The Housing Bubble

The Used House Salespeople report on October results in California. “Home sales decreased 40.2 percent in October in California compared with the same period a year ago, while the median price of an existing home fell 9.9 percent, C.A.R. reported today. ‘Financing issues have dogged entry-level buyers since early 2007, but they spilled over into the middle and upper-tier markets in the last few months,’ said C.A.R. President William E. Brown. ‘The decline in sales at the upper end of the market contributed to a significant decline in the statewide median price as even well-qualified borrowers had difficulty securing financing.’”

“The median price of an existing, single-family detached home in California during October 2007 was $497,110, a 9.9 percent decrease from the revised $552,020 median for October 2006, C.A.R. reported.”

“C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in October 2007 was 16.3 months, compared with 6.4 months (revised) for the same period a year ago. In a separate report covering more localized statistics generated by C.A.R. and DataQuick, 13.9 percent, or 41 out of 296 cities and communities, showed an increase in their respective median home prices from a year ago.”

The Ventura County Star. “On Sunday, Kennedy Wilson Auction Group will offer the homes for sale, beginning with minimum bids of $295,000 to $375,000. The homes this summer were priced from $537,000 to $619,000.”

“‘Basically, it’s driven by the market,’ said Rhett Winchell, president of the Beverly Hills-based auction firm. ‘Sales have slowed over the last year, so builders are looking for other options.’”

“In early November, the company sold all 45 condos remaining in a Benicia development and the remaining seven homes in a Pinole project. Some of those Northern California properties sold for $100,000 less than what they’d sold for in the summer.”

“The sagging market has also been dogged by tighter lending rules, making it difficult for those who are ready to buy, said Gustavo Ramirez, owner of Realty World/Adelante Mortgage in Oxnard. ‘In years past, all you needed is a pulse to get a loan,’ said Ramirez, who has been in the industry for 20 years. ‘That’s changed.’”

“Mark Schneipp, of California Economic Forecast in Goleta, said done right, the auction is the purest distillation of what the true market value of the homes is at this time.” “In essence the auction could ‘establish the new market value’ for homes in that part of Oxnard, he said.”

The Orange County Register. “Orange County foreclosures are rising at a faster rate than they did during the last significant housing slump, in the 1990s, according to an Orange County Register analysis of DataQuick numbers.”

“For example, last month there were more than 500 foreclosures in the county; 12 months earlier there were about 100 foreclosures in a single month.”

“In the 1990s, the growth to more than 500 foreclosures a month from more than 100 a month took 55 months.”

“Walter Hahn, a real estate economist in Irvine who has analyzed several housing cycles, said the loose lending of the boom that preceded the bust far outpaced anything in the ’90s.”

“This time around ‘anyone with a pulse’ could get a home loan, and lenders pushed low teaser rates offered for one year to five years, he said.”

“‘There is no point in fooling around with historical data, because we have never seen anything like this,’ Hahn said.”

The Voice of San Diego. “In the San Diego County breakdown of the Case-Shiller index, data shows that the lowest of the three price tiers appreciated the most during the boom, and has fallen the furthest over the last year.”

“Economists aren’t surprised. The easy financing that swung open the homeownership gate for unqualified buyers fueled a speculative market that sent the region’s house values soaring. ‘Subprime is what drove prices up so high, and what subprime has giveth, subprime has taketh away,’ Thornberg said. ‘Overall, the upper echelons of prices have to come down just as much.’”

“Bob Wilson, a real estate agent who’s been in the business since 1990. He has a condo listing in the Mid-City area in San Diego where his seller owes more than $180,000. The condo won’t likely sell for more than $107,000, he said.”

“‘It doesn’t surprise me that the bottom is going out of the bottom,’ he said. ‘They’re the people who can afford it the least.’”

“Looking at data on the region’s MLS on Tuesday afternoon, Wilson said the listings that have closed escrow in November represent just 5 percent of the total properties listed for sale. ‘That number is beyond scary,’ he said. ‘When you have such low (sales) numbers, prices can only drop.’”

“Thornberg said a region’s markets are inextricably linked. Dropping prices in an inland market pulls demand from the subsequent markets all the way to the coast. And decreased demand will lower those other markets’ prices.”

“‘[Realtors] were telling us everything was fine, but now they’re telling us all real estate is local,’ Thornberg said. ‘But when are you going to stop believing the [expletive]? The reality is your house is not worth as much as you think it is.’”

The Bakersfield Californian. “Kern County’s economy slowed between July and September as the housing market continued to slide and business and consumer confidence waned, according to a report released Tuesday by Cal State Bakersfield.”

“Despite the journal’s publisher, Abbas Grammy’s confidence that the recent spike in local home foreclosures is part of a normal cycle, he conceded that he had underestimated the severity of the downturn.”

“County records indicate that, between January and October, 2,174 Kern homes were foreclosed on. During the same period last year, the total was 255.”

