December 12, 2007

It Seems Like Sort Of A Fiasco In California

The Santa Cruz Sentinel reports from California. “A city planning commissioner contends few homeowners will benefit from current state or federal efforts to prevent foreclosures. Emilio Martinez, a private investigator who has worked with hundreds of Latino homeowners in Santa Cruz, Monterey and San Benito counties, said he’s reviewed 300 Watsonville homes in foreclosure from the past three months and found 78 percent owed more than they paid for their homes.”

“He said he has seen a common pattern among borrowers. ‘They’re upside down,’ he said. ‘They’re paying $4,000-$5,000 a month, and they’re paying interest only. The value of the home is less than what they owe. There’s no way they can salvage that loan.’”

“‘You lenders want them to adhere to the contract when it was worth $700,000,’ he said. ‘It’s worth $400,000 now. They’ve already paid $4,000 a month for two years to live there, and you want them to keep on paying.’”

“Martinez said struggling borrowers have flocked to his office asking for help. ‘They can’t read English. Whatever people told them, they believed,’ he said. ‘They were misled to think they would be able to refinance. When they go to refinance, they find out about the prepayment penalty.’”

“One case involves people who make $40,000 a year making sandwiches at Togo’s. They bought a $680,000 home and can’t afford it.”

“He advises borrowers to stay in their homes even if they can’t make payments. ‘I know a house in Hollister where three families are living together, 20 people in one house,’ he said.”

“Martinez criticized lenders for refusing to re-evaluate what the home is worth when borrowers are struggling. ‘They’d rather leave homes empty because they want a bailout,’ he said. ‘They shouldn’t be allowed to foreclose if they didn’t follow policies and procedures.’”

“With homes declining in value, the question is who will bear that loss.’

The Contra Costa Times. “The Berkeley City Council will consider a plan tonight to give homeowners facing foreclosure one-time loans and counseling to keep up with their mortgage payments.”

“Berkeley foreclosures rose 330 percent, from 10 in the first 10 months of 2006 to 43 in the same period this year, according to DataQuick. And the number of Berkeley homeowners behind on mortgage payments who are facing foreclosure rose 85 percent, from 67 in the first 10 months of 2006 to 124 in the same period this year.”

“Rae Mary, Berkeley’s interim housing department director, said her department would be a logical place to implement these kinds of programs, but money to run them could be a problem. ‘I’m a little concerned about resources to do it,’ Mary said.”

The New York Times. “Just south of Los Angeles, there is a small city called Paramount where houses have all but stopped selling. As home prices rose ever higher in other parts of Southern California, Paramount became all the more attractive — and prices eventually soared there as well. By last year, the typical house sold for almost $500,000, up from $200,000 in early 2003.”

“Many of those sales depended on adjustable-rate mortgages with tantalizingly low initial payments, and now that those mortgages are much harder to get, there aren’t many buyers willing and able to pay $500,000. Yet sellers in Paramount haven’t adjusted to the new reality by cutting their prices very much. Instead, the real estate market has frozen.”

“Since the summer, only about three homes a week — including houses and condominiums — have sold in Paramount. In the third quarter of this year, only 30 homes changed hands, down from 134 in the third quarter of last year.”

“That 78 percent drop is bigger than the decline in any other ZIP code in the country, according to DataQuick.”

“‘We got to a point in this area where the values far exceeded the capability of the median family,’ said Gary Endo, a real estate agent in Paramount. ‘So people created a loan to bridge that gap. All they did was create a problem.’”

“Mr. Endo added: ‘We’re going through that transition where sellers can’t accept that prices are falling. They’re still caught up in this idea that their property is worth more than it is. It’s just strange.’”

“On Sunday, Luis Perez and his wife, Hilda, held their fourth open house since putting their apricot-colored stucco home on the market in August. They have reduced the price once, by about 5 percent. They still haven’t received a single offer.”

“Mr. Perez…bought his house for $380,000 six years ago. He later refinanced his mortgage and took out a home-equity loan. As a result, the interest rate on his new mortgage reset in October, causing the monthly payment to jump $1,300, to $3,900.”

