The Housing Bubble

It’s Friday desk clearing time for this blogger. “Median new home prices in the Las Vegas area fell 9.2 percent in October to $299,575 while sales plummeted 49 percent to 1,302, compared with the same month a year ago, according to SalesTraq. Existing home prices dropped 11.4 percent in October to $257,000 and sales were down 44.3 percent to 1,549. SalesTraq president Larry Murphy said in one subdivision of the Anthem community in suburban Henderson, new home prices were slashed $250,000, or about 30 percent.”

“Nearly all home builders in Las Vegas have reduced prices in new subdivisions around the valley, said Murphy.”

“North Las Vegas homeowner Steve Rohl sold his home at auction in October after watching it linger on the market as home prices dropped. ‘Putting your home on the (MLS) and expecting a sale is like watching dinosaurs dodge asteroids,’ Rohl said. ‘It’s an exercise in futility. Have you tried to do an open house lately? There are six open houses within a block of me. You’re lucky to get one person.’”

“Metro Detroit’s once-booming condo market has hit the skids. Caught in the middle of the condo slump is Anne Feighan, who bought her two-bedroom, two-bath condominium at the SkyLofts Market Square building in Royal Oak for $310,000 in October 2005. Just two years later, it has lost $50,000 in value.”

“‘I wish I would’ve rented,’ Feighan said. ‘It stinks. For me to try and sell right now would be insane. I know that no matter what happens, I’m going to lose money on it.’”

“October figures released by the Southern Twin Cities Association of Realtors, indicate that 63 single family detached homes are currently for sale in the community (55009 zip code). There are also 13 condominiums or townhouses on the market. Local sellers closed on the sale of only three homes in October, compared to six closings last October.”

“‘The office isn’t getting many inquiries about lots or new construction,’ Jim Althoff of Edina Realty noted. ‘People are also asking ‘Why would you build a new house, when you can buy a used one so cheap?’”

“Tom Carnel has been in business for 30 years, and this is the most foreclosures he’s ever seen. ‘It’s also the worst market since the ’80s,’ he said.”

“Andy Walker, president of the South Carolina Realtors said the recent declines in local home sales indicate a return to a normal market. The biggest problem, Walker said, is a tightening in the mortgage industry, which has become more cautious about verifying income, credit, job status and property value.”

“‘That’s just normal. That’s not unusual,’ he said. ‘What’s been unusual is the ability of buyers to just walk in and get a loan for whatever they want … without there being any verification.’”

“They lined up in the cold for days just to get a chance at buying into one of Toronto’s hottest condominium buildings. But all the buyers literally fighting for a spot in the queue for the 80-storey tower were really at the end of the line.”

“About a week earlier, the developers held a posh party in a nice warm sales office for the home-run hitters among Toronto’s real estate agents. About 24 hours later, those agents and their clients got first dibs at buying.”

“‘It’s like owning a night club. If you have a big lineup outside, you let the people in first who keep coming back,’ said Brad Lamb, generally regarded as one of the city’s superstar agents. ‘The regulars get to come in because they are the ones who continually support your business.’”

“Peak season for Shenzhen’s property market is the autumn months of September and October. But this year, the number of transactions dropped sharply over that period, as banks tightened credit and local governments issued policies to curb rising prices.”

“Wang Feng, Deputy Director of Shenzhen Real Estate Research Center said ‘Currently, more and more properties smaller than 90 square meters are being sold. More properties in the 70 to 90 square meter range will hit the market next year. So property prices will experience an adjustment.’”

“According to the research center, both investors and home buyers are taking a wait-and-see approach and that creates a stagnant market. But prices, which soared from an average 9000 yuan per square meter last year to 15,000 yuan in August, are expected to remain high.”

“Election day will be another day of house-hunting for thousands of Victorians still fighting to get into the market. Irena Kades was determined to get her dream piece of land at Sanctuary Lakes by camping out last night to be in the running today.”

“Ms Kades and her husband recently sold their first home at Pt Cook and said they were keen to secure the land in an effort to beat soaring prices.”

“Australians for Affordable Housing spokesman David Imber said whoever wins the election will have to act fast to address the dire situation. ‘The reality is, when people wake up on Sunday, there will still be 1.1 million Australians in housing stress,’ Mr Imber said.”

“Kasey* from Boronia is addicted to credit. When she sees advertising offering her money, she applies. At just 23, Kasey has racked up more than a quarter of a million dollars of debt. Her minimum monthly repayments outstrip her income by almost $500.”

“‘I’m kind of addicted to finances (sic). Now I’m up s–t creek without a paddle.’”

“Now that her repayments are more than her income, you might think the financial institutions would stop lending her money, but you’d be wrong. Just last month, she applied to GE Money for another personal loan of $7000. Not only was the $7000 approved, she was offered $10,000.”

“‘I answered all their questions honestly and told them about all my other debts and my income,’ says Kasey. ‘When I was on the phone to them, I was actually kind of thinking to myself. ‘God, I hope they don’t approve this.’”

