The Housing Bubble

The Sierra Sun reports from California. “Realtors are not the only ones suffering from the slipping demand for new homes. Local contractors and builders are shifting their work strategies to soften the impact the ongoing slump in the California housing market has had on the region’s building trades. ‘The fact is that you can find a contractor and get materials for less,’ said Tony Reid, president of Truckee Tahoe Lumber Company.”

“President Mark Tanner of the Contractors Association of Truckee Tahoe said he often receives ‘three phone calls a day’ from contractors and foremen who are looking for work — people who are ‘very reputable.’ He has also been contacted by architects searching for jobs.”

“‘Three years ago, everyone was so busy and their pricing was accordingly,’ Tanner said. ‘Now, to some degree, people are willing to take work just to make ends meet.’”

“It’s the homes built on speculation without a guaranteed buyer that are hurting the region’s builders the most, Tanner said. Several spec-home contractors have stopped new construction altogether because the market is so congested, he said.”

“‘Back in 2004 and 2005, we didn’t need to do anything. Business was pouring out the door,’ said Mike Bernard of Mountain Home Design. ‘Now we’re knocking on doors to advertise this company.’”

“Paz Knoke, owner of A Clean Sweep, said her home-cleaning company has seen a surge in business from foreclosed homes that are being prepared for sale. Since September, Knoke has cleaned nine foreclosed homes.”

“‘It’s good but it’s bad, because we can see the hardship of the families,’ Knoke said. ‘We can see that people just got up and left.’”

The Contra Costa Times. “Dannice Fuller is a realistic real estate agent. Seeing that her client wanted a quick sale, she asked her to drop the price to $417,000, or the conforming loan limit for federally sponsored loans, and open up the East Oakland property to nearly every buyer on the market.”

“‘A lot of people can’t get approved for a jumbo loan,’ said Fuller, an agent in Richmond. ‘So now the house is competitively priced.’”

“Christopher Thornberg, an economist and principal with Beacon Economics, said that the act of agents pricing homes near the conforming loan limit is just another marketing tactic in a tough market. ‘They’re trying to find any hole they can to generate business,’ he said.”

“It was precisely these tactics that caused the market to tank in the first place, he said. ‘They say in places where prices are collapsing, ‘Oh, no, not at this price point,’ or ‘I think things have bottomed out,’ whatever it takes to make a commission,’ Thornberg said.”

“Right now, about 1,050 homes are listed at less than $417,000 in Oakley, Brentwood and Antioch, said Bryce Ellsworth, a real estate broker in Brentwood, so there’s some stiff competition.”

“‘A house he recently sold in Brentwood went for $420,000; he had two offers right around $417,000. ‘But it was 2,900 square feet and in good condition … with a pool,’ he said. ‘But we would like to see the limit raised to reflect the region.’”

The San Francisco Chronicle. “The UCLA forecast says the slowdown will be longer and more severe than it previously projected, in part because the housing slump is destroying more financial jobs than expected. It now sees the loss of approximately 74,000 construction jobs and 25,000 financial jobs during the downturn.”

“‘Real estate is worse than the official numbers suggest, especially on the finance side of things,’ Anderson Forecast economist Ryan Ratcliff said.”

“In the Bay Area, construction and finance jobs have been evaporating for some time.”

“As housing sales slowed, ‘we’ve had to scale back on staff,’ said Sherry Mar, manager of Placer Title Co. in Alameda. The office has shrunk to four employees from seven a few years ago, and ‘the present staff could handle a bit more volume,’ she said.”

The Sacramento Bee. “Long one of the fastest growing districts in the nation, the Elk Grove Unified School District may see a decline in enrollment next school year.”

“School officials, who sounded the warning bell at Tuesday night’s board meeting, blame the housing slump for the potential decline – the district’s first since it formed in 1959.”

“‘It’s the first time anyone of us can remember ‘declining enrollment’ being in our vocabulary in this district,’ board member Priscilla Cox said.”

The Union Tribune. “Analysts at Wall Street investment firms and think tanks are debating whether the economy is slipping into recession, but that debate seems purely academic in many parts of San Diego County.”

“‘People aren’t spending like they used to. It’s really changed drastically,’ said Lauren Tammariello, owner of Bacio Boutique in Escondido.”

“Erlinda Avena, who heads the San Diego Home Loan Counseling and Education Center, said her offices have been flooded with people who can’t make their mortgage payments. ‘There is a ripple effect of people losing their homes, losing their cars and not having access to credit,’ Avena said.”

“‘I don’t think San Diego is immune at all,’ said James Hamilton, an economist at the University of California San Diego. ‘Because of the high home prices here, we’re quite vulnerable.’”