“‘I did not expect the housing market to be in such a prolonged recession,’ he said, ‘and that is perhaps the only soft side of our economy — that the housing market is not going to recover perhaps until 2009.’”

The Press Enterprise. “The meltdown of Inland Southern California’s housing market and the dramatic increase in foreclosures could mean an economic hit of more than $2.3 billion next year, a study released Tuesday found.”

“The weak housing market means less construction work and fewer jobs processing loan applications and homeowner’s insurance. It also means fewer people going on spending sprees for furniture, appliances and other additions.”

“‘The last few months has been kind of slow,’ said Erick Ceniceros, general manager of Macias Furniture in Riverside. ‘People are just not buying like they used to. It’s a problem for everybody.’”

“‘All of that is probably from the decline in construction activity, residential and, to some degree, nonresidential, said ‘Chapman University economist Esmael Adibi. ‘If you cut the number of building permits, it will create some vacuum in spending. All of that construction activity generates quite a few dollars.’”

“Regional economist John Husing said the area could be hit harder than most if gas prices stay high because Inland residents earn less than those Orange and Los Angeles counties and are less able to handle a spike. That could make the economic growth Global Insight predicts harder to achieve.”

“‘That level of growth could be optimistic,’ Husing said.”

“A recession is defined as a decline in growth for two consecutive quarters. The report predicts only Pascagoula, Miss., will produce less growth.”

The Appeal Democrat. “From the lead of a sinking home market, a Yuba City real estate brokerage hopes to spin a bit of gold for some would-be house buyers.”

“Some 25 people are expected to visit houses in north and west Yuba City during a unique tour Saturday; a tour of homes whose previous owners defaulted on their payments, caught in a wave of home-loan defaults that has drastically slowed housing sales starts in the Mid-Valley and nationwide.”

“‘This is something that’s already happened and is beyond everybody’s control,’ said Margo McLeskey, the broker organizing the tour series. ‘We’re trying to help people who couldn’t afford a house two or three years ago to get into the market in a healthy, strong way.’”

“Saturday’s tour will be the second organized by ERA Showcase in the Mid-Valley since mid-October, and the brokerage plans six more events by the end of March.”

“A bus will take hopeful buyers – along with Realtors and mortgage-firm officials – on a four-hour circuit of about 10 houses in north and west Yuba City, ranging in price from $200,000 to about $450,000.”

“Third-quarter foreclosures in Yuba, Sutter and Colusa counties, for example, totaled 436 this year, compared to 161 in the same quarter in 2006, DataQuick reported last month. Statewide, home defaults jumped from 27,218 to 72,571 from the third quarter of last year to the same period this year.”

“‘There’s nothing we can do about the past, but we can hopefully help people in the future,’ said McLeskey. ‘It’s the reality of what has happened across the nation.’”

The Albuquerque Tribune reports from New Mexico. “With the housing market slowing in Albuquerque, sellers are trying some unusual approaches to bring buyers to their doors. Longford Homes had its first-ever auction. The company put up 30 homes on the Duke City’s northwest side that have sat empty an average of six months. Colorado resident Emmet Main walked away from the auction paying $230,000 for a house previously priced at roughly $300,000 by Longford Homes.”

“Main and his wife had considered moving to Albuquerque for a year. The main problem was the cost of homes. ‘Prices have been out of sight,’ he said. ‘Up, up, up for the past few years. It has gone out of reach for a lot of people.’”

“While the auctioneer poured numbers from his mouth in a rhythmic, guttural monotone, his tuxedo-wearing assistants rushed between aisles waving their arms, clenching their fists, clapping their hands and shouting out the bids they took from audience members who lifted numbered white cards.”

“In the corner, a line of young women steadily applauded and smiled. The auctioneer interspersed his pitch with jokes — ‘I’m going to ask you 10 more times, ma’am; I don’t have time to beg you,’ he said as he playfully requested bids from a woman in the audience.”

“One Albuquerque seller who didn’t want to be named is giving away an antique dinner table, a hutch and china with his house. Some builders are offering kitchens full of appliances, while others, including KB Home, have sweepstakes for buyers that will offer a chance at a room full of Disney furniture.”

“In the current market, Pulte Homes of New Mexico sales manager Joe Maez has this advice: Take advantage of the dropping market and buy homes while you can. ‘It’s a huge opportunity, because there’s a perception of a buyer’s market,’ he said. ‘2008 is going to be a seller’s market again.’”

“Over the past four years Travis Thom has bought and then sold about 20 houses for a speedy profit. That strategy worked when the Albuquerque real estate market was hot, but it’s on hold for the time being, says Thom, a real estate broker in Albuquerque and a so-called home flipper.”

“‘I am kind of waiting on the sidelines with a few other people,’ Thom said.”

“Realtor Chris Pino said about half of his job involves tracking down homes that investors can fix up and quickly sell. In the past, such sales would take three months, but Pino now estimates 12 months. ‘I’ve never seen it this slow,’ he said. ‘There’s just not very many buyers right now. People are not making decisions.’”