“No one can say how or when the subprime mortgage crisis will end. But the next act will not, or at least should not, include Fannie Mae and Freddie Mac riding to the housing market’s rescue. That became clear Tuesday when Freddie reported an all-time record quarterly loss of $2 billion, just 11 days after Fannie Mae reported a $1.4 billion loss.”

“A Fannie-Freddie rescue always seemed unwise to us, in part because it would address the crisis by boosting home prices generally rather than delivering relief targeted to those borrowers who need it most. It also didn’t seem terribly feasible.”

“The losses at Freddie Mac and Fannie Mae show that not even the GSEs are immune to the rot spreading from the subprime market. This is no time to pile new risks on top of those, known and unknown, that Fannie and Freddie already bear.”

Warning, a PDF file with Swerve Magazines’ cover story from Calgary. Right click, save to disk, second page from the end, “If you want to know more about why the U.S. housing market is wobbling like a Weeble in a hurricane, you might want to check out the Housing Bubble Blog. Ben Jones’ readers are a smart, sensible lot, hailing from across the political spectrum.”

“Because his readers are able to highlight local trends as they happen, Jones has been able to connect seemingly isolated dots. As early as 2005, what could have been dismissed as individual pricks in the bubble instead add up to signs that the air is whistling out of the U.S. economy as a whole.”

“‘We call it a Rolling Bubble,’ says Jones, describing how what happens in Florida rolls into Nevada… South Carolina… California… Massachusetts. ‘Similar trends break out all over the country, they’re just not in sync.’”

“‘This isn’t an academic exercise, this is real life,’ he says. ‘You have to look at the Housing Bubble Blog as a lens. Now we’re into the clean up, the explanations and the reform.’”

The Modesto Bee reports from Caalifornia. “Gov. Schwarzenegger proclaimed ‘a very, very big victory for the people of California’ this week in getting lenders to help homeowners avoid foreclosure, but the deal he announced apparently isn’t new at all. The governor took credit Tuesday for negotiating an agreement with mortgage lenders Countrywide Financial, GMAC Financial Services, Litton Loan Servicing and HomEq Servicing to help keep subprime borrowers in their homes.”

“Those four lenders, however, told The Bee on Wednesday that their lending policies haven’t changed and the governor didn’t get them to agree to anything new.”

“‘The governor’s principles already are in alignment with what we already do,’ said Larry B. Litton Jr., who heads Litton Loan Servicing. ‘Nothing’s substantially changed.’”

“Homeowners expecting new assistance from those four lenders may be disappointed, however, because their foreclosure procedures haven’t changed. ‘This is nothing new for us. We’ve always tried to help our borrowers,’ said Kim Cohen, HomEq’s spokeswoman.”

“‘We’re already doing what he suggested,’ GMAC spokesman Stephen Dupont said. ‘No. Things really haven’t changed.’”

The Sacramento Bee. “As California’s housing slump punches through the state economy, it’s leaving bruises on the state budget. Four months into the 2007-08 budget year, state revenue is $1.1 billion below what was forecast. The decline can be seen in all major revenue streams.”

“While it’s not clear how much the state has lost in the collapse of the overheated real estate market and the subprime mortgage crisis, finance officials say the fallout is having a substantial impact on California’s treasury. Even a wealthy man like Gov. Arnold Schwarzenegger is worried about the high rate of foreclosures.”

“For some, government efforts come too late. Erin O’Hagan, a former escrow assistant, said that in January she will be moving out of a Foothill Farms duplex she purchased nearly three years ago with her son.”

“She and her daughter-in-law have lost their jobs, leaving the family unable to pay their adjustable-rate mortgage. Their payments jumped $1,000 a month when their interest rate was reset. ‘I am a 50-year-old widow, my credit is totally trashed, and for the first time in a long time, I’m going to be a renter,’ O’Hagan said.”

“O’Hagan isn’t the only homeowner affected by lax financing rules and high prices. DataQuick has reported a record 24,209 foreclosures in California in the third quarter of 2007, the most since the company began collecting data in 1998.”

“Sacramento County is already getting $15 million less in property taxes this year after the assessor reduced taxes on 50,000 properties. County assistant assessor Kathleen Kelleher said the office may lower assessments on another 25,000 properties next year. ‘We expected this,’ she said.”

The Mercury News. “Bay Area food banks have had a little less to be thankful for this year. Although many of the local charities are seeing a record need for basic food items, donations have been lagging. And food bank workers are nervous, with some calling this the worst season for hunger since the dot-com bust rocked the valley years ago.”

“Michael Bute, a former printer and truck driver now living at InnVision’s shelter, said the influx of needy residents could be blamed on too many folks counting on their homes for income.”

“‘Everyone is depending on the real estate to be a big boom, and it’s a big bust,’ said Bute, as he took a walk after a Thanksgiving meal at InnVision.”

