The Housing Bubble

The Monterey County Herald reports from California. “In Monterey County, the numbers are less drastic. But those trying to sell a home face an uphill battle as the inventory of houses on the market continues to climb: The Monterey County Association of Realtors showed 2,732 active home listings in the county last month. That’s up 61 percent from 1,671 in October 2005.”

“Home prices here haven’t dropped as steeply as in many parts of the state and across the U.S., said Monterey County Association of Realtors president Arliene Beesley. ‘I think it’s mostly perception,’ said Beesley. ‘There’s a fear factor: ‘Gosh, will the prices go down more if I buy now?’”

“For qualified buyers, real estate is still a good investment, said Beesley. ‘It’s just getting people to understand not to be afraid, if they buy a good house in a good neighborhood,’ she said. ‘You’ve got to have someplace to live.’”

“While the October median home price in Monterey County declined 10.1 percent from the previous month — down 5.3 percent from the previous year, according to the California Association of Realtors — some of the county’s pricier neighborhoods have a entirely different story to tell.”

“In the third quarter, most of the county saw price declines, from North Monterey County to Pebble Beach, across Salinas and down to the south coast.”

“In East Salinas, median home prices dropped from $528,313 to $395,000, and in South Monterey County, third-quarter sales dropped from $500,000 last year to $385,000. In Marina, third-quarter median home prices slipped from $650,000 last year to $540,000, and Seaside experienced a median price drop from $639,000 to $572,000, according to Monterey County Association of Realtors statistics.”

“Beesley doesn’t sugarcoat the status of the local housing market. It’s been tough on sellers, on real estate agents, on buyers who aren’t sure what move to make.”

“‘It’s a difficult year — we won’t minimize it,’ said Beesley. ‘This real estate downturn has affected the whole country, and that’s every corner of it.’”

The Ventura County Star. “Still stinging from the housing market’s credit woes that have left some potential buyers unable to qualify for financing, Ventura County home sales plunged last month while the median price slid further. Sales tumbled 52.6 percent compared with the same month a year ago.”

“While there’s been ‘a huge falloff in sales’ during the past two years, the median price has held steady, said Bill Watkins, executive director of the UC Santa Barbara Economic Forecast Project.”

“‘It seems the longer sales are weak, the more likely prices will weaken,’ Watkins said. ‘The most likely scenario — we continue to see weak sales and soft prices until developers’ inventories are worked down.’”

“Marcella Poitras, a Realtor in Oxnard, goes door-knocking for up to three hours every day to distribute 100 fliers. Poitras reports her sales have doubled compared with last year. Poitras credits her success to her determination and market conditions, namely the rise in foreclosures.”

“‘The market is saturated with foreclosures, and the buyers are finally ready to buy,’ Poitras said.”

“‘You have to be pretty serious to put your house on the market, because the offers that are out there are not full-price offers,’ said Hope Goss, a Realtor in Ventura.”

“This has been a tough year. October sales at Simi Valley-based Troop Real Estate were off about 30 percent from last year, said Brian Troop, president of the company. ‘Many of my agents are struggling a little bit, and they’ve had to take outside jobs,’ said Troop.”

From ABC 7 News. “That’s where changing locks on homes like this that have gone into foreclosure, has become a bit of a windfall for Joe Grant, the owner of ‘Poppa Joe’s Lock & Key.’ Joe Grant, Locksmith: ‘I’ve done probably 50 houses this year.’”

“With so many houses for sale in Contra Costa, one might think the business of making these signs is booming, but not so. Local sign-makers told ABC7, the demand for signs hasn’t changed much because for every real estate agent who needs a new one, another has gone out of business.”

The Daily News. “Home sales in the San Fernando Valley hit a record low for the second consecutive month in October, plunging 54 percent from a year ago as mortgage industry turmoil continued to roil the market, a trade association said Wednesday.”

“October’s median price slipped an annual 3.3 percent, or $20,000, to $590,000 and was off $33,700, or 5.4 percent, from September, the association said. Sales have now fallen from their year-ago level for a record 25 consecutive months dating back to September 2005. The prior mark was a 23-month decline from April 1989 to March of 1991. The association’s records begin in 1984.”

“From Toluca Lake to Calabasas, Valley home sales took a bigger hit last month than both Los Angeles County and the state.”

“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said that the sales numbers are looking like they did in the early 1990s, the last time the market made such a big turndown.”

“‘I think people quickly forget how bleak it was in the early ’90s, but this is going to be a rough period,’ he said of the months ahead.”

“At the end of last month there were 7,730 properties listed for sale in the San Fernando Valley, a 16-month supply, slightly more than three times the stockpile of a year ago.”

“Association president Winnie Davis said…buyers still seem to be betting on big sales price reductions. ‘Waiting may not mean they will get a better deal down the road,’ she said.”

The Tribune. “The housing industry’s credit crunch took a heavy toll on Los Angeles County last month with home sales plummeting 42 percent from a year earlier, the California Association of Realtors reported Wednesday.”

“The region’s median price for October was $533,070, down 6.4 percent from the previous month and off 8.6 percent from October 2006.”

“The biggest local drop in median price occurred in La Puente, which suffered a 13 percent annual decline in October, according to additional information provided by DataQuick.”

“El Monte and La Mirada both posted an 11.4 percent drop in their median price. Other notable declines occurred in Covina (-10.5 percent), Alhambra (-10.3 percent) and Claremont and West Covina, which both saw their median price fall 9.9 percent.”

