The Housing Bubble

The Daily Pilot reports from California. “Orange County had the lowest job growth this year of any major urban area in California and may soon be mired in a nationwide recession, a group of business leaders said Tuesday at a forum at the Island Hotel. ‘To be blunt, we’re on recession watch,’ said Jack Kyser, the chief economist of the Los Angeles County Economic Development Corporation and the conference’s keynote speaker.”

“As of October, Orange County had added only 400 jobs to its total from last year, putting it far behind the pace of Los Angeles, San Diego and other areas around the state, Kyser said. The county also posted increasing numbers of unsold houses, unrented apartments and vacant offices, he said.”

“Jay Moss, the CEO of Mosaic Homes, compared the state of the economy to the Titanic submerged halfway in the Atlantic.”

“Even the more pessimistic speakers said they expected the economy to work through its troubles eventually. ‘California is going through a real estate recession, if you will, but it will recover,’ said Frank Foster, the CEO of Fieldstone Homes. ‘It has in the past, and it will in the future.’”

The Orange County Register. “In their 30th annual forecast, Chapman economists Esmael Adibi and Jim Doti are predicting that job growth in Orange County will turn negative starting in the second quarter of 2008 and stay negative in the third quarter. That qualifies as a recession, according to Chapman’s definition, which is two consecutive quarters of negative year-over-year job growth.”

“‘There is little doubt that the economy is hurting from the demise of real-estate related activity,’ the economists write. ‘It is clear that construction and financial activities are the weakest sectors of the economy followed by trade, transportation and utilities which are indirectly affected by the housing market.’”

“Altogether, Chapman is calling for a loss of 2,400 jobs next year. ‘Most of the job losses are expected to occur in the financial services and construction sectors,’ the economists write.”

“They also foresee an 8.1 percent drop in the median price of a resale single-family home in 2008.”

The Daily News. “Improbable as it sounds, a recession is not likely because of the housing and mortgage market meltdowns, according to a UCLA forecast that will be released Thursday. That scenario holds true for Southern California, the state and the nation, said the widely-watch UCLA Anderson Forecast issued each quarter.”

“Still, for anyone in a real estate related business, the next year or so will probably feel like a recession.”

“‘We’ve read this story for most of 2007 and the economy has pretty much lived up to our expectations, as bad as they were,’ said Ryan Ratcliff, an Anderson economist who wrote the California report.”

“‘In August everyone freaked out at once. There were more defaults than we were expecting and it seemed like everything hit the fan at once in late October and November,’ he said.”

“Economist Jack Kyser said that it could take a while longer for the real estate sector to bounce back. ‘Some people have been really gloomy saying it’s going to be 2010 before housing starts to recover,’ he said.”

“‘This slower job growth is still not enough to create a recession and that’s been an element of our forecast for two years now,’ Ratcliff said.”

From ABC 7 News. “It used to be a thriving business, making custom bunk beds in the growing bedroom community that once was Antioch. But with all the home foreclosures now lining the streets here, Ken Johnston’s workload has all but ground to a halt.”

“‘When the market was good, I would have two shifts of employees at this time of the year for Christmas. Right now, there’s no comparison. It’s just myself and one other person and I’m only working one or two days a week,’ said furniture maker Ken Johnston.”

“Johnston is not alone. Whatever they’re selling, in East Contra Costa County, businesses are feeling the pinch of the mortgage crisis.”

“‘We’re definitely getting calls from everything from veteran’s offices to restaurants to retail stores saying they’re concerned. It’s definitely more of a challenge right now,’ said Devi Lanphere from the Antioch Chamber of Commerce.”

“According to the county, more than 1000 people in the mortgage industry have been laid off in the East Bay this year.”

“‘They have lots of skills, but there aren’t necessarily an abundance of jobs out there that provide that same level of income right behind what they’ve been doing,’ said Stephen Bater from East Bay Works Career Center.”

“Pittsburg’s Michele Lombardo worked in the mortgage industry for 20 years, before being laid off in September. ‘It’s very discouraging because I loved what I did,’ said Lombardo.”

The Modesto Bee. “Youngdale’s, an appliance store and 85-year fixture downtown, is closing its doors. Store owners Joe Bonander and Sonia Caldeira, whose grandparents founded the store, told Youngdale’s employees Tuesday morning that the decline in real estate led them to conclude that the business should close.”

“‘We had a very good time when customer confidence was high and home equity was high, and customers were using that equity to upgrade their appliances in their homes,’ Caldeira said. ‘The trend is opposite now.’”

“Sharon Silva, president of the Turlock Chamber of Commerce, described the store as one of the city’s leading businesses for generations. ‘It’s very sad when one of the local businesses is leaving,’ she said. ‘I believe this is one sign of what’s happening in the econcomy of our country and in California.’”

“Turlock Mayor John Lazar echoed Silva’s thoughts. ‘It’s the end of an era,’ said lifelong Turlock resident Lazar. Lazar, a Realtor, said Youngdale’s was a preferred vendor for many home developers in and around Turlock. The dramatic slowdown in home construction probably hit the store hard, he said.”