The Recordnet. “New home sales throughout California remain sluggish, a state home-builders trade group said Wednesday.”

“A monthly sales report by the California Building Industry Association and Hanley Wood Market Intelligence showed that all new-home sales in September, including condominiums, were 45 percent below September 2006.”

“The median base price of homes sold dropped by 12.1 percent from the same period last year, falling from $452,990 to $398,060, the report said.”

“In San Joaquin County, sales fell by 77.1 percent from 328 in September 2006 to 75 this past September, the report said.”

“‘The problems relating to credit availability don’t seem like they will be resolving themselves in the near future,’ said Jonathan Dienhart, director of published research for Hanley Wood. ‘Until we have stabilization in the broader market of real estate-backed securities, access to financing will remain restrictive for many potential homebuyers.’”

“Dienhart said consumers seem very wary about home purchasing in general.”

“‘Many would-be home buyers have taken themselves out of the market because they see it as too risky, and until this perception improves, we will continue to experience a degree of paralysis in the new and existing home markets,’ he said.”

“A total of 105 home-building permits were meted out last month countywide, the lowest level by far for any October so far this decade, according to the Construction Industry Research Board, which tracks the building sector in California.”

“That was down from 188 in October 2006 and compares with the high for any October this decade of 638 in October 2002.”

“Statewide, just 12.6 percent of all the homes sold could be afforded by a median-income family, up from 11.7 percent in the second quarter, the group said. California accounted for nine of the 10 least affordable metro areas in the country: Napa, Los Angeles, Salinas, Anaheim, San Luis Obispo, San Francisco, Santa Cruz, Merced and Santa Barbara.”

The North County Times. “New-home sales dropped 67 percent in San Diego during September compared with the previous year, numbers reflected throughout the country as the real estate market continues to struggle, according to reports.”

“But real estate analysts said they can take some comfort in the fact that the market is not getting much worse, even if it is not getting any better.”

“‘August was the worst month we had seen, so September wasn’t better, but it was not greatly worse. So in a way, that’s a positive result in these dark days of the housing market,’ said Jonathan Dienhart, for Hanley Wood Market Intelligence.”

“Home sales throughout the state fell 45 percent during September compared with the previous year, according to Hanley Wood’s report.”

“September home sales in San Diego also took a 26 percent dive when compared with August numbers. San Diego’s market is slumping more severely than the state’s and the nation’s, in part, because a low inventory of housing and higher prices have contributed to a more volatile market, said Paul Tryon, CEO of San Diego’s Building Industry Association.”

“Perhaps even more significantly, consumers are wary of jumping into a slumping housing market. ‘When you start to hear bad news, people who have extended themselves to invest in California in the past start to take a breather. Everyone wonders, ‘How bad is it?’ and ‘How bad is it going to get?’ Tryon said.”

“Also, Dienhart said some Realtors are unwilling to slash prices on valuable coastal properties and would rather hold the homes until the market improves.”

“A return of a healthy real estate market will be greatly dependent on the general state of the national economy, Dienhart said. ‘If we’ve had this bad of a housing market with the economy doing relatively well, there’s no telling how bad it can go if economic conditions worsen,’ he said.”

The Tribune. “Dawn Curnes is closing The Waggin’ Tail Cafe & Barkery, a boutique for pets, in San Luis Obispo next Friday.”

“Curnes said earlier this month that she intended to stay in business at least long enough to get a boost from Christmas sales. But after getting advice from a business expert, she said, ‘it just was not in the books to continue.’”

“‘I’ve been losing money from March on,’ said Curnes, who never accrued any pay for herself in the two years she’s been open. ‘National predictions say retail will be very soft this Christmas, and there’s just no end in sight. Now I have to buy myself out of retail contracts and sell my equipment below market, just to get rid of it, so I anticipate losses around $35,000 to $50,000.’”

“Curnes said she believed her business closure may be one of many to come in the near future. ‘I had such high hopes, but this is a real tough town,’ she said. ‘Small businesses are really taking a hit here, what with the economy, gas prices — it’s a perfect storm.’”

“John Rossetti, Curnes’ landlord and co-owner of the property, estimated that he has seen 50 percent more vacancies than last year in the commercial properties he oversees. The lag time to fill those spaces is about six months.”

“‘I’m getting this strange vibe and am starting to wonder, with the housing market and all the trade that’s attached to it, could it be we are having a recession?’ Rossetti said.”

The Union Tribune. “Nearly 50 sign-waving demonstrators chanted and marched outside the Countrywide Financial office on Frazee Road yesterday to protest the way the firm has handled soaring foreclosure rates in San Diego County.”

“Leaders of the protest also questioned the importance of an agreement with lenders brokered this week by Gov. Arnold Schwarzenegger. ‘Is this really a new commitment?’ asked Orson Aguilar, associate director of Greenlining. ‘It appears to be the same old commitment that hasn’t been working. We’re hopeful, but we’re also very skeptical.’”