The Arizona Daily Star. “Some agents say representing buyers in a buyer’s market makes sense, particularly for buyers relocating to Tucson, and it helps the agents land business in the midst of a slowdown. ‘Buyers are in greater demand than in recent years,’ said Jim Hogan, director of the Hogan School of Real Estate.”

“One caveat to representing relocation clients is that some might have trouble selling their homes in order to move, said Bonnie Smith, a Long Realty agent. Lately, some clients have had to ask Above & Beyond Relocation Services for help finding a rental property because of problems selling other homes, said Laurie Becker, a partner in the service.”

“‘Being a buyer’s agent before wasn’t nearly as much fun,’ said Jon Quist, a longtime exclusive buyer’s agent, referring to the high-pressure environment of the boom years. ‘Now you can go out, and you can be calm and look at houses.’”

The Arizona Republic. “Phoenix will likely have to slash programs and services in the coming year as the result of a budget shortfall caused by the slowing housing market and plunging sales-tax revenue. The current forecast shows Phoenix will take in $53 million less than expected over the next 18 months, virtually guaranteeing steep cuts to nearly every department in the city.”

“‘It’s clear that we’re going to be cutting programs,’ Phoenix City Manager Frank Fairbanks said Tuesday. ‘There really is no other recourse.’”

“Valley cities are the latest entities to be rocked by the slowdown in consumer spending that has accompanied the bursting of the housing bubble nationwide. The state is facing an $800 million budget shortfall this year that could balloon to $1.5 billion next year.”

“The situation is similarly bleak in Mesa, which is more dependent on sales-tax revenue than other cities because it does not levy a property tax. ‘Pretty dismal, pretty disappointing,’ is how Deputy City Manager Bryan Raines described Mesa’s latest sales-tax report.”

“Tempe has also experienced slumping sales taxes. Scottsdale’s finance officials have watched the city’s sales-tax revenue drop steadily since September, as well. ‘I expect things to get worse before they get better,’ Finance Director Craig Clifford said. ‘I expect it’s going to be a tough economy for us in the next 12 months or so.’”

The Nevada Appeal. “A self-described ’small’ developer said a slow housing market is not the time for Lyon County to raise water and sewage connection fees. Randy Butler…said he is staying afloat right now, but contractors are facing little or no profit and he is concerned about the county wanting to raise fees.”

“‘The cost of building homes exceeds the market value,’ he said.”

“Butler said many development projects were doomed when banks lost hundreds of millions of dollars encouraging people to build too many homes, and those homes are now being foreclosed on.”

“‘Whatever problems you have, I don’t think you can pay that through developers,’ he said, noting that prices for some homes have dropped more than $100,000. ‘We are not out of the woods, not by a long shot.’”

The Reno Gazette Journal from Nevada. “Nervous Washoe County homeowners are calling the assessor’s office by the hundreds to make sure the large increases in land values shown on recent county mailings won’t be reflected in their property taxes next year.”

“Thomas Gregory, a retiree who lives in the Galena Country Estates on the Mount Rose Highway, said he was ‘floored’ when he saw the land value for his home on less than a half-acre is rising from $66,256 to $159,600.”

“‘I have a pile of rocks worth $100,000 more, and there ain’t a bit of gold in it,’ Gregory joked.”

“The south county had not been reappraised for five years, and home sales studied in a required three-year period included the peak of the housing boom. Even though home prices now are dropping, that lag time is why property assessments went up so much in the south.”

“After reappraising the south end of Truckee Meadows, Washoe Valley and Incline Village, Assessor Josh Wilson said the average land value is up 80 percent for the tax year starting July 1 over the current tax year.”

“Wilson said the median county housing price for 2007 is $326,165. That’s down from a peak of $365,581 in 2006 and from $343,403 for 2005, the years covered in the study.”

“Wilson said the Legislature will talk about changing the state’s tax structure in 2009, especially since the governor has called for sweeping budget cuts due to declining sales and gaming tax revenue.”

The Review Journal from Nevada. “Prudential Americana Group, one of the largest residential real estate firms in the Las Vegas Valley, is filing for Chapter 11 bankruptcy so it can reorganize its debts while continuing operations.”

“The company, which had not filed the paperwork by press time Tuesday, has 1,200 sales executives operating under its auspices and has positive operating cash flow.”

“Owner Mark Stark, however, said Prudential Americana Group, the seventh-largest real estate firm nationally in the Prudential network, needs bankruptcy court protection so it can restructure its debt.”

“The bankruptcy filing will not affect the 3,000 exclusive listings that Prudential Americana has in Southern Nevada, he said. Stark estimated that the company is probably the biggest residential real estate company in the area, with a 15 percent share of all local home resales.”

“Prudential Americana is the second big Las Vegas realty firm to seek bankruptcy protection in recent months.”