The North County Times. “Local and national economies are either Wile E. Coyote, suspended mid-air off the cliff’s edge and about to take a devastating tumble, or a mountain climber with a firm grip on that cliff, ready to climb slowly to safety, according to a UCLA economic forecast released Wednesday.”

“Although a precipitous drop in home sales and prices has historically foretold a recession, the UCLA report predicts this housing crisis is different. ‘In previous housing downturns, we see an increase in foreclosures because people have lost their jobs,’ said Jerry Nickelsburg, an economist who wrote part of the UCLA forecast.”

“Instead, many people are losing their homes because of interest-rate resets or because they have mortgages they could not afford, Nickelsburg said.”

“Marney Cox, chief economist for the San Diego Association of Governments, said California’s superheated housing market has worsened the impact of its downfall. ‘California housing rose so high it was at a lofty peak to begin with, and so you’re going to see a rapid drop from that peak,’ Cox said.”

The Press Enterprise. “Survival will be the goal of home builders in Riverside and San Bernardino counties next year, as they lower prices further to clear unsold inventories of completed houses and woo buyers who demand bargains.”

“‘It looks like 2008 will be a rough year,’ said John Young, founder and president of Upland-based Young Homes.”

“He said builders already have cut prices by about 25 percent and will continue to struggle with unsold inventory, high rates of cancelled sales and a tightening of mortgage lending practices.”

“The Bush administration will unveil its methadone plan for the mortgage crisis today. Is this simply prolonging the pain?”

“‘You’re just giving the junkie more dope,’ says Christopher Whalen, managing partner with Institutional Risk Analytics, a consulting firm.”

“‘Some people who would qualify for this supposed assistance are probably better off defaulting,’ says Whalen. ‘The redefault rate for mortgages that are changed or modified is 30 to 40 percent. These banks continue to extract as much cash out of the borrower as they can, then they do default.’”

“If they paid an inflated price, can barely make the payments and now owe more than their house is worth, ‘Are we really helping them?’ he asks.”

From CNBC. “I went on ‘The Call’ with news from a Lehman Bros. report suggesting that the housing downturn will be worse in California than the rest of the country (duh), and that it will be worse than the downturn of the early ’90s (uh-oh).”

“I lived through that downturn, as the defense industry disappeared, the S&L crisis dumped inventory into the market, and the Northridge earthquake convinced some homeowners to just walk away. I bought a house in 1992, and by 1994 it was worth a third less. It did not return to its original value until 1999. It’s up 150 percent in value since.”

“A lot of people lost their homes in the ’90s, but most of them weren’t 110 percent financed in houses that they couldn’t afford to buy in the first place. So the next couple of years are not going to be good, and any bailout plan is going to end up in court, meaning the people who will come out ahead will be the lawyers.”

“My story also showed that far from Wall Street, people on Main Street are really angry. I mean, really angry. The angriest are those who are about to lose their homes.”

“We interviewed one woman named Lolita Lierdo, who says her mortgage is worth $570,000, but she can only sell the house for $400,000. If the bank lets her do that, the IRS considers that $170,000 forgiven debt as income, which must be taxed. YIKES!”

“Some of you responded: From Pat G., a loan officer in Maryland: ‘Cry me a river!!! These individuals who are crying the blues are the same individuals who would have told me right up front - if you can’t get me into that house, someone else will.’”

“From Craig T: ‘Please explain again how Lolita Lierdo is a victim? I don’t care WHAT the mortgage people told her - her mortgage is $570k?? Is she kidding? Did she ever think she could handle a loan that size? Right. Because every single one of these jokers was just ‘reaching for their American Dream.’ Because home ownership is a ‘right’…Well, surprise! SOMETIMES YOU LOSE MONEY IN SPECULATION! It’s no different than the internet slaughter that took place in 2000 - a game of hot potato with the last sucker holding the bag.’”

“Mark T. : ‘I am in So Cal and short sales is almost all we do…I do not believe the media knows just how bad this is.’”

“From Clint G: ‘OH GIVE ME A BREAK! I just love this stuff when everyone jumps on the band wagon and then they all want to be bailed out.’”

The Times Delta. “The president of the National Association of Realtors told local real estate professionals Wednesday that real estate is on everyone’s radar screen as foreclosures dominate industry news.”

“Still, Dick Gaylord told an audience at the Visalia Convention Center that he’s ‘never been more confident’ in the market. ‘Real estate has always been the best way Americans built wealth and it will always be,’ Gaylord said.”

“He had flown in on a private jet, courtesy of local developer Andy Mangano, to attend the association’s annual luncheon.”