“As they marched along Frazee Road, protesters chanted ‘Fix our loans, save our homes.’ Some of the messages written on signs they carried said, ‘Got Turkey? Countrywide home loans’; ‘Keeping my home should not cost me an arm and a leg’; and ‘Would you give your mom a subprime loan?’”

The Associated Press. “Some of the participants held handwritten posters with slogans such as ‘Our lives are not adjustable,’ and ‘Mozilo, don’t be a Grinch’ — a reference to Countrywide Chairman and CEO Angelo Mozilo.”

“One of the protesters, Nanshi Ignacio, said she refinanced her home in San Diego earlier this year with a loan from Countrywide, but now she’s desperate for the lender to change the terms of her loan before it resets in a few weeks.”

“‘I need help to get my loan fixed so that at least I can get a fixed rate and have peace of mind,” said Ignacio. ‘I tried to talk to (Countrywide) but they were saying they can’t do anything because I haven’t defaulted.’”

“”At one point, the protesters walked up to the Countrywide office and slipped signs that read ‘Got Turkey? Countrywide Home Loans’ beneath the doors, which appeared locked.”

Some housing bubble news from Wall Street and Washington. “Profits in the Japanese banking sector have taken a 1.2 trillion yen (£5.3 billion) hit from the US sub-prime mortgage crisis and the country’s central bank has said that worse turmoil may be on the horizon. Seiji Nakamura, a board member of the Bank of Japan, said yesterday that it remained ‘uncertain when adjustments in the US housing market will end.’”

Dow Jones Newswires. “A pair of banks on Thursday said they will invest about $1.5 billion in French-owned bond insurer CIFG Services. The injection will come from Banque Populaire Group and the Caisse d’Epargne Group, two French cooperative banks that own controlling stakes in CIFG’s parent, Natixis. The companies said the move will allow CIFG to keep its AAA credit rating with the three rating agencies.”

“Without the credit enhancement provided by companies like CIFG, Ambac Financial and MBIA, the rating agencies are more likely to downgrade the CDOs further. And ratings downgrade in turn could decrease the value of those debt pools further and possibly trigger forced selling by investors who cannot hold instruments without AAA ratings.”

“According to a report in The Wall Street Journal, CIFG had direct exposure to residential mortgage-backed securities of $1.9 billion, most of which were backed by subprime mortgages, another $4 billion in CDOs that are backed by subprime mortgage loans and $1.4 billion in ‘claims-paying resources.’”

“Fitch Ratings has downgraded its ratings for six collateralised debt obligation asset managers and $29.8bn of CDOs with exposure to US residential mortgages. On Pimco, Fitch pointed to distress in its Pacific Coast CDO before the sub-prime crisis, as well as its Costa Bella vehicle issued in December which has ’significant exposure’ to distressed sub-prime assets.”

“Separately, Derivative Fitch, a unit of the global ratings agency, has downgraded $29.8bn of CDOs with exposure to US residential mortgages, bringing its total CDO assets downgraded to $67bn.”

“The agency said in a statement: ‘The updated assumptions reflect increased probabilities of default, reduced recovery assumptions and increased correlation with respect to recent vintage subprime residential mortgage-backed securities and structured finance CDOs.’”

From The BBC. “There has been a slump in the number of mortgages being approved for home buyers by UK banks. The British Bankers Association said that in October its members lent 44,105 mortgages for house purchase. That was 19% fewer than in September, and 37% down on October 2006 when more than 70,000 mortgages were lent.”

“The figures suggest that the housing market is about to go through a significant slowdown due to high prices and higher borrowing costs.”

‘”October’s data provide evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing,’ the BBA’s director of statistics, David Dooks, said. Last month also saw a big fall in approvals for remortgaging.”

From Thisismoney UK. “Subprime mortgage lender Kensington Group has turned its back on its traditional market in favour of low-risk products. Kensington CEO Alison Hutchinson said: ‘Tough times call for tough decisions.’”

“Melanie Bien, director at independent mortgage broker Savills Private Finance, said: ‘Kensington was the original subprime lender, whose success encouraged many other lenders to move into the sector. If Kensington can see no opportunities in subprime, what chance have other lenders with less experience got?’”

The Economist. “Northern Rock, it seems, is everyone’s problem. The bank, once Britain’s fastest-growing mortgage lender, is now a wreck. Having turned to the Bank of England for an emergency bail-out in August, it is unable to repay its loans unaided.”

“There can be no good ending to this sorry saga, which had its origins in slack supervision, bad central-bank calls and a panic-stricken rescue. Nationalisation looks the best choice of a bad lot, for it aligns risks and rewards most closely and keeps control in the hands of those who have most invested. But there should be no illusions that it is anything but a mercy killing.”

The Irish Times. “With an estimated 10,000 empty apartments in the Dublin area, builders are opting to rent them out rather than try to sell them, says Fiona Tyrrell. The vast majority of these are new apartments which have either failed to sell or have not been put on the market.”