“If he can’t sell the house for something close to the asking price of $549,900, he expects the bank will take it from him.”

“‘The truth is, I don’t think my house will sell,’ Mr. Perez said in Spanish, to my colleague. ‘If in four months I’ve had no offers, I don’t see how I’ll get an offer now that it’s more difficult to sell.’”

The Recordnet. “A couple of top bidders in a no-minimum-bid auction of foreclosed homes nearly a month ago in Stockton are not only unhappy that banks didn’t accept their bids or even negotiate a sale, they haven’t gotten back thousands of dollars in deposits.”

“‘It was a waste of my time,’ said Lewis Stallworth Jr., a Stockton man who put in a top bid of $135,000 for a north Stockton house. ‘I feel like it was almost a scam. There’s no use in going to an auction if they’re going to act like that.’”

“In another case, Mel Schell of San Andreas placed a top bid of $180,000 for a house in San Andreas, and it was rejected outright. His agent, Lynne Miller then was told the foreclosure owner wanted to reconsider the bid.”

“But neither Schell nor Miller has heard anything more, and Schell’s 5 percent deposit of $9,000 hasn’t been returned. ‘I’m getting a little bit anxious about it,’ he said.”

“‘I’m kind of sorry I got into this, to tell you the truth,’ Schell said. ‘It’s been way too long.’”

“Miller said the auction deceptively implied most bids would be accepted. Plus, several weeks after the auction is too long not to hear anything, she said. ‘It seems like sort of a fiasco,’ she said.”

“Not everyone is unhappy. One successful bidder from Lodi, Travis Campbell, was pleased with the auction. He bid $150,000 for a fourplex. About a week later, the bank countered with $170,000, but he held at $150,000. The deal was made a week later.”

“‘It worked out good for me,’ he said.”

The Record Searchlight. “There were 600 fewer construction, mortgage lenders and real estate agents employed in Shasta County in October than in October 2006. October unemployment in Shasta County reached a nine-year high at 7 percent.”

“Mike Neves, president of Access Mortgage in Redding, said he expects to see more lenders tighten their belts, either by consolidating or simply closing.”

“‘Everybody is doing expense control because the money lenders are losing, taking losses from short sales and REOs (bank-owned properties),’ Neves said.”

The Anderson Valley Post. “The Vineyards housing development in Anderson has lain relatively dormant for several months. The plan by developer Sanderson Communities entails 2,500 acres to contain 5,500 units in the hills behind Wal-Mart on Rhonda Road.”

“No construction that requires building inspections has been done at The Vineyards since July.”

“One reason for the delay, according to Roger White, VP of development at Sanderson Communities, was the high cost of project items. He also noted that The Vineyards has had difficulty getting partners to help with financing.”

“‘Possible financiers were very skittish,’ White said.”

“White said that houses on 95 lots would be ready for construction by March, but only a few houses would actually be built until the housing market improves. ‘The hype about the housing market is running out of gas,’ White said. ‘People are still having babies and are still interested in this area.’”

“Many of the vacant houses that have already been built in Anderson have been vandalized. There has been no apparent security, although White said that Wolf Security was recently hired to patrol the area. Anderson police reported that patrol cars have taken extra routes through the area since the vandalism started.”

“The houses are not the property of The Vineyards, said White. Two builders for The Vineyards actually own the houses; they are Palmer Homes and Northwest Builders.”

“The president of Palmer Homes refused to speak with the Valley Post, while the owner of Northwest Builders did not respond to multiple voice messages and messages left with his office’s secretaries.”

The Sacramento Bee. “Hopes for an office tower and high-rise housing at Eighth and I streets downtown have been dashed again. The CIM Group, a Hollywood-based developer, has opted out of its plans, says Rob Leonard, economic development director for Sacramento County, which owns the site.”

“CIM’s move follows a similar decision last year by Texas home builder D.R. Horton to abandon its plans for a 21-story ‘Library Lofts’ project at the same site.”

“Leonard says CIM’s decision was a ’sign of the (weakening real estate) market’ and an indication that CIM is focusing on other local projects.”