“‘The decline in sales is a rejection on the part of buyers to the prices that were out there,’ said James Joseph, owner of Century 21 Ambassador in Whittier and Brea. ‘Successful sellers are reducing their prices dramatically.’”

“Los Angeles County officials are bracing for a round of belt-tightening as property tax revenues fall short of expectations on drooping home values and the state prepares to cut off additional funds.”

“The assessed values of properties in the county rose from $570 billion in 2000 to more than $1 trillion this year. And as some people who recently bought homes watch the values drop, Assessor Rick Auerbach said he’s seen a slight increase in the number of people appealing their assessed values.”

“Two years ago, 12,172 homeowners appealed their valuations - this year that’s expected to hit 13,000 to 14,000.”

“Meanwhile, the number of foreclosures as of Sept. 29 totaled about 8,800 - or 8 percent of reappraised transactions - nearly triple the 3,184 last year that accounted for 1.7 percent of transactions.”

“‘Hopefully by the end of May, we’ll be notifying taxpayers for their 2008 assessment if they deserve a reduction in value,’ Auerbach said. ‘Obviously, for most people, a reduction in value means the actual value of the property has gone down in the last year. That’s the bad news because, for most people, their home is their largest investment.’”

“‘The good news, at least in some small way, is that their property taxes will also go down,’ he said.”

The Orange County Register. “Sales at Skyline at MacArthur Place have been halted through Feb. 1, said Cory Alder, president of Nexus Cos., which is developing Skyline. The home-loan crunch that dampened residential sales nudged Nexus to be the second Orange County developer to halt sales on units under construction.”

“‘With the credit crunch, there’s a lot of instability,’ he said. ‘We’re going into the holiday season, so let’s slow down until next year.’”

“He declined to say how many units are in ‘release 1,’ but the company said in late September it had sold 43 units of its 349 units.”

The North County Times. “More bad news came from RealtyTrac, which released figures today showing that foreclosures in California shot up 213 percent in the month of October from the same time last year.”

“San Diego’s foreclosure rate of one in every 260 homes was on par with the state average. The number of filings increased 165 percent during October when compared from the previous year.”

“Riverside County recorded the fourth-worst rate in the state…an increase of 313 percent from the previous year.”

“Analysts predicted that prices will have to drop further in order to work down historic levels of unsold homes and the slump in housing, already the most severe in more than two decades, could last for another year.”

“‘The light at the end of the housing meltdown tunnel appears to be an oncoming train,’ Joel Naroff, an economist with Naroff Economic Advisors, said in response to the new figures. ‘With so many choices and so few buyers, the median price is cratering.’”

The Press Enterprise. “The state is seeking an emergency federal grant to provide retraining for people laid off in the mortgage and banking industries, according to a statement from the state Employment Development Department.”

“Riverside County is one of the locations being considered because it is one of 12 areas in the state hit hardest by layoffs at companies such as Countrywide Financial and Fremont General, EDD spokesman Paul Feist said in an interview.”

“Other one-stop centers are considered for Los Angeles, Orange and San Diego counties, along with locations in Northern and Central California.”

“Gov. Schwarzenegger was in Riverside on Thursday launching a campaign to alert homeowners living in one of the nation’s most mortgage troubled regions to options that may enable them to save their homes from foreclosure.”

“Schwarzenegger announced the $1.2 million public awareness campaign a week after saying he had reached an agreement with four large mortgage servicing companies.”

“Mike Teer, a Riverside real estate broker who was among those to greet Schwarzenegger, said the governor’s loan freeze option would do no good for the majority of homeowners already headed to foreclosure on mortgages that have escalated beyond their reach.”

The Billings Gazette reports from Montana. “The subprime investment jitters have hit Yellowstone County government. On Tuesday, Yellowstone County Commissioners asked the Montana Board of Investments to return nearly $72 million of its investment funds because of the potential exposure to risky loans and other concerns. Yellowstone County Finance Director Scott Turner said he just got nervous and so did the commissioners.”

“‘All three agreed to redirect the money to the bank for now until we get a better comfort level with what’s going on,’ Turner said. In addition to the subprime risks, Turner said he could no longer get a quote on the daily yield or the investment returns on county funds.”

The Missoulian from Montana. “Production and employment in Montana’s wood products industry continued to decline in the third quarter because of the ongoing U.S. housing slump and related low timber prices.”

“Todd Morgan, director of forest industry research at the University of Montana’s Bureau of Business and Economic Research, said Tuesday it is the second consecutive year with significant declines in Montana’s industry because of national housing issues.”

“Morgan said weak markets, mill curtailments and closures can be expected well into next year. ‘I haven’t seen anything yet indicating a recovery in 2008,’ he said.”

The Idaho Statesman. “Home sellers and real estate agents hoping for a turnaround in the Treasure Valley’s housing slump will have to keep waiting. The latest housing data show prices slipping, with little reduction in the backlog of unsold homes.”

“Throughout the market a common sight has become the real estate sign claiming ‘price reduced.’ ‘Prices are coming down. I’ll guarantee you that,’ said George Tallabas, a Realtor in Nampa who has been concentrating on selling farms and ranches since the residential market tanked in late 2006.”