“Bill Bassitt, chief executive officer with the Stanislaus Economic Development and Workforce Alliance, said Youngdale’s closure is a sign of real estate’s slump affecting other businesses.”

“‘This is the fallout that occurs, and this isn’t going to be the last one,’ he said.”

“A longtime customer, and lifelong Turlock resident, Realtor Jim Theis said Youngdale’s closing reflects an economy that’s been badly shaken by the collapse of real estate. ‘That’s the same segment that drove everything to such highs a few years ago,’ Theis said. ‘It ripples through the whole economy. I’m sure it’s a tough situation for them and other businesses.’”

“Caldeira said she and Bonander had planned to run the store until they retired. ‘We both have to find new jobs now,’ she said.”

“The credit crunch has taken a tiny bite from Orange County’s investment pool.”

“Treasurer-Tax Collector Chriss Street said Tuesday he discounted 17 county-owned securities by nearly $14 million after a ratings agency warned it might downgrade the securities.”

“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”

“The securities are a type known as structured investment vehicles. They consist of bundles of different kinds of debt, including commercial bank paper and student loans.”

“Moody’s Investors Service said it was reviewing and might downgrade dozens of structured investment vehicles, including 17 in which the county invested $460 million. The county has invested another $370 million in other structured investment vehicles that are not facing a potential downgrade.”

“The county has been buying structured investment vehicles since at least 2001 but stepped up its purchases two years ago. Today it owns $830 million worth, or 14 percent of the pool’s total assets. That’s up from 5 to 10 percent two years ago, said Paul Cocking, the treasurer’s chief portfolio manager.”

“While about 15 percent of the assets are mortgages, they’re outside the troubled U.S. mortgage market in places like the United Kingdom, the Netherlands and Australia, financial analyst John Byerly said.”

“These securities typically pay about 5.25 percent to 5.65 percent, a fat return for risk-wary government investors.”

“Among the skeptics: Pimco, the Newport Beach-based bond trading giant. ‘We didn’t think they paid enough for the risk,’ said Josh Anderson, a Pimco expert on the securities. Pimco has bid on assets held by some troubled structured investment vehicles, Anderson said, and ‘they aren’t pretty.’”

Inside Bay Area. “City code enforcement officials now have the power to knock out eyesore homes. Starting today, a series of ordinances will take effect that give Manteca the ability to dole out civil penalties of $1,000 per violation per day, or up to $100,000 per structure per year.”

“Manteca now also has authority to abate a home by keeping it properly boarded or maintained at the property owner’s expense.”

“Plunging housing prices and bad lending practices have turned Stanislaus and San Joaquin counties into one of the nation’s leading areas for foreclosures. Manteca is in the center of the crisis.”

“There are 253 homes that are vacant or vacant with lockbox in Manteca, according to Metro List Services data. Some local real estate experts suggest the number of vacant lots could go up at the beginning of 2008 due to quarterly adjustments from when people bought homes at the crest of the market.”

“‘We’re not going to do anything until the banks own the property,’ said Greg Baird, the city’s code enforcement officer.”

“Manteca police Capt. David Bricker added he was unsure about whether larger banks or international banks who own Manteca homes would respond. Some in local real estate have questioned whether liens imposed on homes due to the ordinances would make it harder in the future for anyone in Manteca to get a loan.”

The Desert Sun. “Coachella Valley home sales are 30.1percent lower than this point last year. But that’s better than the statewide sales figures, which have dropped 40.2 percent compared to October 2006.”

“The exact number of homes sold in October was not available late Tuesday, according to the monthly information released by the California Association of Realtors.”

“Nearly 9,200 Coachella Valley homes were on the market in October and 9,593 were on the market last month, according to the local figures. That’s about a 1,000 more homes than were for sale in November 2006.”

“The median price of a Coachella Valley home is $323,440 - a 6.5 percent drop since September and a 5.1 percent decline since this time last year. While the median price is used as a benchmark for tracking homes, it can be misleading when several high-end, multimillion-dollar homes sell in a single month.”

“While roughly 24 percent of Californians can afford the median priced home in their communities, 33 percent of valley residents can afford homes here. At the ‘height of the market,’ the local figure was as low as 11 percent, said reg Berkemer, executive VP of the California Desert Association of Realtors.”

The Billings Gazette reports from Montana. “Michael Grover, from the Federal Reserve Bank of Minneapolis, said Montana has fewer foreclosures and fewer high-cost loans than the national average. But he said more rural areas face pressures because of high-cost loans, which is a surprising new turn. Grover pointed to a map that showed counties like Fergus, Powder River, Judith Basin and Daniels. In those rural counties, more than 30 percent of home loans are high-cost loans.”

“Others already see problems. Sheila Rice, from the Montana Homeownership Network, said the number of people seeking help from her organization because of late home payments has jumped tenfold just this year.”

“‘In Billings alone in 2006, there were 1,200 high-priced loans,’ she said. ‘Statistics show that 15 percent go into foreclosure (eventually).’”