“When he bought the company, Stark said he expected a slump in the local real estate loan market would follow the boom that sent home prices soaring, but he was stunned by the magnitude of the drop.”

“‘I did not see a 67 percent downturn coming to the Las Vegas market,’ he said, referring to the drop in existing home sales over the past two years.”

“Nevada leads the nation in the actual number of preforeclosure filings through October with 40.5 preforeclosure filings per 1,000 households. Nevada had 30,276 preforeclosure filings through October, an increase of 106 percent from last year.”

“Realtor Robin Camacho said banks are not protecting the properties they take back. Some have sustained thousands of dollars in damage from being vandalized while in the foreclosure process, which can take anywhere from six months to a year.”

“She said she has one client who recently lost a home to foreclosure and drives by about once a week to throw out squatters, fix the gate and keep the place locked up.”

“‘The grounds are trashed,’ Camacho said. ‘He takes photos, hoping that when the bank comes after him for the deficiency he can show them the photos. I don’t think they will care.’”

From Las Vegas Now in Nevada. “Home prices have been falling for several months in Southern Nevada. Several major builders in Las Vegas are slashing prices in an effort to sell homes in the struggling housing market.”

“Prices have dropped by $55,000 in some cases and as high as $200,000 in one case. But the savings don’t stop there.”

“Geoff Gorman, with Astoria Homes, said, ‘If you add in the fact, builders are paying your loan costs, which is pretty expensive, it gets less and less expensive. Not only do you have a lower price, but you are not paying for the loan.’”

“‘Builders are dropping prices because people weren’t buying homes at the higher prices anymore. The market peaked and people stopped buying homes. Investors left the market, builders have to sell homes, so just about everybody has dropped prices and that has caused homes to sell,’ he said.”

From KSL TV 5 in Utah. “The allegations are sweeping through the south end of the Salt Lake Valley. They involve dozens of investors, millions of dollars, and a deal that sounded so good even law enforcement signed up.”

“Neighbor after neighbor tell Eyewitness News they lost hundreds of thousands of dollars. Investors say it hit Riverton hard; Herriman and Bluffdale, too. People say they were promised big returns, so sweet that not even trained investigators sniffed this one out until it was too late.”

“Jerry Gomez says he has nothing to lose by speaking out about the $150,000 he put in. For a while he was getting a return, then late this summer, nothing.”

“‘All of the strength in my body was just gone. I wanted to fall down. I thought, ‘Oh no, it’s gone, lost. What am I going to do now?’ he said.”

“Gomez and other investors filed a lawsuit that claims they were promised an 18 percent return. They thought their money would be used to purchase residential lots in booming communities in Salt Lake and Utah counties, and company notes indicate their money was secured by deeds of trust.”

“We asked Gomez if he has his name on a lot. ‘No,’ he answered. ‘It was never secured.’ He doesn’t know where the money went.”

The Deseret News News from Utah. “The summary of a 2008 nationwide real estate forecast is sprinkled with fearsome words: ‘greater downside risk,’ ‘repricing environment,’ ‘vulture-oriented investing,’ ‘retrench,’ ‘ebbing tenant demand,’ ‘tapped-out consumers.’”

“But speakers at a meeting Tuesday about the ‘Emerging Trends in Real Estate 2008′ report said Utah has a hard-charging economy and demographics that will insulate it from a lot of the troubles besetting the real estate industry nationwide.”

“‘Our fundamentals are absolutely outstanding,’ commercial real estate broker Michael Richmond said at the meeting of the Salt Lake District Council of the Urban Land Institute.”

“Michael Hansen, director of state and local planning in the Governor’s Office of Planning and Budget, said Utah’s ‘white-hot economy’ is driven by a booming population and continued job growth, and buoyed by exports and manufacturing, defense spending, quality-of-life amenities and a highly educated work force, in addition to ’skyrocketing’ home values.”

“In many respects, Utah is ‘almost an untapped market’ because of the strong economic factors, he said.”

“Richmond said any white-hot real estate markets in Utah could not be sustained. ‘If you see headlines about the economy slowing in Utah, yes, but it’s not panic,’ he said. ‘I think it’s being back to more sustainable, more healthy levels.’”

“‘With respect on the housing side, we have seen some defaults occur through the financial services and the real estate-related companies. The Union Park area…has a high concentration of mortgage, title and real estate-related companies — there’s going to be a little bit of risk there with companies downsizing and shutting down those offices…’ he said.”

“Turmoil actually could be good for the industry because it could lessen the chances of overbuilding, said Dean Schwanke, a senior VP at the institute and editor, principal researcher and adviser of the report.”

“‘The theme for this year is ‘A Dose of Fear,’ Schwanke said. ‘And I think that’s a good thing, because we were a little fat and happy, I think, for the last five years, and it just couldn’t last forever.’”