“The problem is the number of homes for sale in the Treasure Valley. October’s statistics showed 7,411 single-family homes in the Treasure Valley awaiting buyers, compared with 6,595 in October 2006. Sales aren’t making much of a dent in the supply.”

“Don Hubble, owner of Meridian-based Hubble Homes, said there are still buyers at the right price. For example, his recent listing of a home in Caldwell priced at $109,990 drew 2,000 hits on the Intermountain MLS. ‘They called us to see if it was mistake because they had never seen a listing get so many hits,’ Hubble said.”

“He said builders can’t offer the same deal in Meridian, even though land prices have fallen from about $160,000 an acre a year ago to below $80,000 as 2007 nears an end.”

“‘We seriously over-built,’ said Boise State University economics professor Don Holley. ‘I think it’s going to take at least a year to work through all that inventory. Maybe two years.’”

The Oregonian. “Almost every Clackamas County homebuilder sings the same refrain these days: There are lots of buyers out there, but they’re scared. Dire news reports about subprime mortgages, foreclosures and glutted markets elsewhere, especially in Sun Belt, have tarred Portland as well, the builders say.”

“‘What’s killing us is the perception of the market,’ said Tony Marnella, owner of Marnella Homes, which has a 115-lot subdivision in Happy Valley.”

“‘You’ve got all those people sitting on the fence. They think if you buy it today it’s going to be worth less tomorrow,’ Marnella said. ‘We’re just waiting to see what happens.’”

“‘For the next 60 to 120 days there are going to be some good values’ as developers clear their backlog of homes, said Ken Hoffman, a north Clackamas County real estate broker. ‘Bankers are saying to builders, ‘You’ve got to move that inventory,’ Hoffman said. ‘Builders are going to have to take it on the chin.’”

“At Oregon City and Canby subdivisions, Sequoia Development is trying to lure buyers by promising to make mortgage payments for six months. Sequoia’s 276-unit condominium and townhouse project just north of Clackamas Town Center has some units available for rent or with a lease-to-own option. Developers and Realtors say that may be a sign a project is struggling.”

“In Canby, Jason Bristol is dabbling in land development as a second career. He is seeking city approval to build 19 townhouses on an acre he owns. He’s currently renting out four houses on the site.”

“Bristol expects a real estate revival. But, he said, ‘every time I check the MLS, I see a lot of the same houses still for sale.’”

“Two years ago, Lori Loen, a real estate broker, knew exactly how she would spend her days, scouring the southwest suburbs, searching for more land to feed an insatiable housing market.”

“A lot has changed since then for Loen and virtually everyone else involved in the region’s housing industry.”

“The scramble to lock up land for new residences is largely on hold as unsold housing inventories have climbed and many potential buyers are clinging to the fence.”

“A smattering of statistics underscores that the suburban housing market, and corollary efforts to buy raw land for new houses, have slowed. The average price of homes sold in Lake Oswego in 2006, for instance, was $596,600, Lake Oswego Realtor Adelle Jenike said, citing monthly data provided by RMLS. So far this year, that number stands at $547,700.”

“‘The prices of homes have dropped, no doubt about it,’ Jenike said. ‘But we’re not seeing anything like the horror stories on television from around the country.’”

“Last month, according to the same information, the Portland area had an 8.4-month inventory of homes for sale. It’s the highest rate of inventory since January 2000, when the figure topped 10 months.”

“In October 2006, by contrast, the inventory was 4.6 months. In 2005, when the area housing market was red-hot, that figure had dropped to 2.2 months, representing one of the lowest inventories in years.”

“‘Two years ago, we all thought things were insane and probably unsustainable,’ said Ken Gertz, owner of Gertz Construction in Tualatin. ‘But by any long-term measures, the Portland market itself is still very strong.’”

“Other parts of the state, he added, aren’t keeping up. Jackson County, for instance, has slowed dramatically in recent months. ‘And Bend is a tomb,’ Gertz said. ‘But we all knew that. There was no way it could sustain the level of growth it had seen the past two or three years.’”

“At the fledgling Villebois master-planned community in Wilsonville, developer Rudy Kadlub is still planning to start construction Jan. 2 on the 73 rowhouses, townhouses and condominiums.”

“‘We’re continuing to take a very aggressive approach,’ said Kadlub, founder of Costa Pacific Communities. ‘The more ‘there’ we create, the more overall traffic there’ll be.’”

“Former Portlander Jacinda Kirk, a 26-year-old renter in suburban Seattle, would like to buy a place outside of Seattle, but she can’t afford it. ‘We left the Portland area thinking it was expensive,’ Kirk said. ‘We moved to Seattle and said, ‘Oh. my gosh. We love Portland prices.’”

“Kirk would like to see prices come down. She keeps clicking through the Internet in search of a deal in Seattle or Portland. Kirk, who’s married with an infant son, recently found a Beaverton home with a yard on a corner cul-de-sac lot. It’s 1,900 square feet, four bedrooms and has 21/2 bathrooms. Price: $350,000.”

“In Issaquah, a Seattle suburb, she found a 1,700-square-foot, four bedroom and 21/2 bathroom townhouse with no grass for her son to play. Price: $440,000.” “‘If we’re going to spend $400,000 for a house,’ she says, ‘we at least want a yard.’”

The News Tribune from Washington. “Though Tacoma’s largest developer, Prium Cos., has yet to make a formal announcement, the company has quietly pulled its eight-story Hanna Heights condominium project off the market.”

