier. Builders are increasingly taking smaller jobs such as adding a garage or putting in tile.”

“The drought in home construction follows a two-year decline in sales prices and a corresponding piling up of unsold houses. As a result, the median price of a single-family home in Lee County has fallen to $231,600 in September, the latest month available, down 28 percent from an all-time high of $322,300 in December 2005, according to the Florida Association of Realtors.”

“Meanwhile, about 15,000 existing houses are for sale in the county, more than four times what there were at the height of the boom in 2005.”

“Kerry Johnson, who with her husband Mark were mainly building custom houses during the housing boom but that now ‘we’ve definitely picked up a lot of remodeling and additions and upgrades.’”

“They’re building one new house, she said, but ‘there’s not a big market for that.’”

“Spec homes, put up by a builder ‘on speculation’ that a buyer will materialize, were never a big part of their work and now have disappeared altogether, Kerry Johnson said. ‘With the buyer’s market, we can’t really afford to build spec homes.’”

“The situation isn’t limited to Southwest Florida, Johnson said — builders they know in Atlanta and Destin are reporting the same type of market.”

“Optimism was in the air in August 2005 when Pat Logue sold the company he’d built from the ground up to one of the country’s largest builders.”

“Logue had vaulted First Home Builders to the top of Lee County’s housing market with more than 5,000 sales in 2004 and on track to nearly double that when he signed the deal with Hovnanian Enterprises.”

“Hovnanian was itself a rising star on the national home-building scene, going on a buying spree of local builders as it moved up to No. 8 in the industry. Its stock was worth $4 billion. But even though Hovnanian’s bet in Lee County seemed like a sure thing, the seeds of Hovnanian’s near-destruction in Southwest Florida had already been sown.”

“Experts now say Hovnanian’s timing was bad, to say the least, although, at the time, it seemed the company was buying into one of the hottest real estate markets in the world.”

“‘Hovnanian was a little late to the party,’ said housing analyst Alex Barron. ‘They went from no exposure to having 25 percent of their market in Florida.’”

“Sure enough, the honeymoon only lasted four months. By December the median price of an existing home in the county had peaked and was poised for a steep slide. To make matters worse, much of First Home’s supercharged growth in 2005 had come in the form of thousands of houses bought by people hoping to resell them quickly for a profit.”

“Helping people get financing had always been a strength of First Home’s, and most of the buyers were borrowing close to 100 percent of the home’s value.”

“Huge numbers of homes being built by First Home ended up flooding the inexpensive-home market because so many buyers were investors who never intended to live there. Now, just more than two years after buying First Home for an undisclosed amount, Hovnanian is largely out of business in Lee County.”

“It has a skeleton crew of about 50 employees, down from nearly 1,200 during the boom. The company’s inventory of hundreds of lots is for sale. Two of the main lenders for First Homes construction loans are also in financial trouble.”

“Nationally, analysts say Hovnanian is not destitute but, like most big builders, clearly struggling to stay afloat as prices continue to fall and mortgage foreclosures dump existing homes back on the market. To cope, the national builders are selling off what they can at fire-sale prices.”

“Hovnanian was one of the first, with its weekend ‘Deal of the Century’ Sept. 16-17. It knocked prices down by as much as $300,000 and also offered a slew of financing incentives and upgrades. All the big builders are doing that to stay solvent, Barron said, but ‘it’s not sustainable.’”

“Now, he said, ‘Every week there’s somebody who’s having a sale’ and buyers are getting the message that it’s foolish to buy except when big discounts are offered. As a result, Barron said, ‘It only takes one builder to cut the prices for everyone else to have no sales.’”

“‘Ultimately, a lot of people made commitments on houses they didn’t intend to live in, and builders are having a lot of difficulty getting them to close,’ said Ann Thomas, who was senior VP of construction for First Home until she was laid off in February.”

“‘It’s really the First Home Builders division that’s hurt Hovnanian the most,’ said Jack McCabe, a real estate consultant based in Deerfield Beach. ‘Fort Myers/Cape Coral is the worst market in the country right now; it saw the most rapid inflation in prices and now it’s seeing the most rapid deflation. It just doesn’t have the industries that would attract new residents. People are either already here or retirees.’”

The News Journal. “For (some) in Volusia and Flagler counties who aren’t even trying to buy or sell a house, it may seem like a mystery why the housing slump is hurting them, too. People are losing their jobs, their retirement, their savings. It started with layoffs in construction and real estate and then trickled down to harm schoolteachers, secretaries and restaurant workers.”

“‘The gal who does my nails said her business is struggling,’ said Mary Spearman, president of Gulf Stream Mortgage in Port Orange. ‘If people cut back, that’s the kind of thing they cut out. I’ve talked to a lot of people and this has affected all types of businesses.’”

“To beleaguered homeowners trying to sell houses in Volusia or Flagler, it may seem as if outside forces have conspired against them. And they are right. This isn’t just about them. They are caught up in something bigger, with the same storm hitting the rest of the country and even the world. But there are reasons it has hit Florida particularly hard.”

“In Florida, it all started in 2002 and 2003 when, thanks to a growing number of retirees, low interest rates and the relative bargains across the state compared to South Florida, home prices started soaring like never before.”

“‘We saw a meteoric rise in prices,’ said John Adams, president of Adams-Cameron Realty.”