Some housing bubble news from Wall Street and Washington. MarketWatch, “Sales of existing homes fell further in October even as more homes came on the market, driving the supply of homes to the highest level in 22 years, the National Association of Realtors reported Wednesday. For single-family homes alone, the inventory of 10.5 months is the highest since July 1985. The median sales price fell 5.1% in the past year to $207,800. That’s the largest year-over-year price decline ever recorded.”

“Sales dropped 1.2% to a 4.97 million seasonally adjusted annualized pace in October, the real estate advocacy group said. The sales pace is the lowest since 1999, when the group began tracking combined sales of single-family homes and condos. The median sales price for single-family homes is down a record 6.3% in the past year to $205,700.”

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

“In the West, where sales have plunged 33% in the past year and down 48% from the peak.”

“Existing-home sales in the Northeast are 12.6 percent below October 2006. Existing-home sales in the South are 19.4 percent below a year ago. In the Midwest, existing-home sales are 16.9 percent below October 2006.”

The Associated Press. “Shares of two big Texas-based homebuilders fell to their lowest levels in more than four years on Tuesday after their chief executives said that the troubled housing market will weaken even more next year. ‘This is my fourth downturn,’ said Donald J. Tomnitz, CEO of D.R. Horton Inc. ‘No question about it, this is the most difficult downturn Horton and I have worked through.’”

“Timothy Eller, the CEO of Centex Corp., said, ‘There is no way to predict when this thing will bottom.’”

“Tomnitz said the current slump is different because speculators who had bid up prices disappeared. ‘Once those investors could no longer buy a home and flip it for 15, 20 percent more, they left the market,’ he said.”

“The speculative bubble pushed up prices, which Centex’s Eller blamed for the current state of housing. Despite relatively low interest rates, he said, ‘We have more unaffordable markets in the U.S. than we’ve ever had,’ making it harder for buyers to qualify for loans.”

From Builder Online. “D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year.”

“On a more positive note, Tomnitz said home builders have done a great job adjusting prices and cutting costs through the downturn, so most builders are in a very strong position when they go head-to-head against existing-home sellers.”

“‘That’s the rosy picture here,’ said Tomnitz. ‘We can offer a new product at a more competitive price,’ he concluded.”

From Bloomberg. “Wells Fargo & Co., the second- largest U.S. mortgage lender, will take a $1.4 billion pretax charge tied to increased losses on home equity loans.”

“The fourth-quarter charge reflects ‘the higher losses the company expects in this portfolio because of further deterioration in the outlook for the housing markets,’ the bank said in a statement. The bank cut off most home-equity loans originated by other financial institutions and mortgage companies and tightened standards on ones made by outside brokers.”

“CEO John Stumpf said this month the bank is ‘not immune’ to the housing market slowdown, which he called the worst since the Great Depression.”

“Although Wells Fargo didn’t pinpoint the troubled markets in Tuesday’s SEC filing, management has previously said the bank is experiencing its biggest headaches in California’s Central Valley and ‘auto-belt’ states in the Midwest.”

“Freddie Mac, the second-biggest source of money for U.S. home loans, plans to sell $6 billion in preferred stock and cut its dividend in half to shore up capital depleted by record mortgage defaults and foreclosures.”

“The company may be trying to raise capital in ‘a big chunk’ because sales ‘three to six months from now may happen at worse prices,’ said said Thomas Atteberry, who oversees $2.8 billion in fixed income. Atteberry’s holdings include $550 million in mortgage bonds guaranteed by Freddie Mac and Fannie Mae.”

“Investors will be looking for about an 8.25 percent dividend on the non-convertible shares if they carry a fixed rate, according to Jim Vogel, head of research into debt of government- affiliated issuers at FTN Financial.”

“‘It’s going to be expensive capital for them but they just don’t have a choice,’ said Andrew Harding, who helps manage $16 billion. ‘Sometimes the rate isn’t as important as getting the loan itself.’”

“‘On the surface, the fact that they’re going with this offering means they’ll have to service a dividend on a regular basis. To me, it just adds another liability to their books,’ said Eric Bjorgen, co-manager at Leuthold Core Investment Fund. According to Bjorgen, ‘it smacks of desperation. They’re probably not finding much in the bond markets and they’re finding that traditional avenues have dried up.’”

From CNN Money. “Abu Dhabi’s $7.5 billion stake in Citigroup Inc. is more than just a bandage for the bank, but it’s far from a cure.”

“‘It’s a bad deal,’ said CIBC World Markets analyst Meredith Whitney in an interview, pointing to the 11 percent yield, which is nearly 4 percentage points higher than the yield the bank gives shareholders through dividends. ‘Someone was not using their calculator on this deal,’ she said.”

“Sandler O’Neill & Partners LP analyst Jeff Harte…added, ‘their decision to raise capital given the current market is somewhat troubling. They may be more capitally constrained than we’d like to think.’”

“The 11 percent yield is higher than investors get for non-investment grade bonds, noted Bill Smith, president of SAM Advisors LLC, which owns 60,000 Citigroup shares. ‘We blew right through junk status,’ he said.”