The Missoulian from Montana. “Luke and Jennifer St. Claire and their 13-year-old daughter rented an apartment in July of 2005. But with the birth of their twin boys in March 2006 and a new pregnancy shortly thereafter, the family realized they would need more space and privacy than the apartment could provide.”

“Feeling pressure to find a home quickly, the St. Claires got a subprime loan and moved into a modest home on the south side of Missoula.”

“A year and a half later, that mortgage, as well as rising food, fuel and utility costs, are squeezing the family and making ends harder and harder to meet.”

“According to Jennifer, their mortgage payments are slated to go up by $400 a month in February 2008 - to $1,800. ‘We haven’t a clue where that extra money is going to come from,’ she said. ‘We’re hoping to refinance or sell.’”

The Times News from Idaho. “Some say it was only a matter of time. The affects of a nationwide housing slump and growing credit problems have reached south-central Idaho.”

“Home sales have declined 19 percent in Twin Falls County, according to a report from the Greater Twin Falls Association of Realtors. According to a report of building permits issued by Twin Falls County, building officials approved only 240 permits for single-family homes as of Nov. 30 compared to 535 during the same month last year - a decline of about 55 percent.”

“Real estate brokers and home builders interviewed by the Times-News denied a slump in the housing market, and did not want to answer further questions about the issue.”

“But some brokers did say that much of the decline is due to homeowners in other states, who cannot escape higher mortgage rates in order to buy a more affordable home in Idaho.”

The Idaho Stateman. “Believe it or not, there is still affordable housing to be had in Ada County. Diana Cavigllano, a Realtor in Boise, says there were 83 homes for sale Tuesday in Boise and Meridian with price tags below $150,000.”

“Most of the properties priced below $150,000 are in foreclosure, or have had their prices slashed by owners who have seen their properties languish on the market because of the market downturn, Cavigllano said.”

“A ’shocking number’ of the homes are vacant, which gives the buyer leverage because the owner has moved and is eager to sell to avoid having to pay mortgages, she said.”

“Some of the homes are fixer-uppers. But other are already in livable condition. ‘These homes are just sitting there,’ she said.”

“A five-bedroom, 1-1/2-half bath, 1,482-square-foot home (was) originally priced at $189,900. After 136 days on the market, the owner will now take $147,900. A two-bedroom home on the Boise Bench was cut from $149,000 to $143,900 after just 19 days on the market.”

“Cavigllano said that for the first time in a long while, some new homes are being built and sold for less than $150,000. At the Charter Pointe subdivision, Hubble Home plans to build three homes priced at $149,990. ‘They haven’t been built yet, so you can go out there and start picking out your colors,’ Cavigllano said.”

“Canyon County offers a much larger choice of low-cost homes. Associate broker Shaun Tracy said 582 Canyon County homes are priced at or below $150,000.”

The Mail Tribune from Oregon. “Brenda Potvin sold insurance for the better part of two decades before jumping into the white-hot real estate market three years ago.”

“‘It sounded good at the time,’ says Potvin.”

“Then the real estate market turned cold, and the Medford woman began looking for other options. When the opportunity came to watch her 11-week-old granddaughter while her son was away, she decided it was time to leave real estate.”

“Potvin is one of a rapidly growing number of real estate agents who are deactivating their licenses or letting them expire during the market lull. The number of local real estate agents surged during a four-year period beginning in 2002, growing by nearly 50 percent before cresting in mid-2006.”

“‘I was one of the lucky ones, because I was still doing good business,’ Potvin says. ‘I know agents didn’t make a penny this year.’”

“Leo Ford worked the local real estate market for 11 years, until recently when he moved to Maui. He says the rapid appreciation that drew so many agents into the market masked reality.”

“‘I called it four years of stupid, because sellers and buyers drove prices so high,’ he says. ‘I saw it coming and so did the other long-timers. We expected this to happen and prepared. The newbies were having a ball signing papers and making 20 to 30 grand in a couple of months. Right now, the best thing is for an agent to stay out unless they’ve been around long enough to get repeat business.’”

The Bend Bulletin from Oregon. “The Central Oregon Business Index stumbled in the third quarter of 2007. The index’s quarterly year-over-year declines illustrate that the region’s economy is quickly cooling after riding the wave of the red-hot housing market of 2005 to 2006, said Tim Duy, adjunct assistant professor of economics at the University of Oregon and the study’s author.”

“Additionally, that market may remain weak even after it hits bottom, Duy said. ‘The housing market is just a mess,’ Duy said. ‘I’ve been saying for a while that these are the two toughest quarters — the fourth quarter 2007 and the first quarter of 2008 — we have to get through without any other major negative shock (to the market).’”

“‘Talking to mortgage brokers, their business is fundamentally changed because of the lack of access to capital — they just can’t make the types of mortgages they’ve made before and I think the financing just is not going to be there next year,’ Duy said. ‘There’s no housing ATM anymore.’”