“The company, which had not sold one of the 35 units in the building at Sixth Avenue and Fawcett Street despite a recent upgrade to granite countertops and other upscale amenities, is converting the building to apartments.”

“Real Estate agent Julie Sargent, who was attempting to sell the building’s condominiums, said Prium notified her about three weeks ago to halt condominium sales efforts. Hanna Heights is not the only Prium project that has seen the effects of the slowing real estate market and the credit crunch.”

“Near Sixth and St. Helens avenues, Prium’s plans for a 20-story condo tower, Jay Heights, have been put on ice.”

The Seattle Times from Washington. “The housing crunch hit Renton-based First Financial Northwest Wednesday, as the lender said it would set aside $4.5 million because one of its large borrowers, a residential developer, may have trouble repaying $37.3 million in loans.”

“The company…described the unidentified customer as ‘an entry-level builder’ that took out 90 separate loans for projects in King, Pierce and Thurston counties. The single-family homes in those developments sell for an average $300,000 to $400,000.”

“The developer, First Financial said in a statement, ‘has experienced a slowdown in home sales as a result of tightening credit markets, which has [sic] a greater impact on entry-level borrowers.’”

The Seattle PI from Washington. “Seattle’s 12-month reign atop the nation in annual home-value increases came to an end in September, according to a report released Tuesday. Seattle’s annual appreciation has declined for 19 straight months.”

“September’s year increase was the lowest since June 2003, and home values actually dropped from the prior month for two straight months — the first consecutive decline since November 1995 through January 1996.”

“‘That’s really what I’ve been telling folks to expect,’ said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. ‘Consumers have more choices in the marketplace, and they’re negotiating better deals from sellers.’”

“One of those sitting on the sidelines is Dave Anderson, who moved to Seattle from New York in 2005 for a job. He has been in a position to buy a home for about a year.”

“‘It seems like there’s sort of a euphoria that continues or a denial that the national situation will affect the local market here,’ he said. ‘I think a 5 or 10 percent correction, coupled with sort of a consensus that Seattle is not immune to price declines would make me feel a lot more assured that the bubble is over.’”

The Columbian from Washington. “It’s been four months since Lori and Fred Clark put their Vancouver house up for sale and joined thousands of sellers in pursuit of a shallow pool of buyers.”

“While they haven’t had any offers for their one-story ranch, the Clarks say they’re willing to wait out the market. However, they’ve taken down the ‘For Sale.’ They’ve also cut their price.”

“Despite slowing Clark County home sales, the Clarks don’t plan to take their 2,000-square-foot house off the market. The retired couple say they’re prepared to hold out through the slump.”

“‘It’s just a waiting game,’ Lori Clark said.” “Lowering the home’s asking price to $325,000, down from $339,900, hasn’t helped, the Clarks say. Back in August, their real estate agent was showing the home about three or four times a week.”

“‘There’s been no interest at all since the end of October,’ Lori Clark said.”

“‘They think it’s better to wait for better deals,’ said Sana Mathews, the Clarks’ Realtor. The Clarks are among plenty of sellers. Their home is counted in an 11.4-month supply of new and existing homes for sale here, according to RMLS. Last month’s inventory was up from a 7.2-month supply during the same month last year.”

“The Clarks’ had hoped to sell their Lincoln-area home in time to escape another cool Vancouver winter. They’re planning a move to the warm climate of Albuquerque, N.M.”

“‘But we’re going to wait and do things step by step,’ said Lori Clark. ‘We’ll sell this house and then go there and pick out a place.’”

Some housing bubble news from Wall Street and Washington. CNN Money, “The biggest plunge in new home prices in 37 years was not enough to revive October sales, according to the government’s latest reading. The Census Bureau’s latest report also sharply cut back on its earlier estimates for sales in August and September. Also depressing sales and prices was a record 191,000 completed new homes on the market that have not yet been sold.”

“The report showed that the median price of a new home sold in October plunged 13 percent from year-earlier levels to $217,800. It was most severe year-over-year drop since September 1970.”

“And the price figure may actually be underestimating how the bottom has fallen out of prices in recent months. Most builders are trying to support prices by offering to cover closing costs or adding free extra features on new homes.”

From MarketWatch. ” Sales rose 1.7% to a seasonally adjusted annual rate of 728,000 last month from a revised 716,000 in September, which was a 11-year low. September’s sales pace had originally been reported as 770,000. August’s sales were also revised sharply lower to 717,000, down from 735,000 estimated a month ago and from 795,000 estimated in the first release.”

“Sales are down 23.5% in the past year, a vivid reflection of the carnage in the home-building industry.”

The New York Times. “E*Trade Financial, the Internet bank and brokerage, said Thursday it would receive a $2.5 billion cash infusion from a group led by Mr. Griffin’s firm, Citadel Investment Group. With Thursday’s deal, Citadel will pick up E*Trade’s collection of asset-backed securities.”

“This portfolio includes collateralized debt obligations, which are complex bundles of debt whose value has slumped because of the recent rise in mortgage defaults.”

“Citadel is getting E*Trade’s portfolio for a cut-rate price: It is paying $800 million for assets that had a book value of $3 billion. E*Trade said Thursday it is taking a $2.2 billion haircut on the transaction.”

From ABC Money UK. “LBBW, Germany’s biggest public sector bank, is faces possible writedowns of more than 800 mln eur related to credit turmoil, Financial Times Deutschland reported.”