From Reuters. “The seizure of the credit market, which roiled the financial markets and cast a pall over the U.S. economy, could last into 2009, real estate leaders said on Tuesday.”

“The fear factor grew as defaults of home loans made to those with risky credit histories popped up in all kinds of investments, in what has become to be called an FTD — a financially transmitted disease.”

“‘Did anyone know E*Trade was in the subprime business?’ said Michael Fascitelli, president of Vornado Realty Trust.”

“Fascitelli and CB Richard Ellis Group Inc Vice Chairman Darcy Stacom said Wall Street must first digest the nearly quarter of a trillion dollars in loans it absorbed before it resumes profitable lending operations.”

“‘The system has one chunk in it,’ Fascitelli said. ‘When you’re constipated, you’re not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they’ve cleared that big load.’”

“Although Fascitelli would not say exactly when he believed that would happen, he said the fast and easy amounts that made possible large transactions earlier this year would not return. ‘If we have a recession, then all bets are off,’ he added.”

The LA Times. “Countrywide Financial Corp. moved to reassure investors Tuesday that it wasn’t borrowing too much and wouldn’t be constrained in its ability to provide home loans.”

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

“Florida local governments and school districts pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money- market fund contained more than $700 million of defaulted debt.”

“‘Knowing other people were pulling out, and that word was spreading, we looked at the potential for a run on the pool,’ said Jim Moye, Orange County’s chief deputy comptroller.”

Keep Maine Current. “The state treasurer apparently got caught in the subprime mortgage lending mess when a $20 million short-term investment designed to raise money for the state’s cash pool was made in a fund whose assets are frozen, at least for now.”

“State Treasurer David Lemoine, whose office made the investment based on advice from its financial advisers at Merrill Lynch, said Monday he believes the money will be repaid.”

“‘Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,’ Lemoine said. ‘I haven’t booked it yet,’ he said, but, ‘I’m pretty confident, that with patience, we should get our money back.’”

The Wall Street Journal. “The ax has been falling on the CEOs of banks — UBS, WestLB, Bear, Merrill, Citi, Northern Rock. I think the ax should be aimed up one level at the boards of these institutions, whose directors have failed miserably.”

“Amnesia about past credit mistakes is common in the banking business as banks compete for every deal that any other bank is willing to do. This amnesia is taking its usual blame for the current slowdown. But this time is very different. The handwriting has been on the wall for some time, and bank boards have made little effort to read.”

“Wolseley Plc, the world’s biggest distributor of plumbing and heating equipment, plans to cut 1,300 jobs in the U.S. in its fiscal second quarter as the worst housing recession for 16 years hurts profit.”

“‘This is at the very extreme of our worst-case scenario and 2008 will get worse,’ said Paul Checketts, an analyst in London. ‘The cuts announced today are the bare minimum.’”

“Up to one in three or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the U.S. subprime crisis and the tougher lending climate it has created, a study showed.”

“‘The focus over the last few months has very much been on subprime borrowers, but they are only the tip of the iceberg,’ Toby Clark, a senior finance analyst at Mintel, said in a statement.”

“Mintel said 9 percent of British mortgage holders were classed as sub-prime, while a further 24 percent were ‘non-standard’ and relatively high risk because they had irregular incomes.”

“‘In today’s more conservative lending climate, the unconventional financial situation of these homeowners means that they will now face higher repayments and increased lenders’ fees when remortgaging or moving house,’ Mintel said.”

The Calgary Herald. “Since it was introduced a year ago, the 40-year amortization for residential mortgages has been a big hit with Canadians, especially in this province.”

“Albertans have embraced the long-range mortgage debt repayment plan more than any other Canadians, says Canada Mortgage and Housing Corp.”

“Bill McFarlane, regional manager of builders’ markets for Royal Bank, says the uptake is large. ‘I’m suggesting it’s over 50 per cent of the mortgages, and in the new home category, it’s probably higher.’”

“The reason for the popularity is simple, says Richard Corriveau, regional economist with the Calgary branch of CMHC. ‘It’s largely a result of the escalation of house prices,’ he says.”

“‘The principle and interest on the 40-year amortization would be $2,420 a month, compared to $2,840 for a 25-year term,’ he says. ‘That means people would need $12,000 less of an income to qualify, or they could buy $75,000 more house.’”

“A big benefit, though, is for the first-time buyer, who wouldn’t otherwise be able to purchase a new home with the rising prices in the city, says McFarlane. The average price for new single-family homes is expected to reach $475,000 this year and $550,000 next year.”

“‘Rising prices over the past several years have squeezed affordability,’ says McFarlane. ‘The extension to 40 years has helped substantially. While incomes have increased, they have not kept pace with the run-up of prices of homes.’”

“The sentiment of people today has changed, says Corriveau.”