“As for backing out of the Eighth and I streets project, CIM exec John Given says there were ’some great ideas but it didn’t come together.’”

“What happens now at that location, where a three-story, former Bank of America building now sits vacant?”

“Leonard says the county likely will hold the land until the market improves. Meanwhile, he adds, ‘we’ve heard from a couple of private and public (entities) that might want to lease the building.’”

An Alligator To Feed Every Month

The East Valley Tribune reports from Arizona. “The Valley’s existing home market continued to drag last month with sales showing 35 percent decline from a year ago, a report by Arizona State University’s Realty Studies department shows. Year-to-date through last month, there were 47,690 sales – a 24 percent drop from the same time period last year and a more than 50 percent tumble from 2005.”

“‘Although there is a large inventory of available homes, buyers appear reluctant to take advantage of the market,’ Realty Studies Director Jay Butler said. ‘The first issue is that most buyers have to be sellers, which is difficult in this market.’”

“In November, the Valley’s median existing home price was $240,000. That’s the lowest monthly price since $235,000 in May 2005.”

The Arizona Republic. “Meritage Homes is seeking lower payments on property it purchased near 56th Street and Loop 101 in the Desert Ridge community. The giant home builder purchased the 288-acre property in July 2005 for $92.2 million. The State Land Department was the seller.”

“Mark Winkleman, land commissioner, says such land deals typically are set up like mortgages. The department is ‘constrained,’ he said, in what it can do to ease the financial burden on land buyers.”

“‘We can offer deferred interest payments,’ Winkleman said.”

“Winkleman says it typically takes 2½ to three years for rooftops to show up in newly purchased land, ‘but where the market is now, there has been no activity for who knows how long.’ All home builders have ‘excess inventory and land they cannot use,’ Winkleman said.”

“In another example of taking a long time between purchase and actual development, D.R. Horton only recently opened a sales office for its Cielo project on land it has owned since March 2004. The company says it will begin construction in 2008 - a full four years after it bought the land for $49.3 million.”

The Arizona Daily Star. “Staring the real estate slowdown in the face, a local restaurant owner is working on plans to turn a former restaurant site into a condominium complex. Jeff Petersen, of Scottsdale-based Landmarc Capital & Investment Co., which has agreed to fund the project, said the complex would have about 40 to 50 units priced at about $175,000 to $225,000.”

“One local real estate broker who specializes in condos said the complex may not be a sure bet. ‘Right now the condo business is really price-sensitive,’ said OnSite Realty owner Caroline Auza. ‘There’s so much inventory on the market right now that they’re shopping everything and buying where they can find the best deal.’”

“Local builder Canoa Homes…is planning to auction off 10 homes starting Wednesday in a weeklong process. The minimum bids range from about $150,000 to about $200,000.”

“The properties are in the Southwest Side, Vail and Corona de Tucson, said Jerry Wade, VP of sales and marketing for Canoa Homes. All of the homes were built for customers who canceled their contracts, Wade said.”

“‘We’ve found we have more inventory than we feel comfortable with,’ he said.”

The Review Journal from Nevada. “Nobody’s ready to declare that the Las Vegas housing market has reached bottom, but some real estate experts are convinced the floor is at least being established.”

“The inventory of homes for sale receded slightly in November to 23,494, about 400 fewer than the previous month, and sales remained below 1,000 for the third consecutive month, the Greater Las Vegas Association of Realtors reported.”

“Inventory is up 19.1 percent from a year ago and sales are down 37.4 percent.”

“‘It appears we have reached the bottom everyone is waiting for,’ Robin Camacho of American Realty & Investments said. ‘December is looking horrible, but it’s December and it’s always the worst month.’”

“Realtors sold 968 single-family homes in November at a median price of $273,500, an 11.2 percent decline from a year ago. Condo and townhome sales fell 50 percent to 162 and the median price is down 10 percent to $180,000.”

“‘Prices are still dropping, in large part because investors are buying up the best deals,’ Camacho said. ‘Prices are still dropping while sales are rising. I think we have an ideal buyers’ market that won’t last much longer.’”

The Associated Press on Nevada. “Jackie Castleberry won’t be playing Santa Claus this year. This year she is just struggling to keep her North Las Vegas, Nevada, house.”