“Meanwhile, Dermot O’Leary, economist from Goodbody Stockbrokers, says that stock levels of unsold homes in Ireland ‘has risen steadily.’ There are now 42,000 second-hand homes for sale - equivalent to a 12-month supply of housing stock, he says. Some regions are more affected than others, according to O’Leary.”

“One in 15 properties is on the market in both counties Cavan and Roscommon, he said.”

“General Motors Corp. has ‘no further obligation’ to inject capital into former finance unit GMAC LLC after a $1 billion infusion earlier this year.”

“The November 2006 agreement to sell 51 percent of GMAC to a group led by Cerberus Capital Management LP ended any need to fund GMAC beyond $1 billion, Randy Arickx, GM’s executive director of investor relations, said.”

The Wall Street Journal. “GMAC Financial Services and its owners are exploring options to salvage its unprofitable mortgage arm, and they are undertaking a debt buyback of as much as $750 million, with a long-term eye to the industry’s recovery.”

The New York Times. “It’s not just subprime anymore. Freddie Mac, the government-sponsored mortgage lending enterprise, said this week that enough borrowers were defaulting on loans made this year or last that it needed to mark down the value of the loans by $1.2 billion.”

“How many of those loans were subprime? None.”

“The borrowers may not have qualified as subprime, but many of the loans should have raised questions before they were made. ‘The underwriting standards declined,’ said Anthony S. Piszel, Freddie Mac’s chief financial officer. ‘That was across the board.’”

“Those who made loans and expected to sell them quickly did not care much about assuring that the loans would be repaid. It turns out that the financial wizards who made it easy to transfer risk also assured that more risks would be taken. They produced innovations like ‘No income, no assets’ loans, which, Mr. Piszel said, ‘found their way into prime space.’”

“As Mr. Piszel told me, ‘As long as house prices were going up, it cured all evils.’”

From Conde Nast Portfolio.com. “James Hamilton took a dive into the balance sheets of Fannie and Freddie. And he’s found some pretty scary figures: The total ‘book of business’ held by Fannie and Freddie between them is now $4.7 trillion, mostly in the form of mortgage-backed securities as opposed to outright mortgages. That means their $65 billion in capital is just 1.4% of their book of business.”

“Fannie and Freddie have been reasonably good at avoiding subprime: their $170 billion of subprime MBS is just 3.6% of their total book of business. But it’s still $170 billion, which is 2.6 times their total capital.”

“The problem FRE has is that the 38% of its book concentrated in ‘06 and ‘07 vintages has very different characteristics from the overall book: 39% Alt-A, 44% IO and 14% option arm. (WHAT were they thinking, these past 21 months, enquiring minds want to know?)”

“It’s a very good question: Freddie Mac was not founded with the idea that it would buy a pool of mortgages 44% of which were interest-only.”

From Bloomberg. “Freddie Mac, the second-largest U.S. mortgage-finance company, may report wider losses than it forecast as the slump in credit markets worsens, Moody’s Investors Service said.”

“‘Continued deterioration in the mortgage market, resulting in further decline in these books, may lead to credit losses in excess of their 11 basis point loss forecast,’ Moody’s analysts Brian Harris and Craig Emrick wrote in the Nov. 21 report.”

“New York-based Moody’s said changes in legislation or government support for Freddie Mac’s housing mission would lead to a ratings downgrade, which it called ‘highly unlikely.’”

From MarketWatch. “While the headlines have been full of stories on the credit crunch, subprime mortgage mess and the real estate bubble, a lot of ordinary homeowners have figured they were immune from the problems.”

“An online real estate community reported Tuesday that home values nationally are down more than 5.5% compared with a year ago, with many markets being hit much harder.”

“As a result, more than 15% of homeowners nationwide who bought their home in the last year are now underwater. The number is slightly worse for consumers who bought their home two years ago.”

“‘We are so used to the fantasy that real estate is a great investment and that it always goes up in value that we’re surprised when it doesn’t,’ says author Marc Eisenson. ‘This is a scary place to be, and a lot of people who never expected to get here are watching the waters rising — particularly if they have adjustable-rate mortgages — and their home values sinking.’”

“Former Federal Reserve Chairman Alan Greenspan said he has ‘no particular regrets’ and that the deepening slump in the U.S. housing market isn’t a result of his policies.”

“‘Markets are becoming aware of the fact that the decline in house prices is not stopping,’ Greenspan said today in Oslo. ‘I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon.’”

“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”

The Housing Bubble Blog on December 11, 2004. “Pricing bubbles often end in a parabolic rise, which we probably saw last year. It is no surprise that what is holding up the market now is lending to so-called subprime borrowers. I view this as bad news for this market as these folks will be in financial trouble even faster.”

“Consider that the risk to mortgage lenders increases, suggesting some desperation for borrowers. ‘Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired’..borrower.”

From Reuters. “Former Federal Reserve Chairman Alan Greenspan said on Friday that U.S. house prices have not bottomed out after a crisis in the subprime mortgage market.”