“The housing market is falling faster and faster, Duy said. Housing units sold in the region fell again to a monthly average of 225 homes, compared with 305 in the third quarter of 2006. September was especially bad with 153 homes sold compared with 214 in September 2006, Duy said, reflecting the national tightening of credit in the home mortgage market.”

“Residential building permits for new construction, however, have dropped sharply, Duy said, to a monthly average of 82 permits. In the first quarter of 2007, the index tracked 199 new building permits in Deschutes County. The third quarter of 2005 saw a monthly average of 391 permits.”

“Woodhill Homes in Bend is one business shackled to housing. The builder this year has logged 75 percent fewer closings and new-home starts compared with the boom years of 2005 and 2006, said owner Jay Campbell.”

“‘We’ve in turn focused on the market but also on the business and ways in which we can do things better and improve our systems,’ he said. ‘All that said, and you’ll probably hear this from every builder: There has never been a better time to buy a house.’”

Marketplace reports from Oregon. “With home prices dropping all over the country, how do you choose the right time to buy? Ethan Lindsey walks us through his home buying experience in Bend, Oregon. He’s a reporter for Oregon Public Broadcasting in Bend. That city tripled its population over the last 15 years. Home prices rose in tandem.”

“Kent Chapple owns a coffee shop in town and a home as well. He says homebuyers here read their property prices like the stock pages.”

“Kent Chapple: I do pay attention to it but I knew that it was overvalued. And all my neighbors were all excited about how our houses had increased in value. But it was kind of funny to me, because where you gonna move to, right? Everything has increased. So, if my house is worth more but I can’t afford to buy a new house, then what difference does it make, you know?”

“Realtor Becky Breeze doesn’t have a bad word to say about Bend. To her, the home prices mean the market is bright. But, even she sees some dark clouds on the horizon.”

“Breeze: The only problem is that so many agents went into the business and so many mortgage brokers went into the business during that little upside period that there’s not enough to support that many people. We wish some our houses would sell faster, absolutely.”

“At several open houses, the seller started to haggle with me the moment I walked in the door. In the past few months, I’ve walked through 30 or so homes in my price range. Of those, fewer than five have sold.”

“Dawn Dwyer is a realtor in town. Dwyer says that in 2005, many of the homes I’ve looked at would have been swamped with multiple offers on the day they were listed and furious bidding wars broke out over these homes.”

“My experience has been the opposite. In my hunt, I fell in love with a two-bedroom bungalow. When I first saw the house, it had been on the market for more than a month. I finally got it for $20,000 less than the price on the sign out front.”

“Dwyer: It’s the true story of what it’s like to be in a buyer’s market and what it’s like to be in a seller’s. In that fast a time, a few years, to see that much of a difference, it’s amazing. Yeah, you’re really lucky.”

“As a whole, the city probably isn’t so happy. Real estate is the third-largest employer in Bend. It pays the salaries of 15 percent of working residents. That scares some economists who say if the housing market goes, so could the local economy.”

“That scares me, too. Maybe this isn’t the time to be buying that first home.”

The Columbian from Washington. “Who could blame the average Clark County homeowner for being confused about the local housing market? With reports rolling in nearly every day from news organizations, industry groups and national economic agencies, it’s darn difficult to make sense of the numbers.”

“There are two things to remember is evaluating all this: Clark County is a unique housing market separate from Portland. What is going on here is different than what’s happening across the river or elsewhere in the region or nation.”

“News about this market is more timely than most national and regional reports. So while you might read that Portland-Vancouver housing prices have shown little decline through the third quarter ending Sept. 30, we know that in October, the median price of homes sold in Clark County was down 7.5 percent from 2006 as sellers began to adjust prices to unload property.”

“Metrowide, there’s an 8.4-month inventory of new and preowned homes for sale as compared with a much larger 11.4-month supply in Clark County, according to RMLS.”

“Because our market is unique, The Columbian business news section tends to play down national housing news or at least run a ‘local angle.’ Bottom line: A psychological standoff continues in Clark County between buyers who think house prices should be dropping on weaker sales and sellers who are convinced their homes are not overvalued. If mortgage rates drop, buying should pick up, say the experts.”

“Have we got it all straight?”

Some housing bubble news from Wall Street and Washington. MarketWatch, “Mortgage giant Fannie Mae Wednesday said it sees increased credit losses and falling home prices next year as the housing correction continues to play out. Fannie Mae is forecasting a peak-to-trough decline of between 10% and 12% in home prices for this housing cycle. The lender said it expects 2008 credit losses to be between 8 and 10 basis points, up from a range of 4 to 6 basis points this year.”

“The lender said there is a ’severe correction’ in the U.S. housing market. ‘The decline is expected to be nationwide and is estimated at about one-half of the magnitude of the decline experienced in Southern California in the early 1990s,’ it said.”

“The information was posted on Fannie Mae’s Web site in a road-show presentation supporting its offering of $7 billion in non-convertible preferred stock, which the company unveiled on Tuesday. Fannie Mae is also slashing its dividend by 30%.”