“The interest rate on her four-bedroom home loan shot up in October and she is $6,000 behind on her payments. She now owes $168,000 on her home, which once was worth $220,000 but is now worth about $150,000.”

“In the past, when times were tough, she would borrow against her home’s equity — that’s no longer possible.”

“‘I was always seen as the person that’s giving, but it’s kind of affected this year,’ said Castleberry, a former casino buffet supervisor who now makes $11 an hour, 30 hours a week, supervising children before and after school. ‘This year, I can’t see anything right now as far as gifts.’”

“Money’s also tight for Deborah Vick, a Las Vegas home loan officer who says she’s cut back on spending since the housing slowdown took hold and cut her salary in half. She used to have a BMW and a Land Rover, but had to give up the BMW to a company that took over her $600 a month lease.”

“‘If you have to give up a luxury item, which you probably shouldn’t have purchased in the first place, you know, for me it was a learning experience,’ she said.”

“‘My daughter’s having a fabulous holiday. She always does,’ Vick said. ‘Am I going to go buy myself another car this year? No.’”

The Nevada Appeal. “Chad Hill, of Dayton, left the renter’s world to pursue home ownership, recently closing on a house in a subdivision off Dayton Valley Road. Hill said prices finally came down far enough for him to buy.”

“‘It’s much better now that the interest rates have gone down some and you don’t get stuck in one of those ARM loans with a balloon payment,’ he said.”

“Up to 2004, Dayton home prices were lower than Reno and Carson City. If Reno’s and Carson’s prices were out of reach for a homebuyer, Dayton was a popular alternative. Then, from about 2004-2005, Nevada’s housing market took off, and brought Dayton with it, pushing prices to starting in the high $200,000s and out of reach for many.”

“Sheena Beaver, of the Builders Association of Western Nevada, said the median price of a new home in 2006 was $269,000 in the Dayton area, and for 2007, the median price was $242,000.”

“In 2006, the median sold price was $282,500, and the median list price was $295,000. The median sold price for 2005 was $288,950, and the median list price was $292,000.”

“Jody Foley, of Coldwell Banker Best Sellers, said it does take longer for listings to sell, and sellers should be ‘realistic’ in their pricing. Some sellers may not be listening to that advice, as the 125 homes on the market in Dayton through Nov. 30 show the median price to be $369,900, and the average time on the market at 150 days.”

“The statistics on expired or withdrawn listings in Dayton show some sellers chose to wait until the market picks up. In 2007, 80 listings expired or were withdrawn, with median list price of $417,400 and an average time on the market of 165 days.”

“‘It’s a great time for buyers to be out there looking and buying,’ Foley said. ‘There are good buys out there and there’s so many to pick from now.’”

The Reno Gazette Journal from Nevada. “The city of Reno is allowing developers to abandon their unfinished subdivisions and avoid the high cost of continuing projects that are not selling in the current slow housing market.”

“John Hester, Reno community development director, said he proposed the new policy when builders such as Centex, West Haven and SilverStar Communities asked if they could stop making payments on construction surety bonds, which cover the cost of multimillion-dollar public improvements.”

“‘With those three who came to talk to me, they don’t want to finish until the market is better,’ he said.”

“Centex is making bond payments on and paying property taxes on 1,240 recorded lots in its 1,517-lot Bella Vista Ranch project in the southeast Truckee Meadows.”

“At the end of September, Reno had 9,310 lots among its recorded subdivisions, up from 8,030 in February 2006, according to the University of Nevada, Reno. Throughout the Truckee Meadows, 15,036 unsold home lots are recorded on final maps, up from 11,111 at the end of 2004.”

“With new home sales expected to hit 2,000 this year, the inventory of recorded, unsold subdivision lots represents about a seven-year supply.”

“As of September, 62,584 lots have been approved on final or tentative subdivision maps in the Truckee Meadows, according to the regional studies center. That’s up from 45,964 in 2000 before a building boom began.”

“John Wright, a local real estate appraiser for 23 years, said the policy could help builders who paid cash for their land and public companies that start work on a non-controversial project and now want to suspend work until the market turns around.”