“‘There is less aversion to debt,’ he says. ‘The days of paying off the home may be far behind us. The comfort level in Alberta is that prices will continue to climb, so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”

The Toledo Blade reports from Ohio. “A slump in the local condominium market is mirroring slowing sales of single family homes. The 391 condos sold in metro Toledo and outlying areas from January through October is down 8 percent from the same period a year ago, and the average sale price dropped 4 percent to $157,527, according to the Toledo Board of Realtors.”

“‘There is an excess housing inventory. It’s the simple economics of supply and demand,’ said Dan Lepkowski, an agent in Toledo.”

“The trend of empty nesters who want to downsize into condo units but must sell their homes first are among the factors holding back the market, he said.”

“Kathleen Ryan, of Sulphur Springs Realty in Toledo, said excess residential inventory can cause sellers to take substantially less for their homes. ‘We don’t have the people moving from out of town and coming into the area like we have had in the past,’ she said.”

“The Realtors report shows a steady drop over the last three months in condo sales in Lucas County: 18 units were sold in October; 27 in September; and 29 in August. Jon Modene, president of ReMax Masters in Perryburg, said the 625 condos listed for sale in Wood and Lucas counties in October was…worse than the 515 units in 2005.”

“Still, the outlook for the condo market continues to outpace the residential market, in part, because the bulk of the foreclosures are being made on single family homes, he said.”

The Detroit News reports from Michigan. “Danny Stokes used to sell drugs, before he discovered it was safer and more lucrative to sell mortgages. ‘We are seeing people who two years ago were involved in drug trafficking,’ said Mark Bowling, supervisor of the FBI’s regional office in Macomb County. They slide into mortgage fraud, he said, ‘because it’s easier, it’s safer and the amount of profit is incredibly high. Once they’re in the mortgage fraud business, they see how easy it is.’”

“Inflated appraisals are so common that it’s almost impossible to accurately value properties in some parts of Metro Detroit, said Liza Manzella, a Shelby Township appraiser. Things are particularly bad, she said, in parts of Detroit. ‘You can’t find any in a whole neighborhood that aren’t fraudulent,’ she said.”

“Mortgage fraud was easy for Hani Mortada. From 2002-04, the Lebanese citizen went from a struggling part-time college student in Dearborn to a mortgage loan officer with $25,000 in the bank and a Cadillac Escalade in his garage. In those heady days, money came fast and the chances of getting caught were slim.”

“‘I knew (lenders) would not call to verify (loan information),’ Mortada told a federal jury in Detroit. His group of scam artists had ‘the best underwriters and the best banks — you would not even believe what they would do.’”

“Derek Brown knew Detroit had a problem when a grocery clerk he knew quit his job to become a mortgage loan officer.”

“‘Everyone was selling mortgages. There were mortgage offices on every block,’ said Brown, past president of the Detroit Real Estate Brokers Association. ‘One day bagging groceries and the next day selling my mother a mortgage? What the hell is that?’”

“Today, many of those sweet deals are turning sour. In August alone, there were 3,900 new foreclosure notices in Detroit.”

“‘There were people who couldn’t read or define a loan application who were selling $300,000 loans,’ said Emil Izrailov, who started his career selling subprime mortgages and is now chief operations officer of Kaye Financial Corp. in Bloomfield Hills.”

“On the other side of the table, home buyers were asking for loans that would have seemed outrageous a few years earlier. In Shelby Township, John Karpinki got a $650,000 no-money-down mortgage just 22 months after he was released from prison, where he spent 12 years. The home is now in foreclosure.”

“‘People would come in and tell me what kind of loan they wanted,’ said Nicole Jackson, who worked in the subprime market in Detroit for years. ‘If I didn’t sell them a loan, the person down the street would.’”

“In effect, mortgage lenders today act less like banks than like car dealers: Once a mortgage is sold, their interaction with the homeowner is done. Instead of making money on 30 years of interest, lenders make their money on closing fees. As lenders became further separated from the risk of bad loans, their goal changed: Quality didn’t matter; quantity did.”

“A lot of people made money on Ethel Cochran’s home during the years. After buying her home for $8,000 in 1987, Cochran now owes 14 times that amount — multiple refinancings larded with commissions have left her with a $116,000 mortgage she can’t repay.”

“Her latest lender took a $30,000 loss on the house. Her neighbors are losing money, too: Foreclosures drop the value of nearby homes.”

The Daily Herald from Illinois. “In DuPage County, auctions are held at the sheriff’s office in Wheaton twice a week because of the increased number of foreclosures lately, compared to once a week last year.”

“In the Northwest and West suburbs, 6,662 households received foreclosure notices from January through September. That amount exceeds the full year of 2006, which had 6,428, according to data provided by Kaneville-based Record Information Services.”

“When auctioneer Mary Lee Kopp got to the Winfield property, she announced the opening bid at about $308,000. Having no bids for the Winfield property, Kopp said, ‘I now declare this property sold’ back to Washington Mutual Bank.”