From Bloomberg. “KfW Group, which organized the bailout of IKB Deutsche Industriebank AG over subprime losses, said an agreement was reached with German banking associations to cover the lender’s remaining risks of about $520 million.”

“The additional risks stem from guarantees given by IKB to other banks providing cash lines to its affiliate Rhineland Funding Capital Corp., which invested in subprime assets, KfW said today.”

“The agreement brings total possible losses to be covered by KfW and German banking associations at IKB and Rhineland Funding to about 6.15 billion euros ($9.1 billion).”

“Four IKB management board members, including CEO Stefan Ortseifen, were relieved of their duties this year as an audit by PricewaterhouseCoopers found the crisis was a result of ‘flawed’ risk management.”

The Gazette. “The Caisse de dépôt et placement du Québec has $13.2 billion in asset-backed commercial paper, its president revealed yesterday. Of that total, $1 billion is invested in subprime mortgages, Henri-Paul Rousseau told the Quebec National Assembly’s finance committee, and, at the worst, the Caisse could write off $500 million in losses on the investment.”

“‘It is a lot of money,’ Rousseau admitted.”

“François Legault, the Parti Québécois finance critic, suggested Rousseau was low-balling the potential loss, saying the $12.2 billion Rousseau considers safe is not immune to loss. Legault said the commercial paper holdings of the Caisse resemble those of the National Bank of Canada, which has announced a potential loss of 25 per cent, calculating that the Caisse could lose $3.3 billion, not $500 million, as Rousseau projected.”

From Thisismoney. “Insurer Catlin came through the hurricane season unscathed, except for Hurricane Subprime. It is writing 86% off the value of its subprime related securities, slashing them from £41m to £6m.”

“This will heighten fears of hits to other insurers, coming soon after a shock £500m credit crisis loss at reinsurance giant Swiss Re. Catlin has a £2.8bn investment portfolio, of which £51m was hit by the US mortgage meltdown. It sold the best of these for £10m, but thinks the rest are worth only 14p in the pound.”

“Numis analyst Richard Gradidge says: ‘It depends how far this crisis spreads’.”

Caribbean Net News. “Catlin said…most of its subprime-related assets are collateralised debt obligations. The insurer said it did not expect to be hit hard by claims resulting from the subprime crisis, saying it had largely pulled out of providing liability cover for financial institutions and the executives of major firms.”

From Reuters. “French bank Credit Agricole doesn’t expect the full extent of the subprime mortgage crisis to be clear before April, its managing director Georges Pauget told La Tribune newspaper on Thursday.”

“‘We will not have a clear view on the deterioration before April, or the middle of next year, because large packages of risky loans issued in 2006 are expected to mature,’ Pauget said.”

“‘The problems of the crisis are essentially problems of transmission. There is a responsibility of the American public authorities regarding the treatment of the subprime problem,’ he said. ‘In my view, the maturity of the loans needs to be extended, the interest rates need to be stabilized, and there needs to be a mechanism to share the losses between the banks and the authorities,’ he added.”

From The Age. “Reserve Bank assistant governor Guy Debelle has compared the subprime credit crisis with the junk-bond collapse in the 1980s and blamed lazy investors who ignored basic risk management.”

“Dr Debelle told the Australian Securitisation Forum that investors had not asked enough questions about why different products rated with similar risk of default paid substantially different returns.”

“‘In theory, securitisation has allowed risk to be packaged and sold to meet the preferences of investors,’ De Debelle said. ‘However, the true nature and correlation of some of those risks has only become apparent to investors in recent months.’”

“Ira Kalish, director of global economics at Deloitte Research, said the worst was yet to come. He predicted that next March would have the most resets on variable-rate mortgages and, subsequently, the most defaults with securities that were backed by the mortgages.”

“‘Unfortunately, we are going to see more resets in adjustable-rate mortgages, likely more defaults on these mortgages and more problems for the securities that are backed up by these mortgages,’ Dr Kalish said.”

“‘The credit crunch is not over, there’s still trouble ahead. We don’t even know where that trouble lies. We don’t know who is holding that stuff (the adjustable-rate mortgages),’ Kalish said. ‘We keep hearing surprises from banks that on a weekly basis increase by billions of dollars the amount that they have to write off.’”

“Dr Debelle said fallout from the failing loans had created a ‘lemon’ effect, with all securitised products — regardless of quality — being sold at cut rates.”

The San Francisco Chronicle. “Here’s more evidence that you can’t call the mortgage crisis a subprime problem. On Tuesday, Wells Fargo said it will set aside $1.4 billion for home-equity loans it expects to go bad in 2008 and 2009. What it didn’t say in its news release was that these are not loans to borrowers with subprime credit scores.”

“‘This was a prime portfolio,’ Wells Fargo spokesman Chris Hammond says.”

“The average FICO credit score for all Wells Fargo home-equity loans is 750, well into prime territory. What probably made these loans risky was not the credit score, but other features, such as no income documentation and high loan-to-value ratios.”

“One mortgage broker forwarded a flyer he received from Wells Fargo, ‘A Guaranteed Home Run With Your Borrowers.’ The flyer, dated February 2006, promoted ‘newly enhanced’ guidelines for stated-income/stated-asset borrowers, who are people unable or unwilling to document their income or assets.”