“But he said the policy won’t help small private builders who are financed by banks that require them to maintain their land approvals. ‘They have an alligator to feed every month,’ he said, in paying interest on loans to buy land. ‘That becomes a huge cash drain.’”

“Wright said he expects a number of builders to be foreclosed on next year and their lenders to take back entire subdivisions. He expects these subdivisions would be sold at a lower price, providing another blow to the housing market.”

“And he said another hit could come when more existing homes are dumped on the market at discounted prices next year. He said 36 percent of existing homes on the local MLS are vacant, and owners, including speculators, can’t hold onto them forever.”

“For the greater Reno-Sparks area, about 895 subdivision homes, including models were up for sale at the end of September, including 518 in Reno.”

From Business Week on Utah. “A year ago the six-bedroom house where Scott and Dawn Norton raised 10 children in the shadow of a Utah mountain range would have been snatched up. The Provo (Utah) home, which is listed for $368,000, seems to have plenty going for it.”

“For most Americans, the housing slump began in 2006, but in Provo and adjacent Orem, home prices leaped 14% in the quarter ending Sept. 30, compared with the same period in 2006, according to the Office of Federal Housing Enterprise Oversight’s Nov. 29 report.”

“Still, the Nortons have knocked $30,000 off their original asking price, set five months ago, and are giving a 3% discount to any buyer who comes to the closing table without an agent.”

“Why offer incentives in a hot market? Well, it seems that even some of the nation’s strongest markets, including Utah, the state with the highest third-quarter year-over-year appreciation, are losing steam.”

“‘We live in a great area, and I know we’re priced reasonably,’ says Dawn Norton. ‘I’ve had a Realtor tell me, ‘It’s not just your house.’”

“‘I keep hearing that Utah’s economy is great,’ says Kevin Shoell, who owns title company Title One in Salt Lake City. ‘But the housing market isn’t great. I’ve heard the stats before [about the state's home prices]. Everybody in the industry is looking around and saying, ‘Who are they talking about?’”

Greenspan: An Accident Waiting To Happen

Some housing bubble news from Wall Street and the Washington Post. “The chief executives for two of the nation’s dominant mortgage-finance companies traveled to Wall Street yesterday. Richard F. Syron, Freddie Mac CEO and Fannie Mae CEO, Daniel H. Mudd, forecast continued declines in home prices. Syron predicted home prices would ultimately bottom out at an average of 10 percent below their peaks, and Mudd predicted average peak-to-trough declines of 10 to 12 percent nationally.”

“But Syron outdid Mudd in expressing remorse for past business decisions and in describing the trouble that may lie ahead. If home prices decline by 30 percent, as one noted economist has said could happen, ‘We’re all going long apples and boxes to sell them in,’ Syron said, invoking an image from the Great Depression.”

“Syron traced the trouble in the mortgage business to a housing bubble and accepted some responsibility. Fannie Mae and Freddie Mac contributed to the problem by spreading the message that everybody should own a house, he said. In fact, many people who should not have owned houses bought them, he said.”

“One questioner accused Syron of making a strategic error in failing to adjust to clear signs of looming trouble as early as 2005. Syron agreed that Freddie Mac should have tightened its lending standards sooner. Although Freddie Mac was an early bear about the real estate market, he said, it did not foresee the severity of the problem.”

The Associated Press. “The chief executive of Freddie Mac estimated Tuesday the mortgage finance company will lose an additional $5.5 billion to $7.5 billion over the next few years as the housing crisis worsens and home-loan defaults rise.”

“‘I honestly think it’s going to get tougher before it gets better,’ Syron said.”

“While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been ‘pictures of people standing with furniture on the lawn’ after being forcibly evicted from their homes, Syron said. ‘As that begins to happen, and it will happen, I am afraid of the impact that this has.’”

From Bloomberg. “Bank of America Corp. CEO Kenneth Lewis said losses from the credit markets will be higher than the $3 billion estimated last month. The second-biggest bank by assets after Citigroup Inc. will set aside another $1.3 billion in the fourth quarter to cover losses, mostly at its home equity and credit card units, he said.”