“‘The problem is there has been a tremendous appreciation [in property values] over the past five or 10 years and now people have a misperception of real estate as an investment,’ he said. ‘They think it’s a short-term investment and it’s not.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Toll Brothers Inc., the largest U.S. luxury-home builder, reported its first quarterly loss in 21 years and said the housing slump is the worst the company has seen in decades. The company took a pretax expense of $314.9 million to write down inventory and land in the fourth quarter. The number of homes Toll delivers in fiscal 2008 may fall as much as 42 percent to 3,900 from a year earlier, Chief Financial Officer Joel Rassman said in the statement.”

“Rassman estimated the average sale price in fiscal 2008 will be $630,000 to $650,000, down as much as 9 percent from 2007. In fiscal 2007, the average price of a Toll home fell to about $694,000, or 2.4 percent.”

“The number of contracts signed in the fourth quarter fell the most in Toll’s West region of Arizona, California, Colorado and Nevada, where orders tumbled 87 percent. The second largest decline was in its South region, which includes Florida and Texas, where orders slumped 44 percent.”

From CNN Money. “‘By many measures, fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business,’ Chairman Robert Toll said in a statement. ‘1974 was perhaps rougher, but the difficult times only lasted one year.’”

“The one area where Toll saw a jump in revenue in the latest quarter was land sales, as the company paired back on its holdings to just under 60,000 lots, down more than a third from a peak in April 2006.”

“Besides having land sales increase more than eight-fold from a year earlier to $2 million, the company said it has continued to renegotiate, and in some cases, reduce its optioned land positions.”

The Scotsman. “Housing sales at Crest Nicholson, the housebuilder bought six months ago for £715 million by HBoS and Sir Tom Hunter’s West Coast Capital private equity firm, have fallen 15 per cent since September. Buy-to-let investors account for about 35 per cent of Crest’s apartment sales, but numbers across the country have fallen by half since October.”

“Royal Bank of Scotland Group Plc, the U.K.’s second-biggest bank, reported 1.5 billion pounds ($3 billion) of writedowns from slumping credit markets and said earnings will exceed analysts’ estimates this year.”

“Rabobank Groep NV, the biggest Dutch mortgage lender, will bail out its Tango Finance Ltd. structured investment vehicle by taking on 5.2 billion-euros ($7.6 billion) of its assets to avoid a fire sale.”

“‘There is no immediate prospect of the funding situation for SIVs improving in 2008,’ the bank said. ‘To prevent a potential fire sale of high quality assets, the bank has announced that it is prepared to take the remaining assets of Tango onto its balance sheet.’”

From Reuters. “Canadian Imperial Bank of Commerce noted that conditions in the troubled U.S. residential mortgage market have worsened since the end of its financial year, and it projected C$225 million in additional writedowns for the month of November.”

“The bank also said that it could face ’significant future losses’ in U.S. mortgage-related derivative contracts that are hedged with counterparties, depending on changes in market and economic conditions.”

“‘Conditions in the U.S. residential mortgage market have continued to deteriorate since year-end,’ the bank said.”

“‘In addition, we have exposures to the U.S. subprime residential mortgage market through derivative contracts which are hedged with investment-grade counterparties,’ CIBC said.”

“As of October 31, the notional amount of these hedged contracts was C$9.3 billion. The related on-balance sheet fair value was C$4.0 billion, the bank said.”

“‘We’ve been suggesting for some time that the gross exposure would be a more relevant number, particularly since a number of global credit insurers have been under a lot of market pressure because of concerns about their ability to honor their counterparty contracts,’ said Blackmont Capital analyst Brad Smith Without knowing who the counterparties are, and the size of the bank’s exposure to each one, it is difficult to do further analysis, Smith said.”

“MBIA, the largest bond insurer in the world, said on Thursday it is looking at ways to shore up its capital base, a day after rating agency Moody’s Investors Service said the insurer was “somewhat likely” to require additional capital.”

“U.S. mortgage assets in collateralized debt obligations have lost so much value that the top classes of the securities may be worth as little as 20 cents on the dollar in a liquidation, Barclays Plc analysts said in a report.”

“About 20 percent to 30 percent of principal would be covered for the ’super senior’ portions of mezzanine asset-backed bond CDOs, which mainly contain mortgage bonds and other CDOs initially assigned low investment-grade ratings, Barclays said.”

“Standard & Poor’s on Wednesday said that proceeds from the liquidation of mortgage-backed securities by a collateralized debt obligation will be insufficient to pay back investors in the deal.”

“The CDO, sold by Credit Suisse Alternative Capital and dubbed Adams Square Funding I Ltd, liquidated its assets after a collateral trigger in the deal was tripped, which led to an ‘event of default.’”