“Wells says these loans ‘reflect a combination of the most recently originated vintages, with the highest combined loan-to-value ratios, that do not have the added protection of being behind a Wells Fargo first mortgage.’”

“Wells said Tuesday that it will no longer originate home-equity loans through brokers with combined loan-to-value ratios of 90 percent or higher or that are not behind a Wells Fargo first mortgage.”

“‘This is, of course, akin to saying that the barn door will be closed now that the horse is in the pasture and over the hill,’ writes Dick Bove, an analyst with Punk Ziegel & Co. ‘What is particularly disappointing about this incident is that observers of this company never expected Wells to be making these types of loans in the first place. The most damaging part of the company’s revelation is that this company’s underwriting standards may be weaker than thought.’”

“Trading in a benchmark credit derivatives index suggests eight of the 125 companies in the index may default, a situation that ‘is certainly conceivable’ if the economy deteriorates significantly, Wachovia Corp. analysts said.”

“The Markit CDX North America Investment Grade Index, used to speculate on the creditworthiness of companies including mortgage lender Countrywide Financial Corp. and homebuilder Lennar Corp., is trading at levels that imply at least eight defaults in the next five years, Wachovia Securities analysts led by Richard Gordon, wrote in a report yesterday.”

“‘Out of those 125 credits, there are four homebuilders and a number of lenders and insurers with significant mortgage exposure,’ the analysts wrote.”

“Securities firms and banks sold ‘too many lottery tickets’ tied to U.S. mortgages and failed to look closely enough at their growing risks, the head of the Securities and Exchange Commission’s market regulation division said Wednesday.”

“Financial companies had ‘a significant risk-management failure’ on so-called super-senior classes of collateralized debt obligations made up of asset-backed bonds, according to the text of remarks Erik R. Sirri made at a conference.”

“The CDO classes were ‘a perfect structure to lull even sophisticated traders and risk managers into a state approaching complacency,’ Sirri said.”

“The cost of borrowing in euros for a month rose by a record and loans in dollars climbed the most in more than a decade as banks sought funds to cover their commitments through to the start of 2008 amid a credit squeeze.”

“The London interbank offered rate that banks charge each other for euro loans due after the end of the year jumped 64 basis points to 4.81 percent, the highest since May 2001, the British Bankers’ Association said.”

“The rate for dollars jumped 40 basis points to 5.23 percent, the highest since Sept. 18, when the Federal Reserve cut the target rate for overnight loans for the first time in 4 1/2 years.”

“‘The increases we’ve seen in borrowing costs cannot be simply explained away by year-end pressures; this is a full-on credit crisis,’ said Stuart Thomson, who helps oversee $46 billion in bonds in Glasgow, Scotland. ‘There’s no end in sight either. It’s a really unpleasant picture.’”

“The money market liquidity crunch, which began in August after the U.S. subprime mortgage fallout, is deepening further as banks pay a higher premium for cash to meet funding requirements around the Christmas and New Year period, typically the time banks close their books.”

“That rise of around 65 basis points marked the biggest jump at the daily fixing since early 1995, according to Reuters charts, and higher than any increase seen in the run-up to the ‘Y2K’ scramble for liquidity at the 1999-2000 millennium crossover.”

“UBS said liquidity tensions, which have been apparent in unsecured interbank lending, are reaching the secured, collateralised market as the spread widened between rates in euro repo and the European Central Bank’s long term financing operation.”

“Goldman Sachs said money market tensions stemmed from banks aiming to shore up their balance sheets before year-end in the face of pressure on capital ratios.”

“‘While a year-end effect in the money market is typical, it is exacerbated this year due to deterioration in capital ratios arising from U.S. subprime and other credit market losses,’ the bank said in a note to clients.”

“The liquidity squeeze persists even as central banks pledge to inject more liquidity to prevent a financial system seizure.”

“‘Money market pressures are likely to escalate towards year-end…Central bank actions are less likely to alter these trends before year-end. Liquidity operations can help smooth out spikes in spreads, but it is doubtful this will stop long-dated money spreads from trending wider,’ Goldman said.”

The Union Network International. “The global economy is just at the beginning of a financial crisis, UNI General Secretary Philip Jennings told a meeting of the UNI-Europa Finance Committee, meeting in Nyon, Switzerland.”

“‘We have a crisis of confidence, supervision and regulation,’ he told representatives of Europe’s finance trade unions. ‘We have to raise question marks against the financial markets and the global economy.’”

“The Committee agreed to set up a study to look at how regulations and supervision can be improved to help restore confidence in a global financial system that has been shaken by a subprime crisis, a credit crisis, fears of a recession in the USA, and a growing number of job losses in the finance sector.”

The Bradenton Herald reports from Florida. “The Florida Association of Realtors cited disruptions in the mortgage market and tightening credit as factors affecting Florida’s housing market. Statewide, sales of existing single-family homes fell 29 percent in the year-to-year comparison. The median price of homes statewide was $222,100, compared to $242,700 a year earlier.”

“While those numbers showed the local housing market continuing to struggle, things were worse in many parts of the state.”

“The picture was somewhat brighter in the local condominium market. Barry Gould of Island Vacation Properties attributes the falling condo prices and the increased number of sales to the same thing: investors.”

“‘Part of the reason is there were a lot more condos purchased as speculation houses and some of these people have to sell,’ Gould said.”