“Lewis said writedowns for debt instruments known as collateralized debt obligations, or CDOs, are ‘unknowable.’”

“Lewis said fourth-quarter earnings will be ‘quite disappointing” and credit markets ‘will probably remain challenging into next year.’ The ’subprime crisis has created considerable dislocations in the capital markets’ that probably will stretch into 2008, Lewis said.”

“‘We expect charge-offs to increase next year, particularly on the consumer side,’ Lewis said in response to a question.”

“Wachovia Corp., the fourth-biggest U.S. bank, may double its provision for loan losses in the final quarter and said it can’t predict when credit markets will return to normal.”

“Wachovia will set aside $1 billion to cover bad loans, an increase from the previous estimate of $500 million to $600 million, the company said today in a regulatory filing.”

“Writedowns in October and November tied to securities backed by subprime mortgages and collateralized debt obligations already equal the $1.34 billion pretax loss reported for the entire quarter ended Sept. 30, it said.”

“‘None of us know what inning we are in,’ CEO Kennedy Thompson told investors.”

The Orlando Sentinel. “Local governments will be able to withdraw no more than a quarter of the $12 billion they have invested in a Florida-run investment fund before next spring — because the fund doesn’t want to sell the investments at a loss.”

“Investing agencies, including many in Central Florida, also found out that at least $350 million of their cash is tied up in investments whose ratings are so low that their value ‘truly is a question mark,’ according to Simon Mendelson, a top manager with BlackRock, an investment firm hired by the state to salvage the pool.”

“It won’t be known until later next year, when the investments mature, whether they’ll be worth anything, he added.” “BlackRock segregated about $2 billion in ‘nonperforming’ investments in an account separate from an additional $10 billion that the SBA maintains is in highly rated and safe investments.”

“SBA officials say they cannot sell off investments, even the good ones, because the market for them is bad. They hope that if held long enough, they will eventually pay off.”

From Reuters. “Bank of Canada Governor David Dodge says banks must work together to resolve one corner of the Canada’s troubled debt market, a Canadian newspaper reported.”

“The soon-to-retire governor said all banks will be hit if the asset-backed commercial paper market collapses, losses widen from leverage, and credit constricts and borrowing dries up. ‘We have a collective interest in the whole thing not going into a shambles.’”

“Dodge said losses can multiply because of leverage. ‘Because they’re levered, the amount of global assets that would be affected if all this went down would be eight or 10 times the nominal value of the notes, so you’re starting to get into the C$200-billion, quarter-trillion-dollars’ worth.’”

“‘So everybody, including the international banks, have a real interest in trying to somehow get this thing resolved because if these go down and a whole pile of SIVs (Structured Investment Vehicles) elsewhere go down, then you’ve got an immense number of these assets being dumped on the market at the same time,’ he said.”

The Guardian. “Kazakh President Nursultan Nazarbayev promised on Wednesday to prevent any local bank from collapsing, and criticised credit ratings downgrades as ‘not objective.’”

“A credit crunch caused by the U.S. subprime mortgage crisis has hit Kazakhstan’s fast-growing banking sector hard, prompting Standard & Poor to downgrade the country’s sovereign ratings in October. On Tuesday, Standard & Poor’s cut its outlook again, this time to negative from stable for eight Kazakh banks.”

“Data showed earlier in the day that growth in real estate prices slowed to around 50 percent year-on-year in November from a peak of over 70 percent during summer months. Month-on-month, prices were almost unchanged in November.”

“‘The fact that the ratings agency pointed to longer-term refinancing and asset quality risks, rather than the short-term liquidity problems, as the main issues Kazakhstani banks face is very negative for the industry,’ UniCredit said in a note.”

From Newsroom Finland. “Finnish insurer Tapiola said Wednesday that the growth in Finnish house and flat prices seemed to be grinding to a halt.”

“Vesa Immonen, the head of Tapiola’s real estate investment branch, said signs on the housing market indicated a cool-down, adding the time properties spend on the market had risen markedly.”