“Proceeds from the asset sale, in addition to collateral held in the deal, will not be sufficient to pay back the CDO’s most senior noteholders, originally rated ‘AAA,’ and no proceeds will be available for any other noteholders, S&P said.”

“Freezing rates on subprime mortgages may lead to further deterioration in ratings of bonds backed by the loans despite its goal of reducing losses, Standard & Poor’s said on Thursday.”

“The credit ratings agency’s statement came amid a federal plan to staunch soaring foreclosures on U.S. adjustable mortgages by freezing interest rates ahead of scheduled resets.”

“‘Absent any real offset to default frequency and loss severity that may result from the enactment of any loss mitigation proposal, simply freezing interest rates on some U.S. first-lien subprime mortgage loans would have a negative impact’ on ratings of certain bonds, it said.”

“‘Standard & Poor’s supports appropriate loss mitigation strategies to prevent foreclosures and allow subprime borrowers to remain in their homes,’ the unit of McGraw-Hill Cos. said. ‘In certain instances, the negative effects may outweigh the positive benefits.’”

From CNBC. “I was reading the report from the Mortgage Bankers Association this morning on delinquencies and foreclosures. None of it was particularly unexpected, but I was struck by one aspect, and that is the amount of prime loans that are going into foreclosure.”

“The headline of course is that 43 percent of all new foreclosures are subprime adjustable rate loans, but that means that 57 percent are not. They’re prime and Alt-A loans, and all the bailout plans we’re hearing seem to have nothing to do with them.”

“The Mortgage Bankers Association reported that 0.78 percent of mortgages entered the foreclosure process in the three months ended Sept. 30. The homeowners entering foreclosure brought the total percentage of loans in the foreclosure process to a record high as well of 1.69 percent.”

“The report also showed that 5.59 percent of borrowers are now at least 30 days late making their mortgage payments, which is just below the record high of 5.68 percent set in 1986. And a record 1.26 percent of the borrowers were 90-plus days late, putting them at significant risk of going into foreclosure.”

“Doug Duncan, chief economist for the lenders’ trade group, said those rising delinquencies rates suggest that the problems have not hit bottom.”

“The survey shows more than 20 percent of the seriously delinquent loans in the nation are in California and Florida, while more than 15 percent are in Michigan, Indiana and Ohio.”

“‘As go Califorina and Florida, a lot of these numbers will go,’ he said. ‘We’ve probably not seen this combination of factors before, and that makes it difficult to forecast.’”

“The surge in foreclosures is expanding the inventory of unsold homes and contributing to the decline in housing demand. Sales of new and previously owned homes probably will drop to 5.09 million next year, 32 percent below the 2005 peak of 7.46 million, according to Frank Nothaft, chief economist of Freddie Mac.”

“‘These are the first numbers we’ve seen that combine the meltdown of the credit markets with the drop in home prices,’ said Jay Brinkmann, VP of research and economics for the bankers trade group.”

“There is a ‘substantial‘ risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report.”

“Price levels of the RPX Index, a derivative index based on home prices in 25 U.S. metropolitan residential property markets, indicate an expectation that prices will decline for the next three years, with a recovery likely to occur between three and four years from now, Morgan Stanley said.”

“‘The property derivatives market seems to be suggesting that we are in a very different environment, on the heels of market events that could force a housing recession like none ever imagined or experienced,’ Morgan Stanley analysts said.”

The Associated Press. “The amount of equity homeowners hold in their homes slipped in the third quarter to just above 50 percent, according to a report from the Federal Reserve Thursday.”

“Economists expect this figure, equal to the percentage of a home’s market value minus mortgage-related debt, to tumble even further as falling home prices eat into equity. It could easily drop below 50 percent by the end of next year, some experts say, marking the first time homeowners will owe more than they own since the Fed started recording the data in 1945.”

The Hattiesburg American reports from Mississippi. “A local developer in October halted construction on a Lamar County subdivision, leaving behind remnants of a planned community, an indication that some woes of the national housing market are being felt in Hattiesburg. Robert Neill of Neill Development in Hattiesburg said he finished six of nine phases of Chapel Hill subdivision before he notified residents he wouldn’t be able to complete the 315-lot project.”

“‘It came to the point where I was just financially unable to continue building and decided to finish what projects I had under way,’ he said. He partially blamed the national housing slowdown. ‘Certainly everything has slowed down,’ he said.”

“‘The community has been left unfinished,’ said resident Michael Moore, who said that several empty lots, unfinished homes, broken curbing and mismatching mailbox posts debilitate the development.”

“‘And I’m concerned he won’t finish. I fear one, it will decrease the value of our homes having the subdivision incomplete, and also, I look at it from a buyer’s perspective and worry about being able to sell our home. I wouldn’t want to buy a home with the subdivision looking the way it does,’ he said.”