The Naples News from Florida. “Home sales continued their unsettling trend downward October both locally and around the state. ‘I know as an owner/broker I should be looking at those numbers every month when they come out, but it’s gotten to the point that I sometimes feel like I don’t want to hear it,’ said broker Joe Pavich. ‘I always try to stay upbeat, and I think we’re near the bottom, but the numbers can be discouraging.’”

“Figures for Lee County condos were bleak, with the median price and the number of sales both down 28 percent. Lee Clerk of Courts Charlie Green said there were 1,809 foreclosures in Lee County in October, up from 1,326 in September.”

“Pavich said sales prices today resemble what they were in 2002 and 2003, and serious sellers need to remember keep that in mind. ‘Nobody cares what you paid for your house and nobody cares what you owe on your house,’ he said. ‘It’s a buyers market and that’s what the price needs to reflect.’”

The News Press. “The number of sales of existing homes in Lee County was 405, down 36 percent from 630 in October 2006. With about 15,000 houses for sale in the county, selling a house can be tough.”

“‘In January it’ll be a year I’ve had it up for sale,’ said Rob Ross, who’s trying on his own to sell his three-bedroom, two-bath home in the Silver Lakes community in Gateway for $277,000. ‘The irony is I listed it myself thinking I could pass the savings on to a potential buyer but I’ve just been chasing the market down.’”

“Ross started out with an asking price in the mid $290,000s before cutting the price, and expects he’ll have to cut his price again because there are so many houses for sale in Silver Lakes.”

“‘I don’t like taking any listings in Cape Coral — I don’t believe I can sell those,’ said Alva-based real estate broker Cindi Infiesto. ‘The Cape is saturated with (speculatively built) homes and investor-related homes that are going into foreclosure. I didn’t see anything moving.’”

“The Bonita Bay Group eliminated 14 jobs Tuesday, bringing the cuts to 74 since the beginning of the year. ‘It’s basically because of the current real estate market,’ said spokeswoman Meredith Parsons.”

“Lee County has bigger problems than just foreclosures to contend with — the economy is already contracting sharply as the construction and real estate markets collapse, said Ray Kest, an economics professor at Hodges University who tracks local economic indicators.”

“‘I was shocked,’ Kest said, when he analyzed state sales tax figures for 2007. Since May, revenues collected have been lower than 2006 levels each month. ‘Our economy is hurting a lot more than people realize, and it’s hurting in all sectors.’”

“The bad numbers are a result of higher unemployment, Kest said — 5.3 percent in October compared to 2.8 percent a year earlier. ‘Those construction people were making a lot of money and spending a lot of money. The real estate people were buying Mercedeses and Lexuses; they’re not buying those anymore.’”

The Miami Herald in Florida. “House hunters looking for a bargain may want to consider a condo in Broward County. After falling for five straight months, the median price for Broward condominiums hit $159,300 in October, down 24 percent from a year ago.”

“Broward’s condo price drop was a singular dramatic move in a market characterized for more than a year by a standoff between sellers who don’t want to lower prices and buyers who refuse to pay up.”

“Of course, some sellers have been dropping their price, just not enough to entice buyers. Take Scott Parsons, a restaurant franchisee wishing to leave South Florida. He lowered the price on his three-bedroom, two-story town house in Pembroke Pines’ Villas Lake from $312,000 to $290,000.”

“‘We weren’t getting close to what we needed,’ Parsons said. ‘The offers were outrageous, $240,000, $250,000, on a town house that appraised for $330,000 eight months ago. The market is so terrible.’”

“After listing the town house for six months, Parsons said he has decided to keep it and tough it out until the market rebounds. ‘We’re willing to stay another two years,’ he said.”

From TC Palm in Florida. “The Martin County median home sales price in October was $225,000 down from $269,000 last year.”

“‘The numbers continue to show what appears to be a leveling off of the market for Martin County,’ said Dave Derrenbacker, president of the Realtor Association of Martin County.”

The Sun Sentinel from Florida. “Palm Beach County’s median price for existing homes fell in October for the 15th consecutive month, and analysts say sellers should brace for more hardship ahead as the housing slump intensifies.”

“‘It’s uncomfortable, but it makes sense,’ said David Levin, a housing consultant in Delray Beach. ‘We have to undo the excesses of our recent buying binge.’”

“The county’s median now has slid 17 percent since peaking at $421,500 in November 2005. The median price for existing condos plummeted 30 percent to $158,900 from $225,500 a year ago.”

“‘There’s no way we could sustain that,’ said Gus Pasquale, co-founder of Element Funding, a residential lender in West Palm Beach. ‘What we’re going through is a correction to a more affordable plateau.’”

“Candy Pritchard has been trying to sell her five-bedroom home west of Palm Beach Gardens since the summer. She originally listed the property on an acre lot for $649,000 but has since dropped the asking price to $599,000.”

“Unable to maintain the expensive property, she realizes she may have to come down even more before prospective buyers make an offer. ‘It’s a great market to buy, just not to sell,’ said Pritchard. ‘It’s very slow, very frustrating. If I didn’t have to sell, I wouldn’t.’”

The Palm Beach Post from Florida. “Condominium sellers blinked first. Prices of existing condos in Palm Beach County plunged in October - the sharpest annual decline since the Florida Association of Realtors started tracking them in January 2006.”

“‘Individual sellers are becoming more realistic and lowering prices,’ said Jack McCabe, a Deerfield Beach real estate consultant specializing in the condo market. Seller incentives have failed, he said, and appraisers have ‘returned to fundamentals.’”