“Julia Gavin sold more than a house a week as the Spanish real-estate boom peaked last year. Now that business is drying up, she’s sharing leads with competitors, reckoning a partial commission is better than none at all.”

“‘We’re up to our ears with work, but no sales,’ says Gavin, who works near Madrid. ‘It’s horrible.’”

“Spain is suffering collateral damage from the collapse of the U.S. market for mortgages to the riskiest borrowers and the swoon in U.S. real estate. Spanish banks have exceeded their European peers in tightening lending standards, prompting a plea from Prime Minister Jose Luis Rodriguez Zapatero not to strangle growth.”

“‘The end of Spain’s ‘fat’ years will hit the whole region,’ said Ralph Solveen, an economist at Commerzbank AG in Frankfurt.”

“Three-quarters of Spain’s 60,000 property companies may end up bankrupt, according to Fernando Rodriguez de Acuna M., an analyst at a real-estate research firm in Madrid. ‘They’ve been caught by the two things at once, the demand problem and the liquidity problem,’ he says. ‘Everyone is going to have problems.’”

“Spanish banks’ own borrowing costs are rising — when they can borrow at all. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, was able to sell just a quarter of a 6.3 billion euro ($9.3 billion) bond issue backed by mortgages and corporate loans, a person familiar with the deals said.”

“Bankinter SA pulled a sale of at least 500 million euros of mortgage- backed notes.”

“Gavin and her clients are paying the price. In one case last month, she says, she thought she had a sale after three months of negotiations among buyer, seller and mortgage lender. Then Ibercaja SA, a Spanish savings bank, refused her client a loan covering the 168,000-euro ($247,000) purchase price.”

“The bank said it had concluded the client was overpaying for the property in El Escorial, near Madrid. ‘The banks are coming up with a million excuses not to give loans,’ Gavin said. ‘They don’t want to take any risks.’”

From CNN Money. “Former Federal Reserve Chairman Alan Greenspan in a commentary published Wednesday argues that Fed policy under his leadership was not the cause of the housing bubble that precipitated the current crisis in financial credit markets, as some have charged.”

“Instead he argues in the Wall Street Journal that the credit markets melted down in August because ‘risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.’”

“And he says that if it hadn’t been problems with rising defaults of subprime mortgages and declining home prices, some other problem in some other market would have triggered the crisis.”

“‘The crisis was thus an accident waiting to happen,’ he writes.”

“‘I do not doubt that a low U.S. federal funds rate in response to the crash, and especially the 1 percent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices,’ he wrote. ‘In my judgment, however, the impact on demand for homes financed with ARMs was not major.’”

“‘Demand in those days was driven by the expectation of rising prices - the dynamic that fuels most asset-price bubbles,’ he added. ‘If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations.’”

“While he was chairman of the central bank through January 2006, Greenspan always denied there was a bubble in the nationwide U.S. real estate market, saying only that a certain number of metropolitan real estate markets could see declines in home values.”

“‘The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when…market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World,’ Greenspan wrote.”

“Greenspan also wrote that he believes there was little the Federal Reserve could have done to prevent credit markets from seizing up this August.”

“‘After more than a half-century observing numerous price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives before the speculative fever breaks on its own,’ Greenspan wrote.”

“In the article, Greenspan predicted credit markets would recover from the current crisis only when the inventories of newly built homes have been mostly liquidated, and deflation in housing prices ends.”

“‘That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities,’ Greenspan wrote.”

The Mercury News. ” As Alan Greenspan tours the world promoting his memoir, an average of 12,000 Californians and 55,000 homeowners across the nation receive a foreclosure notice every week, the highest in American history.”

“Next year, a record 2 million adjustable rate home loans are scheduled to spike upward nationwide, putting 1.4 million homeowners at risk of foreclosure. We are at the tip of the iceberg in a rapidly accelerating mortgage meltdown, and the prime cause started with the former Federal Reserve chairman’s policies.”

“By reducing the federal funds rate to a mere 1 percent in 2003 and refusing to increase it for a year, Greenspan and the Federal Reserve created the economic conditions for rampant investor speculation and a loosening of loan underwriting standards as lenders frantically competed for market share.”