“Sue Gallaspy, president of the Hattiesburg Area Association of Realtors, said the Pine Belt has taken a hit because of an excess of available houses.”

“‘We look at the local market, and it has softened a little because we have more inventory than we’ve had in the past,’ she said. ‘It’s taking a little bit longer (to sell homes) now, but we’re seeing prices more like they were pre-Katrina.’”

The New Orleans City Business from Louisiana. “‘Tough’ is how David Gilmore, a Kenner real estate expert, sums up the New Orleans-area residential real estate market. According to the New Orleans Metropolitan Association of Realtors, it took a lot longer to sell a home in October than it did back in October 2004.”

“With homes taking longer to sell, some agents are holding auctions to move stagnating properties. Gilmore, president of Sperry Van Ness/Gilmore Auction, said many sellers have not been satisfied with residential auction bids.”

“‘There are still buyers in the market,’ Gilmore said. ‘We had bidders at every one of our auctions for 12 different sales three weeks ago. But I’ll tell you, on the residential homes, there was a price differential between which the sellers were willing to accept and the buyers are willing to give, and that tells you we have market issues.’”

“Of the 12 properties Gilmore’s firm featured three weeks ago, three homes did not sell because the sellers rejected the offers, he said. There was a 30 percent average difference in what the sellers wanted and the buyers offered.”

The Houston Chronicle from Texas. “Based on new and existing home sales, local economist Barton Smith says about 37,000 adjustable-rate mortgages — or ARMs — will reset by year’s end in the Houston area, jumping to 50,000 next year.”

“Across Texas, of the estimated 91,600 subprime ARMs that had yet to reset as of the end of September, 66.8 percent will do so in 2008, with the biggest chunk coming due from March into the summer, according to estimates from First American LoanPerformance.”

“Without the federal assistance, Smith and other experts predict high foreclosure and delinquency rates through next year, peaking in the summer.”

“While freezing rates helps lenders spread out their bad loans over an extended period of time, ’sooner or later those interest rates have got to go up. It doesn’t solve the basic problem,’ said Smith.”

“Callie and Morris Brooks haven’t been able to make their monthly mortgage payment of nearly $1,000 since it went up by about $300 earlier this year. They’ve received letters saying the loan is in default and that their northeast Houston home will go into foreclosure.”

“When the couple bought the house, they said they weren’t aware of how and when their payments would go up. ‘We didn’t understand,’ said Morris Brooks, who is on disability. ‘It was our first time buying a house.’”

Business Week reports on Texas. “Homeowners started losing hold of their homes years before spiking foreclosures and the housing slump slammed the economy.”

“Piece by piece, some gave away their homes by tapping equity to take cash out to pay for cars, weddings and vacations. Others never owned one brick. During the country’s most recent housing boom, the term ‘homeowner’ became a misnomer as lenders offered 100 percent or more home financing to some buyers.”

“Catherine Alexander, who lives near Plano, Texas, first dipped a toe into home equity before taking a plunge. After her husband died four years ago, Alexander moved to Texas to be closer to her children, buying $172,000 four-bedroom house with life insurance money.”

“For more than a year, she shredded countless home equity checks sent to her unsolicited by Beneficial, a member of HSBC Group. She finally cashed one for $6,000 to meet expenses after being unemployed for over a year. That in turn led to phone calls from Beneficial recommending a larger equity loan.”

“At the end of 2005, Alexander took out a $50,000 equity loan to pay for day-to-day expenses and charges related to her son’s wedding. To satisfy that loan and to pay off her Ford Escort, she took out another home equity loan the next year, this time for $93,000.”

“Alexander put her home on the market in May after her home and loan expenses became too costly. Even though she felt lured into the loans, she also blames herself.”

“‘A lot of it has been my ignorance and being naive about my finances and in trusting people,’ she said. ‘I shouldn’t have had a loan that size for my income and I should’ve been more reasonable in the house I needed.’”

The SMU Daily Campus from Texas. “‘There are always periods of excess. Everyone in the industry could see what was happening. The rules of the whole housing industry have changed,’ said Tony Dona, founder of Thackeray Partners, a real estate private equity fund.”

“Dona said there were two insanely dangerous things going on before the crash. ‘Firstly, floating rate mortgages, and secondly, not requiring purchasers to put money down for funds borrowed.’”

“These two factors allowed people to purchase homes who they would have otherwise been unable to do so. Now that interest rates have increased, these borrowers are unable to pay their mortgages. They simply cannot afford to keep their homes.”