“Daniel Mudd, Fannie’s president and CEO, said the steps are designed to serve the mortgage market. ‘The market needs us to be there — and we believe this plan will help us do that,’ Mudd said in a statement.”

“Fannie Mae estimated its mortgage portfolio at $723 billion in November.”

From Fortune Magazine. “Could Fannie Mae be the next large financial company to announce billions of dollars of market losses on bonds backed by distressed mortgages? That certainly seems possible after the government-sponsored mortgage giant announced plans Tuesday to bolster capital.”

“While…subprime and Alt-A mortgage-backed bonds are only a small proportion of Fannie’s overall mortgage holdings, their combined value of $76 billion is almost double Fannie’s $40 billion of capital.”

“Fannie Mae’s quarterly financial filing for the third quarter said Fannie had $42.2 billion of private-label subprime securities and $33.8 billion of private label Alt-A securities. It’s possible that the AAA subprime securities are trading at a much steeper discount…than the 2% discount that Fannie Mae applied in the third quarter.”

“A Wall Street bank that trades AAA-rated subprime bonds is currently quoting prices for such bonds of around 88 cents on the dollar, or a 12% discount, for loans made in 2006, and 78 cents on the dollar, or a 22% discount, for loans made in 2007.”

“A similar exercised can be applied to the $33.8 billion of Alt-A securities. Many of these so-called ‘liar loans’ are likely to go bad. For instance, as part of its rescue this week of ETrade, hedge fund Citadel appeared to pay roughly 60 cents on the dollar for ETrade’s Alt-A loans.”

“That was a special deal in which Citadel was able to get seemingly attractive terms, but it shows the skepticism about the credit quality of Alt-A loans.”

From Web CPA. “As the subprime mortgage meltdown grows, some experts are starting to see the resulting fallout rivaling corporate scandals of earlier this decade, like Enron.”

“Former Securities and Exchange Commission Chairman Arthur Levitt expects to see more massive writedowns on the way. Last week, he told Bloomberg News that he thinks the Financial Accounting Standards Board should force the banks to close a loophole that lets them keep the structured investment vehicles holding subprime debt off their balance sheets.”

“‘These banks claim these entities were separate,’ he said. ‘If so, then why are billions of dollars being spent bailing out these companies? Evidently they were not as separate as claimed in their accounting.’”

“Experts are beginning to question whether increased regulation will help. ‘We seem to fly from one crisis to another,’ said FASB Chairman Robert Herz at the IFAC World Accountancy Forum in New York. ‘When I go abroad nowadays, [I see] we’re losing credibility. It doesn’t play on Main Street anymore and it doesn’t play in most foreign capitals.’”

From Reuters. “The Financial Accounting Standards Board is requiring companies to disclose more about the market values of their investments, under the FAS 157 and FAS 159 rules that went into effect for fiscal years beginning after Nov. 15.”

“In the end, that sort of transparency is what investors will demand anyway, Jim Quigley, CEO of Deloitte Touche Tohmatsu, said at the conference.”

“‘The market forces will be the way that the correction will occur,’ Quigley told Reuters. ‘It’s clear that there’s not the transparency that everybody wants and needs there, but the marketplace is going to adjust to that. People won’t buy until they have the information that they need.’”

“The first of a new round of investor claims was filed against Bear Stearns Cos. on Wednesday for its role in managing two mortgage hedge funds that collapsed earlier this year, securities lawyers said.”

“A group of lawyers for 11 investors with combined $62 million in losses says that Bear continued to sell shares of the funds this spring, when the subprime market was melting down.”

“‘Officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at both of these hedge funds for an extended period of time,’ said lawyer Steve Caruso of Maddox, Hargett & Caruso, one of four firms representing the fund-of-funds manager.”

“As one of Wall Street’s top underwriters of mortgage-backed securities, Bear Stearns knew or should have known these markets had become extremely unstable, said Ryan Bakhtiari of Aidikoff, Uhl & Bakhtiari.”

“‘My gut feeling is these funds were used as a dumping ground by Bear Stearns,’ said Bakhtiari.”

“A structured investment vehicle (SIV) managed by Dutch bank Rabobank and Citigroup has sold almost half its assets, 4.5 billion euros ($6.6 billion), as the fund could not find sufficient refinancing, Rabobank said on Wednesday.”

“‘The market has dried up. It is all related to what is happening in the United States,’ a Rabobank spokesman said, confirming a report in Dutch daily Het Financieele Dagblad about the declining size of the fund, called Tango Finance.”

“The fund currently holds about 5.5 billion euros in assets, down from 10 billion euros in the summer, and could reduce its holdings further to reduce investment risks, the spokesman said.”

“‘Basically, what Tango is doing now is called unwinding,’ he said, adding that the market value of Tango’s currently held assets is about 97 to 98 percent of their nominal value.”

“The spokesman declined to say whether Tango has been making losses or whether cooperatively-owned Rabobank would put the SIV’s assets on its balance sheet if they could not be sold.”