“Palm Beach County has a 35-month supply of existing condo units, McCabe noted.”

“Despite falling condo prices, sales continued to decline. In Palm Beach County, sales of existing condos fell 12 percent, and on the Treasure Coast they fell 13 percent.”

“There’s a record four-year supply of condos and single-family homes for sale in Palm Beach County, according to Illustrated Properties Real Estate. ‘The high inventory shows that there is still a gap between buyer and seller expectations regarding price,’ said Mike Pappas, CEO of The Keyes Co.”

“The Seasons at Tradition was to be a gem of a 55-and-over community: Celebrity mansion-size clubhouse. Ten tennis courts. Indoor-outdoor pool. An activities director.”

“Now, the guard gate is guardless. The clubhouse, tennis courts and pool were never built. The activities director is being laid off today. And the fate of more than 1,000 unfinished lots in the community is unknown.”

“The Seasons’ builder, Levitt and Sons, got the go-ahead Tuesday in bankruptcy court to abandon its incomplete lots at the Seasons, plus about 3,000 others across the state.”

“‘It really is like living in a ghost town,’ said Phyllis Visakowitz, a retired nurse who moved in May from Great Neck, N.Y., into a $457,000 home at the Seasons. Among the seven homes on her cul-de-sac, hers is the only one occupied.”

“Other residents are living between denuded lots and half-finished homes with tiles stacked on the roofs. ‘It’s very scary when you feel totally abandoned,’ said Visakowitz.”

“The builder stopped construction in October, but not before it managed to close on about 90 homes at the Seasons, the largest of its 11 active-adult communities under development in Florida, Georgia and South Carolina.”

“In a sense, the Visakowitzes are among the lucky ones: buyers whose homes were finished. Sixty-four other buyers at the Seasons put down deposits on homes that Levitt and Sons never finished, court records show.”

“West Palm Beach residents Jerome and Marlene Greenfield shelled out a 10 percent deposit on a house at the Seasons in May. Now they have no idea whether their home will be completed or they will get their money back. ‘We were fortunate that we hadn’t sold our present home,’ said Marlene, who declined to reveal the amount of the deposit.”

“Residents, including Bill Quattrocchi feel that their home values have taken a hit. Quattrocchi thinks the builder duped him with a phony sales lottery that increased his home price by more than $27,000. ‘I saw this here as a promising community,’ Quattrocchi said. ‘A lot of pluses here, but we were deceived.’”

The Atlanta Journal Constitution from Georgia. “‘We were never a bubble market,’ insists Eugene James, director of the Atlanta regional office of Metrostudy.”

“Yet somehow, that nonexistent Atlanta bubble seems to have popped. New-home construction has taken a real blow, with ramifications that will ripple through the region and could significantly alter how Atlanta grows.”

“For example, the crunch is hitting hardest in exurban areas where thousands of lots sit vacant. Overall, it would take 40 months to build homes on all the vacant lots in the Atlanta region, according to James — twice the normal inventory.”

“That’s consistent with a report from the Atlanta Regional Commission that development of open land in the metro area has fallen 70 percent in the last two years.”

“The decline has even become apparent in our school systems, where classroom trailers have long been needed to handle the overflow of students. This year, when metro schools opened, enrollment fell 10,000 students short of projections.”

“‘Anybody tied to residential development — the carpet industry, the building supply industry, real estate attorneys — is feeling the impact of this,’ James says.”

“The strain is being felt particularly in local banking, which has made handsome profits for years by financing developers and land speculation. Now, with lots sitting unsold, developers have a hard time making payments.”

“‘I understand there are quite a few banks in the metro area, and some in the rest of the state, that got too much into land development,’ says state Sen. Tommie Williams, a member of the Senate banking and finance committees. ‘Auditors are specifically asking banks what percentage of their loans are in speculative land development.’”

“That warning is echoed by a federal bank regulator, who told me that they’ve already seen ’severe asset-quality problems emerge at several metro-area banks. If the real estate market does not turn around soon,’ he says, ‘I think the problems could get really big.’”

“According to James, the hesitancy of would-be Atlanta home buyers can be blamed in part on media coverage of collapsing prices in California and Florida. ‘Prices weren’t tumbling here, but all the news in the national media started artificially forcing prices down [for new-home construction],’ James says.”

The Sun News from South Carolina. “Shaken investors along the Grand Strand are being extra cautious, experts say. Many are shying away from real estate and finding other investment vehicles - or not investing at all.”

“‘There’s money on the sidelines right now, waiting for the bottom of the market,’ said William Harrison, director of the Center for Real Estate at the University of South Carolina. ‘Once that money has perceived the bottom, you’ll see that money moving into the residential market to take advantage of those rates.’”

“But nobody is sure when that will be, he said. Some predict there may be an uptick in the market as early as the spring, but Harrison doubts it will be that soon.”

“‘A lot of us tend to want to believe good news that there is a solution to this around the corner, but there’s not, and I’m one of the believers that it is going to get worse before it gets better,’ Harrison said.”

“Local real estate analyst Tom Maeser said he sees a rebound in the residential market sooner rather than later. ‘The main reason buyers aren’t buying right now is because they’re being told by the financial media to hold on, prices are going to go down. I think our buyers are going to start realizing that the prices are not going to come down a whole lot,’ Maeser said.”

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