“Some people are drawing comparisons between today’s home foreclosures and the real estate crash of the late 1980s. Experts believe this is not the case. ‘The ’80s crash was a direct result of job loss. In this go-around, salaries haven’t decreased or disappeared, but mortgage prices have increased,’ said Chuck Dannis, an SMU real estate professor.”

“Others think rapid condominium development in Uptown, Victory Park and Downtown may pose a threat to the already weakened real estate market.”

“‘There has been a demand for condos because people could buy them for the same amount they could rent. If lawmakers tighten up the mortgage standards, there won’t be anyone to absorb condos being built,’ said Ben Brown, a real estate contractor and developer based in Fort Worth.”

“Homeowners who were forced to default on their mortgages will also be able to spurn growth in the rental market. This should help the increasing condominium market. ‘Rental housing is already a pretty healthy market, and now [people whose homes were foreclosed on] will again become renters,’ said Dona.”

The Dallas Morning News from Texas. “City government mustn’t waver in its commitment to revitalizing downtown Dallas through direct investment, public tax subsidies and partnerships with the private sector, Director of Economic Development Karl Zavitkovsky told City Council members Wednesday.”

“His recommendations came while presenting council members with a broad proposal for building on the center city’s recent and rapid growth; growth that also has caused its own set of challenges, such as soaring housing prices and inadequate transportation options.”

“In recent years, City Hall has infused the center city with hundreds of millions of dollars in property tax abatements and direct cash incentives. Such money is largely credited in sparking the conversion of numerous vacant office buildings into residential towers and attracting retail that didn’t exist even earlier this decade.”

“But widespread private investment downtown that isn’t subsidized remains elusive, Mr. Zavitkovsky acknowledged.”

“Mayor Tom Leppert said the city must honor a de facto pact with downtown residents to turn their environs into a true neighborhood filled with amenities such as parks, retail services and security.”

“‘We don’t want them to be pioneers with arrows in their backs,’ the mayor said.”

“The city’s downtown plan appears ambitious and well-conceived, said John Crawford, president and chief executive officer of DowntownDallas, which represents center city business interests.”

“‘It reinforces the necessity of moving forward quickly,’ Mr. Crawford said. ‘It’s also realistic in saying we cannot be all things to all people and we have to approach development on a very strategic basis, and we need some strong, short-term successes.’”

“David and Mary Anne Alhadeff have called 1505 Elm St. home for two years and love easy access to downtown restaurants, the Arts District and Urban Market – the only supermarket in the center city.”

“Still, Mr. Alhadeff feels the city could do more to make both residents and visitors feel more secure.”

“‘Dallas needs more police down here on the streets, particularly at night,’ he said. ‘And I think a year or two from now, it’ll be like a real city, where if you wanted to make a day of it, you could.’”

The Albuquerque Tribune from New Mexico. “Before the foreclosure crunch really started to hit the nation about six months ago, finance counselors at United South Broadway Corp. in Albuquerque received about three calls a month from people looking for advice.”

“Now, the phone rings 20 times a day with calls from all over New Mexico, said the group’s executive director, Diana Dorn-Jones. ‘We’ve been doing lots of foreclosure counseling,’ she said. ‘Lots and lots and lots of it.’”

“Between July 2006 and June of this year, Valencia County had been about twice the national average in foreclosure rates, according to Realtytrac. New Mexico has also seen its foreclosure rate rise. Since October 2006, foreclosures in the state have gone up about 44 percent.”

“‘Our Consumer Division keeps track of this stuff, and all the trends they are looking at say it’s finally going to hit New Mexico in the next couple of years,’ said Phil Sisneros, spokesman for the state Attorney General’s Office.”

“That’s in part, experts say, because the once-popular adjustable rate mortgages are starting to rise, at a time when housing values are going down. ‘You’re going to be getting a higher payment, and your home is worth less,’ he said.”

“Valencia County, just south of Bernalillo County, in recent years has seen a boom in new housing that generally is more affordable than in many parts of Albuquerque. It’s also home to many subprime loans.”

“‘If we look at Valencia County and what the poverty rate is and the increase in what’s supposed to be affordable housing, it’s a perfect storm for people to lose their houses,’ said Ona Porter, executive director of an Albuquerque group that works to help low-income New Mexicans save for a house.”

“A similar storm is brewing on Albuquerque’s West Side, Porter said, for many of the same reasons.”

“While going into foreclosure can be tough for the homeowners, it can also affect neighbors, Dorn-Jones said. ‘You may not be in trouble, but when five, six, seven homes on your block are foreclosed, your value goes down, and you haven’t done anything wrong.’”