“A spokeswoman for Citigroup, which wrote down $6.8 billion in the third quarter and could face more losses on assets, said: ‘Citigroup has no responsibility for the funding of Tango.’”

From MSNBC. “One proposal announced this week by Treasury officials would freeze interest rates on adjustable mortgages for borrowers who are currently keeping up with their payments.”

“‘There is value in these loans,’ said Sheila Bair, chairwoman of the Federal Deposit Insurance Corp. ‘They can’t perform at the reset (rates) because those resets were never realistic. They can perform at the starter rate.’”

“‘I think there a dearth of good ideas,’ said Mark Zandi, chief economist at Moody’s.com. ‘This is a very difficult problem to tackle for policymakers. There is no magic bullet.’”

“Critics of bankruptcy reform say the change could have a chilling effect on new lending, because lenders could no longer count on original loan terms surviving a bankruptcy challenge.”

“‘We need people to be comfortable making home mortgages,’ said Chris Mayer, a Columbia University economist. ‘If I were a lender right now looking at making a new loan, I would be pretty nervous.’”

“Zandi believes that eventually the government will have to set up what amounts to a mortgage clean-up fund, similar to the Resolution Trust Corp. that was created to buy up loans after the collapse of the savings and loan industry in the late 1980s.”

“But the idea of using taxpayer dollars to head off foreclosures still faces opposition…based on mail received by msnbc.com.”

“‘In most cases both lender and borrower are getting what they deserve,’ wrote Lee Goodridge of Marion, N.Y. ‘Maybe it’s about time these lenders stopped scheming and scamming, and borrowers start living within their means instead of trying to outdo the Joneses, let alone keep up with them. Why should the government be doing anything with this?’”

“‘When will people take personal responsibility for their actions?’ wrote Greg Gagola of Tallahassee, Fla. ‘Borrow what you can pay back. Read your contract. If you do not understand your contract, hire a real estate lawyer. We as a nation need to take responsibility for what we do.’”

The Washington Post. “It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one.”

“We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen.”

“What’s important to understand is that this isn’t just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.”

“It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages.”

“The banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same ‘tranching’ process, they could use these mezzanine-rated assets to create a new set of securities — some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.”

“It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used…the whole thing was so highly leveraged that the returns, at least on paper, were very attractive.”

“No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.”

“What we know now, of course, is that the investment banks and ratings agencies underestimated the risk that mortgage defaults would rise so dramatically that even AAA investments could lose their value.”

“If all this sounds like a financial house of cards, that’s because it is. This may not be 1929. But it’s a good bet that it’s way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.’”

From Marketplace. “Ramon Brayan was the first person in his family to graduate high school, to finish college, to get an MBA. He began repaying his debt to his mom in Thanksgiving of 2001, when he bought her a brand new house. A cousin lured him into real-estate finance. He started working for Resmae, a subprime mortgage lender. He made $30,000 in a single month.”

“Brayan: Then your mind starts wandering. You see it as, OK, I made 30 this month, it’s going to stay like that. You know, me being a business person as well, I’m like, let me buy some more property and hold onto it.”

“Ramon sold that American Dream. And he bought it, too. He purchased the home for his mom, another for himself, his childhood condo and an investment property. All four have adjustable-rate mortgages. All four are subprime loans.”

“Ramon leased an office to go into business for himself. Then the mortgage market crashed. Now, he’s out of a job, and he’s on the hook for $16,000 a month.”

“Brayan: You pick up the mail and there’s like, a ton of bills, and you see a lot of money going out of your bank account and not as much money coming in. I’ve worked really hard to get to where I’m at, I don’t want to lose it. So how do I keep it?”

“Ramon’s looking for a job back in ad sales. He was forced to rent the house be bought for his mom. (She’s) back in their cramped childhood condo. A framed photo of Ramon in a cap and gown hangs by her bedroom door.”

The St Petersburg Times reports from Florida. “A Tampa developer made the biggest land gain in its five-year history Friday, scooping up 8,300 home sites in seven counties from financially troubled Lennar Corp. Lennar’s apparent fire sale is the latest domino to fall for what once was the top builder in the Tampa Bay area.”

“On Friday, the same day it closed the Metro purchase, Lennar sold 11,000 home sites in a $525-million deal with the real estate arm of Morgan Stanley, for 40 cents on the dollar.”

“Metro officials wouldn’t disclose the sale price of its purchase, but spokesman Rob Ahrens said Lennar was driven to liquidate its holdings amid the residential market slowdown.”

“Another Metro spokesman said Tuesday it’s still unclear if buyers have already reserved any of the home sites, which includes Waterleaf, a 140-acre development in Riverview. ‘Right now, we’re still trying to digest a rather large meal,’ John Heagney said.”

The Palm Beach Post in Florida. “More big land grabs like the one Lennar Corp. and Morgan Stanley announced this week are in the cards for areas with a glut of home lots, and smaller investors should watch for opportunities, a national real estate expert said during a conference here Tuesday.”

“‘Don’t wait for Goldman Sachs to be announcing that they’ve done 12 deals in Florida,’ said Stephen Blank, a senior fellow at the Urban Land Institute.”