“Speculators…artificially pushed up the demand, leading to overbuilding, especially of condos. Market-watchers said a ‘correction’ was inevitable. In other words, at some point the supply would exceed the demand. What goes up, must come down. And, it might have stayed a minor storm were it not for the gale force winds blowing in from the financial markets.”

“‘There are two markets in play: the real estate market and the financial market,’ said Sean Snaith, an economist at the University of Central Florida. ‘Both have ramifications now on a person’s 401(k).’”

“‘Wall Street sold bonds that were backed by mortgages,’ Snaith said. ‘All that means is that my mortgage is put together with your mortgage and sold under the umbrella of a bond. Remember in the Bailey Building and Loan model (from ‘It’s a Wonderful Life’ with Jimmy Stewart), the banker made the loan and the borrower paid the bank. That’s not the way it works anymore. These loans get sold,’ Snaith said.”

The Sun Sentinel. “With so many homes in North Lauderdale in foreclosure, city leaders are seeking to help financially troubled homeowners.”

“They plan to create a new staff position, Neighborhood Improvement Coordinator, who will advise residents how to avoid foreclosure, guide those about to lose their homes and deal with the rash of abandoned properties in the city.”

“Lenders have repossessed at least 57 homes, the owners of 90 foreclosed homes are trying to sell them and at least 325 additional homeowners are in danger of losing their homes, he said.”

“‘Being a small municipality, what we’re observing and at this rapid rate, this will impact us a lot more and a lot faster’ than larger cities, Jesus Valdes, assistant director of community development.”

The Palm Beach Post. “With so many homes and condos sitting on the market month after month, their fresh-paint smell fading and owners’ costs rising, Realtors must find a way to sell.”

“While home sales have dropped nationwide, they have plummeted in Florida, which is ‘ground zero for the housing market slump,’ said Lawrence Yun, chief economist of the National Association of Realtors.”

“In September, statewide sales by Realtors plunged 38 percent from the same month a year ago, the Florida Association of Realtors says. Prices were down 9 percent from 2006, which was a lousy year, too.”

“To restore their spirits, more than 30,000 members and guests of the National Association of Realtors arrived at the Venetian Resort Hotel Casino last week for their annual conference and expo. John Mike, chairman of the Realtors Association of the Palm Beaches, assesses the mood on opening day. ‘People are nervous and they are concerned about where things are going,’ he says. Real estate agents have been hurting financially, ‘including me,’ he says.”

“When the South Florida market was booming, Mike could sell up to 40 houses a year. Now it’s maybe half that. ‘It’s our livelihoods,’ he says. ‘I’m concerned about real estate offices, which are closing,” hurting not only Realtors, but secretaries, office managers and so many others.’”

The Herald Tribune. “There were 1,612 bankruptcy filings in Sarasota, Charlotte and Manatee counties in the 12 months ended Nov. 9, a whopping 160 percent increase from the 619 filings submitted during the same period a year ago.”

“Not surprisingly, the number of filings related to the downturn in the housing industry grew during the past year.”

“‘It goes right down the line from Realtors, to mortgage brokers, to home builders, to any company that supplies these businesses,’ said Rick Ellis, a bankruptcy attorney in Sarasota.”

“Bankruptcy attorneys say the impact of the real estate downturn is beginning to broaden. Retailers, who have seemingly nothing to do with real estate, are beginning to file, and that trend is likely to increase in the year ahead.”

“‘It’s spreading,’ said Sarasota attorney Timothy Gensmer. ‘With all the people being laid off, they don’t have the earnings they used to have, so they’re not spending as much.’”

“Anna Maria Island developers Steve Noriega and Robert Byrne filed for protection from $33 million in debt owed to bankers and investors after failing to deliver on various multifamily and single-family housing projects on Manatee’s barrier islands.”

“Warren Hickernell, who is involved in more than a dozen condo conversions around the region, submitted two Chapter 11 filings after banks attempted to seize properties through foreclosure.”

“Five companies Ashvin Srivastava took into bankruptcy between January and August, claiming assets of $2.7 million and debts of $5.1 million. Srivastava’s companies, which make and install decorative masonry, ran into problems after underpricing work for the developers of the 1350 Main condo tower in downtown Sarasota.”

“‘I thought it would be a showroom that would allow us to get more jobs,’ Srivastava said. ‘But I discovered that each job has to carry itself.’”

“After finishing 1350 Main, construction activity in Southwest Florida ground nearly to a halt. Though he says jobs in the area are nonexistent, Srivastava does not plan to shut down. His aim is to sell his fire-resistant construction building technique to homeowners in the San Diego area, who are rebuilding after the recent forest fires.”

“‘I’m on the rebound,’ Srivastava said. ‘My only sadness is that I depleted all of our family’s resources.’”

“‘Most of the people I see are contractors, subcontractors, mortgage brokers, real estate agents and people who invested in properties in order to flip them,’ said Gensmer, the Sarasota bankruptcy attorney who specializes in personal rather than business bankruptcies. ‘With the housing industry in a nosedive, that’s not surprising at all.’”

“Tampa bankruptcy attorney David Steen expects many more bankruptcies in the year ahead, and he things retailers will be hit the hardest. ‘I think there will be a lot more retail filings next year,’ Steen said. ‘A lot will hold on till Christmas or perhaps until the end of the season. Next summer will really tell the tale.’”

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