“‘The markets are becoming aware that the decline in U.S. housing prices is not stopping. It is at an unprecedented pace compared to the last 50 years,’ Greenspan told a financial audience.”

“He said the housing bubble had burst and the market was ‘a good deal away’ from its selling climax — a point at which sellers ultimately lower their prices to match lower bids.”

“This was reflected in the large stock of unsold homes and low turnover, which will be overcome only once people start believing such assets are undervalued.”

“He said central banks should concentrate on alleviating the economic fallout from burst asset bubbles because they had few methods to prevent them and ‘lean against the wind.’”

“‘There doesn’t seem to me that there is very much evidence that we can do much about them,’ said Greenspan, who oversaw Fed policy during the dot-com bubble and the start of the present housing bubble. ‘Irrespective if we could identify them, we could not do much to defuse them,’ he said of asset bubbles.”

The Nashua Telegraph. “The House of Representatives has passed a mortgage reform bill that is as remarkable for what it doesn’t do as for what it does. It doesn’t include a bailout of borrowers or lenders.”

“The Mortgage Reform and Anti-Predatory Lending Act of 2007 seeks to prevent borrowers and lenders from making dumb choices. It doesn’t help troubled borrowers and lenders who made poor decisions in the past.”

“The bill ‘cannot undo what happened, but it makes it much less likely that it will happen in the future,’ Rep. Barney Frank, the measure’s architect, said a few hours before the House passed it last week, 291-127. ‘The fundamental principle of the bill is not to put remedies in place to deal with these problems when they occur, but to stop them from occurring in the first place.’”

“Bursting housing bubbles have exposed bad lending practices. From 2003 until early 2007, mortgage lenders grew ever more lax in their lending decisions. House prices skyrocketed in many markets because nontraditional loans made it possible for buyers to overreach.”

“Thus, loose lending led to higher house prices, which led to looser lending, which led to still higher prices. Now the vicious circle is working in reverse.”

“Frank and co-sponsors came up with a bill that tries to arrest any future cycles of loose lending and skyrocketing prices.”

“Rep. Ed Royce said the bill has ‘murky language (that) would invite litigation from every borrower who misses a payment.’ He added that ‘the main loser will be the subprime borrower who will pay higher rates – if he or she can get a loan at all.’”

“Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices.”

“But that argument didn’t carry the day, as the majority of the House agreed with Maxine Waters, who said that the foreclosure rate has almost quadrupled in her state in the last year. ‘Clearly, we need to prevent the now widespread practice of getting people into loans that they can’t afford,’ she said.”

“The debate over mortgages moves to the Senate, where Christopher Dodd,who chairs the Banking Committee, has blamed the mortgage meltdown partly on regulators who, he says, haven’t exercised their full authority.”

“It’s not the best time to be selling a house in much of the country. But increasingly, it’s a good time to build or renovate one. The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees.”

“It’s a striking contrast from the heady days of the real-estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace.”

“A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings.”

“Last year, the same work would have cost nearly twice as much, he estimates, ‘and I would have had to beg someone to do it.’ Now, the commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low ‘I’m going to keep going,’ he says.”

“Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget.”

“The couple bid out a backyard pool themselves. By pressuring contractors to lower their bids, the Phillipses have knocked $8,000 off the cost. ‘We’re definitely playing people off each other, and they’re definitely dropping their prices,’ says Mrs. Phillips.”

The Sun Sentinel reports from Florida. “When the city decided to redevelop 860 acres in the Midtown district five years ago, officials estimated it would take until 2025 to complete the job. But the housing slump threatens to delay the project’s completion by five years, City Councilwoman Diane Veltri Bendekovic said.”

“The first hints of trouble emerged in the past two months, when 21 people who put down deposits for condominiums in Veranda at Plantation,, filed suits in Broward Circuit Court and federal court for refunds and to get out of their contracts.”

“‘Any time you are losing investors on a project, it will have a negative impact on the development and anyone else moving forward on their development,’ Bendekovic said.”

“In Veranda’s case, the second of two phases — about 175 condos — are on hold because of ‘market conditions,’ Ken Simigran, president of builder WestCity Partners, Inc., said.”

“Because of market uncertainty, the city will postpone overhauling some parks, roads and other projects, Mayor Rae Carole Armstrong said. ‘We got off to a rapid start, now we are running into a downturn,’ said City Councilman Jerry Fadgen. ‘It is just unfortunate.’”

The Palm Beach Post. “An array of dire forces - from soaring inventory to fence-sitting buyers - continued to play havoc with housing markets in Palm Beach County and the Treasure Coast in the July-September quarter.”

“That’s the major conclusion to be reached from the Florida Association of Realtors’ third-quarter sales report for single-family homes and condominiums. Perhaps it will curb some appetites - prices and sales in nearly every market went down, down, down.”