“Buying distressed loans looks like a savvy move for 2008, said Blank, a former investment banker and researcher for the institute. Blank’s advice resonated at the Tradition development during the institute’s conference in Port St. Lucie, where home prices have posted double-digit losses since the boom.”

“The ailing Fort Lauderdale-based builder Levitt and Sons got the go-ahead in bankruptcy court last week to turn over about 1,000 lots in the Tradition community to its lender.”

“Locally, it’s now clear that housing prices simply rose too quickly, said Hal Roberts, president of wholesale banking for National City Bank and a panelist at Tuesday’s conference.”

“Buyers aren’t happy unless they’re paying less than the previous buyer paid, said Jeff Chamberlin, president of the Stuart-based real estate firm, SLC Commercial.”

“‘The good news is, the same people that got us in trouble are the same people that are going to get us out,’ Chamberlin said. ‘Because there’s nowhere for South Florida to grow but this way.’”

“Workers probably will feel the pinch. More layoffs, lower bonuses and lifestyle changes are likely, especially for people in the financial services industry, Blank said.”

The News Journal from Florida. “The number of permits issued to build single-family homes in Cape Coral dropped to 12 in December, the lowest in memory and down from 153 in November 2006, according to the city.”

“Permits in unincorporated Lee County also dropped: 60 for single-family homes, down from 91 in October and 357 in November 2006, according to a county report issued Monday.”

“In the past year, actions have been filed on a record 11,700 Lee County foreclosures.”

“Meanwhile, the number of foreclosures filed on primary residences rose to 503 from 472 in October countywide, according to statistics compiled by the Southwest Florida Real Estate Investors Association.”

“‘That’s scary,’ said Ray Kest, an economics professor at Hodges University in Fort Myers. ‘It does not bode well for any type of turnaround in the economy. If homesteaders can’t make their mortgage, there might be an out-migration by some of these people. When people lose their jobs, they hang on, hang on, try to find another job. When they lose their house, they move.’”

“As for the primary residences going into foreclosure, mortgage broker Jeff Tumbarello said, ‘A lot are refis (refinancing) who took the cash out of the house.’”

“Hugh Bromma, CEO of The Entrust Group, said there are sometimes strategies for people to keep their houses even when they’re in desperate financial situations. ‘What you can do is indeed borrow up to $50,000 from a 401(K) if your plan allows it, and you can use that for any purpose,’ Bromma said, and pending federal legislation would increase that to $100,000.”

“The money has to be paid back to the 401(K) over a five-year period, Bromma said, so it’s a stopgap measure. ‘But at least it’ll give me some time to decide what to do.’”

“As the real estate market tanks, Bromma said the tactic is being used more and more by his clients. Entrust, which has an office in Fort Myers, provides services for self-directed retirement plans. ‘I’ve been through three of these (downturns) and this is by far the worst I’ve seen,’ Bromma said. ‘Our clients are investors, and they have self-directed IRA’s and 4019K)s.’”

“Many, he said, are finding themselves having to ride out a period of reduced property values and relatively low rental rates.”

From WFTV 9 in Florida. “Increasing foreclosures are creating eyesores in some upscale Seminole County neighborhoods. Code enforcement said it’s seeing more violations at homes in financial trouble. Channel 9 found one property in Longwood that may soon face nearly $14,000 in fines.”

“Some neighbors are skeptical that steep fines will make a difference.”

“‘Code enforcement can fine them all the want. If they’re in foreclosure, who’s gonna pay the lien? No one, so it’s just useless,’ said Al Moses, a homeowner.”

From 11 Alive in Georgia. “The first Tuesday of every month, foreclosed homes are auctioned off to the highest bidder on the steps of the Fulton County Courthouse. ‘I thought there’d be more order, that it would be more civilized. I’m very surprised,’ said Gary Branson.”

“He said he wanted to come to get a feel for it. What he didn’t expect was chaos, confusion, cacophony.”

“Trent Gaines is a closing attorney, but one day a month, he is a potential buyer. He does extensive research into the history of the properties and their owners, and that, even then, it can be a crap shoot. ‘This was a great job to have in 2001, 2002. There was a ton of equity in every house coming through. Now all the people have refinanced the equity out,’ Gaines said.”

“Gaines and about 60 others raced around the steps, running up and down, forming tight circles around the half-dozen attorneys reading off the lists of properties up for auction.”

“Down on the sidewalk, a dozen protestors carried signs that read ‘My Home is Being Sold on the Steps’ and ‘Stop Foreclosures

The News & Observer from North Carolina. “The Triangle housing market deteriorated further in October as sales of existing homes dropped 26.5 percent. It was the largest monthly decline since the housing slump began last year; it follows a 24 percent drop in September.”

“The Triangle’s biggest economic engine is likely to be wracked by more major declines, economists said. ‘It’s definitely going to get worse, compared to a year ago, for several more months,’ said Michael Helmar, an economist for Moody’s Economy.com. ‘The housing market isn’t at the bottom yet.’”