The Erie Times News reports from Pennsylvania. “Month-to-month comparisons between 2006 and 2007 show the number of properties sold has been down seven months and up four months so far this year. Figures show that 376 properties changed hands during November in Erie County. That’s a decrease of 8.5 percent from the 411 sold during November 2006. ‘The housing situation in Erie continues to get worse,’ Realtor Dennis Weed wrote.”

“Like other local real estate agents, Mary Huffman, president of the Greater Erie County Board of Realtors, says the much-publicized problems of the housing market are largely someone else’s problem. But what about September, when the number of properties sold dipped 23 percent from the previous September?”

“‘That’s real estate for you,’ she said. ‘It’s nothing new. There’s no reason to panic.’”

“Much of the decline in total home sales can be explained by the people who are no longer in the market. Toby Froehlich, president of Coldwell Banker Select Realtors, said, ‘We are back to needing three things to buy a house: good credit, a little bit of your own money and some verifiable employment. A year ago, people could buy without those three things.’”

The Baltimore Sun from Maryland. “Squeezed by the sharp downturn in the housing market, one of the nation’s largest homebuilders has sold the bulk of a luxury townhouse development in Baltimore’s Federal Hill to a local developer who immediately cut prices about 20 percent.”

“Lennar Corp. sold 22 homes in the 26-unit Federal Place development off Key Highway to Terra Nova Ventures. Terra Nova principal David F. Tufaro said the deal allowed the new owner to set prices it felt were more in tune with the current market.”

“‘It turns out that Lennar was making a corporate decision, not limited to Baltimore, to reduce their inventory and improve their balance sheet,’ said Tufaro. ‘At the right price, houses will sell. The market has not fully reflected that because sellers have not reduced their prices.’”

“Lennar, one of the nation’s largest builders, had completed the first of the four-story, two-car garage homes in the spring, with some units priced at more than $1 million, said Cynthia B. Conklin, a partner at Yerman, Witman, Gaines & Garceau Realty, which brokered the sale and is handling marketing.”

“None of the homes sold until November, when four that had been priced at $795,000 sold for $695,000 or just above, with closing cost help, she said.”

“Under its new ownership, Federal Place homes start at $695,000, with the average price in the low $700,000 range. The priciest home, used as the model, had been on the market for $1.25 million and is now priced at $995,000.”

“‘They were thinking they were going to get over $1 million for all these houses that came equipped with an elevator, granite, the finest appliances and grills on the deck,’ Conklin said. ‘They were not having great success.’”

“Builders caught in the housing slowdown have had to halt construction or reduce prices. ‘In many cases, it makes sense to sell everything at one time and move on,’ said Robert L. Merbler Jr., another partner at Yerman, Witman, Gaines. ‘I think it’s something you’re going to see more of.’”

From Virginia Business Magazine. “Homebuilder Louis Genuario Jr. saw the warning signs early. By summer 2005, he picked up on one of the first hints that America’s booming residential housing market was starting to wobble like some shaky house of cards.”

“So Genuario prepared for a slowdown. In early 2006, he pruned the company’s staff from 22 to 12 employees. That year he built half as many homes as the 20 constructed in 2004. In 2007, Genuario built even fewer, six homes. ‘This is classic economics,’ says Genuario. ‘This is the market correcting itself.’”

“Genuario is one of the lucky ones; he expects to break even this year. ‘No more than that,’ he says. ‘Simply put, our cash flow has been meager, so we’ve been living off lines of credit and money we put in the bank off previous years’ profits.’”

“For now, new developments are on hold, and Genuario will wait and see what happens to the market before he finalizes plans for 2008.”

“October saw two projects in Virginia slide into lending limbo. Major construction on the 34-story Granby Tower, a luxury condominium project in downtown Norfolk, stopped in September when the developer’s financing fell through.”

“David H. Downs, a real estate professor at Virginia Commonwealth University, refers to the subprime mortgage mess as ‘the slap heard round the world. … It will be felt in the U.S. and the commonwealth of Virginia…We’re far from knowing how long this slap will reverberate.’”

“Like other states, Virginia is seeing an uptick in foreclosure filings. Compared with the number of filings in the third quarter of 2006, Virginia’s rate shot up dramatically — by 489 percent.”

“Mike Toalson, executive VP of the Home Builders Association of Virginia, noted a 38 percent drop in the number of new homes being built in the past two years. ‘In 2005, at the height of the boom, we were producing 49,000 single-family, detached houses across the state,’ he says. ‘In 2006 the number slumped to 37,000. This year, the level of new houses forecast to be produced across the state is 30,000.’”

“Rich Napier, president of Richmond-based Napier Signature Homes and president of the Home Builders Association of Virginia, has felt the pinch. His company, which builds custom homes priced from $1.2 million to $2.5 million as well as spec homes for around $1 million, built seven homes in 2006, about an average number.”