“‘What goes unexplained is how so many people got caught up in this real estate fantasy after losing money in the tech-wreck bear market of 2000-2002,’ said John Pankauski of the Pankauski Law Firm in West Palm Beach. ‘It seems that as history repeats itself, it costs more each time.’”

From Florida Today. “Brevard County had the largest percentage drop in housing prices in the last quarter of any major market in the United States, the National Association of Realtors reported Wednesday.”

“Few people in the real estate industry are talking about an early rebound in the once red-hot housing market. Some market observers thought the local market would have been stronger by now. ‘I’m surprised that it’s still continuing. You keep thinking it’s going to turn around,’ Space Coast Association of Realtors President Lance Vandeberg said.”

The Sun Herald. “The price of existing houses sold in Charlotte County during the third quarter of 2007 dropped the most of any Florida metro area…an 18-percent decrease from the same quarter of 2006.”

“‘Unfortunately … Charlotte has been hit pretty hard by the housing correction and is one of the worst areas in the state in terms of price declines for housing,’ said Sean Snaith, economist at the University of Central Florida.”

“‘The good news is that the housing market hasn’t had the economy pulled out from under it. Just look at Detroit. A lot of the fundamental drivers are in place, you just have this excess supply,’ Snaith said.”

The Bradenton Herald. “When moving to this peaceful paradise, many new residents are faced with the nagging question: Is it better to rent or buy?”

“With more than 5,250 homes on the market in September compared to only 1,705 during the same month in 2005, according to the Manatee Association of Realtors, many in the real estate business believe there is no time like the present to purchase a home.”

“‘People have a great inventory to select from right now,’ said Realtor Cindy Morton. ‘My advice would be make your best offer. Find the property that you like the best, maybe your top three and start making offers on them because this market will change. And the opportunity to get something at the best price will be gone.’”

“‘If you are able to buy, the smartest thing to do is get out there and look,’ Morton said. ‘But both options, renting and buying, are pretty good right now. A lot of people are renting because they are waiting to see what the market is going to do. They want to know if it is going to come down a whole lot more.’”

“Realtor Jeanette Ward said sellers are ready and willing to negotiate. ‘It used to be location, location, location. Now it is definitely price, price, price,’ Ward said. ‘Renting is certainly a good option because sellers are negotiable, but it is the time to buy.’”

The St Petersburg Times. “In 2006, a year when most Tampa Bay real estate agents saw their business plummet, Lori Polin did remarkably well. It was an impressive feat at a time when Florida home sales and prices were dropping dramatically.”

“But now Polin is accused of owing at least some of her success to mortgage fraud. In a letter to Re/Max’s Denver headquarters, the Pinellas Realtor Organization and many of her fellow agents, an anonymous sender claims Polin ‘artificially inflated’ the prices of nine homes in Tampa and North Pinellas so buyers could get larger loans.”

“Most of the houses were mortgaged for far more than the actual sales price, with the buyer or a third party pocketing the difference. In one transaction, $109,000 went to a construction cleanup company although there is no evidence of any construction or cleanup up since the run-down Clearwater house sold last year.”

“That house and the others listed by the anonymous sender are all now in foreclosure proceedings. Polin said she is the innocent victim of a ’smear campaign,’ which she says may have been started by a jealous rival. ”

“‘It’s serious about these people going into foreclosure, but it has nothing to do with me except this Realtor trying to get me into trouble,’ Polin said. ‘All these deals were put together by attorneys and title companies and lenders. Nothing was inappropriate as far as what I did.’”

“Iris Alfonso said her house had been on the market for months when Polin asked if she would accept a reduced price of $449,900. So Alfonso was surprised to find a contract price of $540,000. She was surprised, too, that the buyer…agreed to let her sister stay on as a tenant at the same low rent she had been paying.”

“‘It did make us wonder if something was going on here,’ Alfonso said. ‘Why would he be willing to take such a small amount of rent when his loan was so much higher than ours had been?’”

My Fox Tampa Bay. “Rising taxes are crushing Florida’s housing market. Now a new report shows our home values are dropping. According to Zillow.com, Tampa Bay area home values have declined, on average, 13 percent in a year.”

“The report shows home values in Clearwater Beach have dropped more than 20 percent. Homeowners like Stefanie Pignatelli can’t move because they can’t sell. She’s asking $205,000 for a house she bought for $250,000.”

“‘With a house that’s not selling, and a job in jeopardy, it’s very scary,’ said Pignatelli.”

The News Journal. “Four months have passed since Lynn Friel and her husband moved into a $425,000 place not far from the Intracoastal Waterway in Edgewater. She calls it their ‘dream house,’ one they couldn’t pass up.”

“But their previous home hasn’t sold, and making monthly mortgage payments on two houses in the same county has become a nightmare for the young married couple.”

“Not a single prospective buyer has dropped by to see the three-bedroom, two-bath house. An open house in September drew only a curious neighbor. The country house (is) listed at $269,900, $10,000 less than a few weeks ago.”