“Pending sales dropped 12 percent in October in Wake, Durham, Orange and Johnston compared with a year earlier. The inventory of unsold homes rose 23.4 percent to 13,534, and the number of homes on the market at reduced prices rose 49 percent.”

“Total closings, however, fell to 2,088 from 2,842 a year before. The Triangle MLS figures are mostly for existing homes, but some new-home sales are included in the report.”

“Lenders have tightened lending rules for nearly all borrowers, said Glen Astolfi, chief operating officer at DNJ Mortgage of Raleigh. ‘You can still get a loan, but the bottom line is it’s more expensive,’ Alstofi said.”

“In 2006, almost anyone could get a loan for 100 percent of a home’s price. Now lenders require at least a 5 percent down payment and a higher credit score, Astolfi said.”

“Ross Rhudy, general manager of one of the Triangle’s largest brokerages, said the easy mortgages have sapped demand. ‘We spent some demand in advance when … anybody in the world could get a loan,’ Rhudy said.” ‘Another problem that remains is the difficulty that transplants are having selling their homes in other markets, preventing many from buying in the Triangle.”

“Broker Shields Pittman had a sale fall apart two weeks ago over a $500 difference between the seller and buyer. ‘The buyer thinks there will be other opportunities at less price,’ Pittman said of the North Raleigh home priced at $225,000. ‘I think he’s mistaken, but people are waiting to see what the market will be.’”

“Dan Tingen is building homes in Raleigh, Cary and Holly Springs. But he’s starting to feel like he’s in Vegas. With the market for new homes in its steepest decline in years, Tingen is making big bets that he can find buyers for 15 homes he is building.”

“‘This is high stakes poker,’ Tingen said. ‘It will keep you awake some nights.’”

“Across the Triangle, hundreds of builders are rolling the dice to decide how many new homes and lots will be needed as a cooling economy and the national housing slump erode demand.”

“Builders are walking a fine line between meeting demand and overbuilding in a market that could shrink by the time homes are finished six months or a year from now.”

“‘It’s not like an engine you can just turn off,’ said Carl Van Horn, research analyst in Rocky Mount. ‘They have to continue building, because there is still demand for housing. People are still moving into this marketplace, and they have to live somewhere.’”

“Developers and builders aren’t expected to lose their shirts. If anything, most are taking reduced profits. Big price reductions by large national home builders this fall have jolted sales of excess inventory, too.”

“In the 12 months that ended Sept. 30, there were 15,125 new homes sold, and about half were spec homes.”

“‘The main thing is to be in business when the market turns,’ said Tingen, owner of Tingen Construction of Raleigh and past president of the Home Builders of Raleigh-Wake County. ‘You can’t just quit, you have your staff, your lot commitments, so you operate at lesser margins. Our biggest problem is their inability to sell on the other end. If we could eliminate that, our market would be pretty much normal.’”

“Tom Taylor and (his) wife moved this month from Laguna Beach, Calif., into a $1 million home in Hasentree in North Raleighn. The couple looked at dozens of houses across the Triangle but found that many builders were unwilling to deal.” “‘Most were not [willing] at all,’ Taylor said. ‘They had yesterday’s price and were proud of their house and are still sitting on it.’”

“The biggest discounts were offered this fall by large national builders to reduce year-end inventory; they control 36 percent of the new-home market. Some discounts were for tens of thousands of dollars, enough to lure buyers such as Rajesh Vallabhaneni, a real estate broker.”

“Vallabhaneni looked all summer, then contracted for a $229,000 home only after builder K. Hovnanian offered $28,800 in upgrades in September. ‘We’d still be looking,’ Vallabhaneni said, ‘if we hadn’t gotten the upgrades.’”

The Daily News from Tennessee. “The plat has been recorded and the first two builders have signed on. Now the developers of Oakland Cross Creek need the housing market to rebound after a dismal year.”

“Oakland Cross Creek, a 129-lot development…in Fayette County was the creation of partners Terry Pagliari, Terry Dan and Billy Perry - and Chuck Schadt. When they launched the development a couple of years ago, none of them imagined they’d be facing a slew of housing woes - from sagging sales to the credit crunch - as they prepare for the first homes to break ground.”

“‘At the time we started, the market was doing well,’ Pagliari said. ‘(Builders) were pulling probably 50, 60 permits a month in Fayette County, so it looked a little better than what it’s looking currently.’”

“But they also think this housing setback is temporary, just a down cycle that could turn around any day now. When it does, they agree that Oakland Cross Creek will be positioned to tap into Fayette County’s potential.”

“‘It’s slow everywhere - I don’t care if you’re in Midtown, Downtown or Fayette County,’ Pagliari said. ‘But there’s a lot of growth in Oakland, and as soon as the market comes back, more growth is going to be there.’”

“‘Things are slow, but we’re seeing signs of picking up,’ Pagliari said. ‘We’re getting better and better traffic, and we’ve got some buyers out there if some of the buyers could sell their own houses - some of them are having trouble selling their existing houses.’”

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