“In 2007, Napier has built only five. He also has two spec houses on the market. ‘If I sold the spec houses and finish up another one, I’d have one of my better years,’ says Napier. ‘But the market doesn’t look good for them to sell. We’ll do well with the five.’”

“Plus, he’s worried about next year. ‘I’ve only signed two contracts to build in 2008.’”

“A Northern Virginia couple had been toying with the idea of buying a second home at Wintergreen Resort in Virginia’s Blue Ridge Mountains. So when a three-bedroom home came on the market for $325,000 this year, they scrambled off the fence. The couple hopes to buy the property for $274,000, the lowest price for a detached home in Wintergreen in the last eight months.”

“‘Since September, we’ve seen a lot of people who have been waiting on the fence for two or three years,’ says Hunter Lynn of Wintergreen Real Estate Co. When home sales were booming several years ago, some people were scared to get in the market, ‘because it was so crazy,’ recalls Lynn. ‘Now they feel more in control.’”

“At Homestead Preserve in Bath County, sales slowed this year, compared with the first year of sales in 2006. Overall, about 150 of the community’s 450 home sites have sold, including 11 this year. ‘It has slowed down,’ says Penny Peery, a marketing official for Homestead Preserve. ‘The problem is just getting people to make the final commitment, because the market is so unsure.’”

“Steve Crandall and other builders remain optimistic that another flurry of building is around the corner. After buyers snap up the deals created by the overbuilding of the last four years, boomers will still be looking for a comfy place to land.”

“‘Buyers are still there,’ says Crandall. It could be two months, he says; it could be six. ‘It’s an evolution.’”

The News & Courier from Virginia. “The contracting world rises early - particularly here in Page County, at least an hour’s drive from construction jobs in Northern Virginia and D.C. metro area.”

“At 5 a.m., Joe Thomas sits inside the store keeping his wife, who works the early shift at Hope Mills, company. In busier times, this and other stores throughout the county did brisk business with the early crowd headed north.”

“But the housing boom’s gone bust and the early crowd’s gone thin; over the next hour, just a handful of construction workers stop in.”

“Thomas, the VP of JLM Construction, is one of the many local contractors who spent much of his career commuting as far as Annapolis, Md. for work. Lately, he’s been getting calls every day from people looking for some sort of construction work.”

“‘They’re gettin’ laid off in the city because there ain’t any work goin’ on, and they want to know if we’re hiring,’ he said.”

“But he isn’t hiring. The opposite, actually - Thomas recently laid off seven of his crew, which was 16 strong just last summer.”

“‘If you’ve got a job, you better be hanging onto it,’ said Vernon Hartless, a 37-year construction veteran. He’s among the few who stop at the store on the way to work. ‘This is the worst it’s been for a long time. The sad part is, I don’t see any improvement.’”

“Last month, the U.S. Department of Commerce released figures showing that nationwide construction of single-family homes has fallen to its lowest rate since October 1991, according to an Associated Press report. While that trend’s regional impact appeared first and most noticeably in Northern Virginia, new development in Page County has been affected as well.”

“‘Right now, we have none,’ said Stanley Town Manager Terry Petit.”

“That’s a dramatic change from two years ago, when plans for 700 housing units in and around Stanley existed on paper, Petit said.”

“In Luray, work is continuing on several large developments that have been in progress for some time. Final plans for a first phase of the 500-home Luray Heights development are expected next month.”

“Still, new inquiries from people interested in local development opportunities have all but vanished, according to Town Planner Ligon Webb. A year ago, the town received four or five such inquiries a week, Webb said.”

“‘This is the worst I’ve seen the construction market,’ said Mike Knight, a co-owner of Knight and Lucas Construction with 25 years experience in the business.”

“Nancy Keyser-Bryant, a real estate agent in Luray and member of the Massanutten Area Association of Realtors, said that times have been tough. ‘Some of the agents are dropping out because they’re not making [money] in real estate,’ she said.”

“Keyser-Bryant began working in real estate in the early 1980s. The market then, with interest rates up to 20 percent, was even worse than it is today, she said. The real estate market is always changing, she added, but this slump is unusual.”

“‘This is the first cycle I’ve seen where interest rates are low and the market is really slow,’ Keyser-Bryant said.”

“‘I think that [affordable housing] is where you need to be in this area in order to keep putting out houses,’ said Doug Rudolph, a Shenandoah contractor and chair of the town planning commission.”

“And therein may lie one of the positive aspects of an otherwise grim story: If demand for expensive houses drops, perhaps there’s an increased incentive to build smaller homes for smaller budgets.”

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