“‘We’ll negotiate,’ she said. ‘It’s not set in stone.’”

“Friel believes most buyers these days are looking for deals, houses in the high $100,000 or low $200,000 price range. The Friels can’t afford to go that low, given the equity loans they have on both houses to help pay the bills.”

“‘If we still haven’t sold it by December, I’ll have more gray hair,’ she said, smiling. ‘But I try not to dwell on the negative.’”

“Don’t feel sorry for Ray Hagood. The veteran homebuilder has seen his share of ups and downs in the housing market in more than three decades in the business, and he’s confident another upswing is coming. He just doesn’t know when.”

“‘It’s unfortunate we’re in this temporary crisis, but it is temporary and we’ll get through this. In three years…there won’t be any gloom and doom,’ said the certified building contractor. ‘I went from five supervisors down to none, at this point,’ he said.”

“Still, Hagood said he can’t help but get discouraged at times. ‘I’m sitting on a lot of real estate, and I can’t sell it unless I want to let somebody steal it,’ he said. ‘And I don’t want to let somebody steal it.’”

“So, like many builders stuck with high-priced land, he’ll hold onto the properties as long as he can because paying the taxes, interest and other carrying costs is less expensive than selling them at huge discounts.”

“‘You start wondering if you can hold onto a house for two more years,’ he said.”

“‘Most builders that are still left are not going to dump their homes, (but) a lot of resales will be dumped,’ he said. ‘Buyers are waiting for prices to go down. Builders are waiting for prices to go up. Somewhere, we have to find some kind of understanding. Only time will tell.’”

“When Carmen Bosco arrives at the office in Ormond Beach, it is nearly 9 o’clock, half an hour later than he started these shifts back when business was booming. Nothing is booming now. There are no other real estate agents in the office on this morning. No customers have pulled up, their engines and air conditioning still purring, to await the office’s opening. The phones are silent.”

“A few years ago, he would have fielded half a dozen phone calls by now, he estimates. He would have needed a back-up agent to take over as Bosco ran out to pick up a listing or show a property. Back then, everything was different.”

“‘As soon as you got a listing, you sold it,’ he said. ‘That was my heyday. I enjoyed that.’”

“By last year, his commissions had fallen to just $35,000 or $40,000. And this year, Bosco said he is on course for just half that.”

“Bosco can handle the slump financially. Still, he likes to work. And now, ‘it’s just completely dead. The phone doesn’t ring.’”

“For mortgage broker Janet Lawrence, a file cabinet that no longer bulges testifies to the year-long drought in her business. ‘I’d say our volume is down 75 percent from a year ago,’ said John Nugent, the other half of the two-person team that’s managing to keep the Ormond Beach brokerage afloat.”

“‘I don’t have the heart to put them in a loan that I know they can’t afford. I can’t morally do this,’ Nugent said. ‘But at the same time, I know they can go down the street and get the same deal from someone else in 20 minutes.’”

“But being finicky about ethics can hurt in the pocketbook, he said. ‘It’s been over a year since I took my kids to Disney,’ said Nugent.”

“Brian Harrington still rents an office in DeBary for Apex Funding, but he had to get rid of four other staff members and run his shop single-handed. ‘The bread and butter of the business is gone,’ he said. ‘There no such thing as a subprime market still left.’”

“And mortgage closings take a lot longer, added Nugent, as lenders demand the borrower’s income be fully documented and appraisals updated to reflect declining market values.”

“‘I used to be able to close a loan in eight business days,’ Nugent said. ‘Now I’m lucky to do it in 38 days.’”

The Herald Tribune. “The magic number is 3,254,530. That is how many ‘yes’ votes are needed to approve the sale of beleaguered Coast Financial Holdings Inc. to First Banks Inc. of St. Louis. The fate of the $664 million-asset bank is at stake.”

“With a positive nod, shareholders will get something from their investment, though many will still take a bath.”

“If the merger is rejected, Bradenton-based Coast Bank could become the fourth U.S. bank failure of 2007, and the stockholders would be left empty-handed.”

“Steve Aidlin of Sarasota, one of the 71/2-year-old bank’s original stockholders, is voting his 50,000 shares in favor of the sale. ‘I don’t see any reasonable alternative,’ Aidlin said. ‘The bank, as I understand it, if it doesn’t go this way, the Fed will take it over.’”

“Aidlin expects to lose at least $500,000 on the sale.”

“The bank has been hemorrhaging, $50.1 million in losses the last four quarters, under the weight of its mortgage meltdown. Nearly $80 million in loans are overdue. Many of them involve borrowers with investment homes who stopped making payments when their builders quit and the real estate market tanked.”

“Coast’s troubles will not simply vanish if it becomes part of First Banks. Some shareholders have filed a federal lawsuit seeking class action status against Coast, claiming they were defrauded when the company lied about its financial condition.”

“More than 100 borrowers have sued Coast to get out of their mortgages for homes that are worth less than their loans.”

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