“As many as 25 homes can sell in one day, said Peggy Rinck, sheriff’s department civil division supervisor. One auctioneer had done the job before. Now two more people are needed to assist with the paperwork.”

“‘We’re just barely able to keep up now,’ Rinck said.”

“Crystal Neubauer wants others to know how she lost her Grayslake home. She contends she and her husband fell through the cracks of a corporate lender that had grown too large, that didn’t have enough workers to help them with mortgage problems.”

“‘My husband got laid off, and we kind of went through a period of time with one financial blow after another,’ she said. Last fall they missed a payment.”

“They had considered selling their home when prices were still strong but were not sure where they could move. They also thought things would work out once they got jobs. Then the housing market slowed while the Neubauers’ loan issues increased. It seemed impossible to them to sell the home for even as much as they owed on it.”

“Eventually, Randy Nosalik of GNR sold the home in what is called a short sale because it was for less than the mortgage. He negotiated with Wells Fargo to accept the lower price.”

“The home was sold for around $138,000 in September, Crystal Neubauer said. The mortgage had been about $168,000.”

“‘They accepted in the long run thousands less than what we owed them. It doesn’t make sense. It was appraised before this whole thing started for $214,000 to $220,000,’ Neubauer said.”

USA Today reports on Illinois. “As in many college towns across the country, the real estate market in Champaign is sheltered from the highest peaks and lowest troughs of the national housing cycles.”

“Between July and September, sales of single-family homes were up 9.4% over a lackluster third quarter last year, while prices edged down slightly.”

“In any market, there are always strong and weak pockets, and in Champaign, condos have taken a beating. Only 116 condos were sold in the third quarter, down from 141 in the year-ago period. Prices, meantime, plummeted 23%.”

The Star Tribune from Minnesota. “Even though foreclosure prevention counselor Melissa Hansen’s job is busier, it’s gotten easier of late. In early October, the company handling a client’s mortgage suggested simply subtracting $21,000 off her client’s $121,000 mortgage debt.”

“Ocwen Financial went on to suggest a permanent cut in Thomas Stroud’s interest rate to 8 percent, even lower than his initial teaser rate, so the building maintenance worker could manage the monthly payments on his north Minneapolis home, which otherwise was headed for foreclosure.”

“‘I would like to say all this happened because I was so savvy and wonderful, but quite frankly the company just offered it,’ said Hansen.”

“Counselors say that, at least occasionally now, they’re breaking through servicers’ previous logjams. Cheryl Peterson, manager of (a) foreclosure prevention program, said in recent months they’re getting loan modifications for 20 percent of clients. That comes as their work has increased. Already they’ve worked closely with 206 homeowners this year, up from 152 in all of 2006.”

“Lenders’ backs are against the wall. With so many interest rates adjusting higher, sometimes for people who can no longer afford the lower rate, and housing prices stagnant if not declining, refinancing is out of reach for many, Peterson said.”

“Mortgage services have said their investors will sue them if they modify mortgages. Mortgage-backed securities come in all shapes: Some are all-principal; others, all-interest; some are high-grade, low-risk; others, the opposite. Given that variety, any changes servicers make will mean losses for some and not others.”

“And the losers will call their lawyers, the servicers said.”

From WDIO.com in Minnesota. “We’ve all heard about the foreclosure problem in the United States. The Northland is not immune to the problem. In fact, 1,000 homes in Saint Louis and Douglas County alone have gone in to foreclosure in the last two years.”

“The number of foreclosure cases is shocking. 1,000 foreclosure cases in Saint Louis and Douglas County in two years. A look at civil court records show people from all over The Northland in all price ranges.”

“Realtor Michelle Lyons says there is a foreclosure near you. “I have them in Denfeld, Lincoln Park here in Piedmont, Lakeside, Proctor and I also go down to Kettle River, Askov.”

“Saint Louis County has seen almost 400 foreclosures this year. Douglas County has just over 150 foreclosures. By the end of 2007, over 1,000 foreclosures are expected in the two counties alone.”

“As a financial counselor, Dan Williams has counseled many people facing foreclosure. ‘In this area for instance there’s been a huge proliferation of sub-prime loans in the Duluth, Grand Rapids even in the Hibbing area.’”

“A study by The Minnesota Housing Finance Agency says 21% of sub-prime loan holders in Duluth are at least two months late. That’s one out of five. The Minnesota Mortgage Association says almost every one of them will end up in foreclosure.”

“Foreclosure sales can be bad news for everyone else on the market trying to sell. There is a lot of home sale competition. Today, there are over 200 homes for sale in Douglas County. 1,600 homes for sale in Carlton, Lake, northern Pine and Saint Louis counties.”

“Williams says all homeowners are affected by the sub-prime issue.”

“This house in the Piedmont neighborhood is owned by the bank. It’s been on the market for six and a half months. The original $140,000 price has been cut $10,000 and there’s still no offers on the table. ‘It’s a drastic impact on the value of your home,’ he said.”

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