“Greenspan shunned increased regulations, even though he has now admitted knowing about abuses in the subprime loan industry.”

“Blinded by the irrational exuberance of surging home prices, Greenspan promoted the non-traditional mortgages that have devastated so many homeowners. In a speech on Feb. 23, 2004, Greenspan stated consumers were paying too much for fixed-rate mortgages and asked lenders to provide ‘greater mortgage product alternatives to the traditional fixed-rate mortgage.’”

“When a person of Greenspan’s influence and stature promotes alternative mortgage products, lenders and consumers listen.”

“For many homeowners, especially the hundreds of thousands that have already defaulted, there will be very little the state or federal government can do. They can thank Greenspan. Maybe he can donate the profits of his book to those families who have already lost their homes.”

A Cycle That Won’t Stop

Hoboken Now reports from New Jersey. “Hoboken-based Metro Homes has shut down a 224-unit high-rise project in Asbury Park, citing the impact of the subprime mortgage collapse and real estate slump, the Asbury Park Press reported. Dean Geibel, the company’s president, told the newspaper it has halted construction and sales on the Esperanza ‘until such time market conditions allow us to move forward.’”

“The project was built on the site of a failed condo project that remained an unfinished steel skeleton for 17 years until Geibel’s company blew it up in 2006.”

The Express Times from Pennsylvania. “Homes sales in the Lehigh Valley plummeted in November compared to last year, according to an industry group. According to the Lehigh Valley Association of Realtors, 410 homes sold in the region in November, down 30.4 percent from 589 sales in November 2006.”

“Last month’s figure is also down 25.6 percent from 551 sales recorded in October. “Bethlehem-based economist Kamran Afshar said the latest trend ‘looks like a crash, but it’s just a correction.’ It is not clear when the current dip will end, he said.”

“‘It will be some time until it stabilizes,’ said Afshar. ‘I don’t think we have seen the bottoming of this process, probably not until next summer.’”

The Times on New York. “Only now is the slump in America’s residential property market reaching the very top of the tree – Manhattan.”

“Finally, almost belatedly, the few square miles of upmarket central New York real estate is beginning to suffer the impact of this summer’s credit crisis. Wall Street bankers are delaying the purchase of new apartments, keenly aware that the country sits on the brink of recession, and boom in the Big Apple is showing signs of abating.”

“According to one of the leading experts on the Manhattan real estate market - Gregory Hymes, chief economist at the property company Brown Harris Stevens – although residential property prices hit a record high in the third quarter of the year, estate agents are beginning to see a slowdown in activity as Wall Street bankers guard their bonuses.”

“Mr Hymes said: ‘People do not like to buy in uncertain times. Some of the problems arising from the stock market turbulence in the summer will be resolved shortly. But some of the problems will take years to unravel.’”

From Reuters on New York. “Bonuses affect the sales volume and prices for the entire market by setting the tone of buyer sentiment. ‘It primes the pump, so to speak,’ said Jonathan Miller, director of research at Radar Logic. ‘A net decline in payouts are very likely to first impact transaction levels.’”

“Looming layoffs could exacerbate the pain. Last year, the securities brokerage firms accounted for 177,000 jobs, according to Moody’s The overall financial sector accounts for 7.5 per cent of Manhattan jobs but 28 per cent of the overall income, the research firm said.”

“Marisa DiNatale, senior economist at Moody’s expects the financial sector to shed 10,000 jobs across the greater metropolitan area of New York City’s five boroughs, northern New Jersey, and three counties north of the city.”

“‘Probably about 70 per cent would be in New York City. Most of them would be in Manhattan,’ she said.”

The Times Record Herald from New York. “Normally at this time of year, homeowners place holiday decorations on their lawns. This year, many in the area are putting up foreclosure signs instead.”

“‘From all the people that I know who’ve been in the real estate industry for years, they’re trying to stay optimistic,’ said Yvette Rooney, a real estate agent in Middletown. ‘What’s different in this environment, though, is how bad the mortgage industry has positioned people. It’s making a cycle that won’t stop.’”

“The influx by New York City home buyers over the past decade means a lot of variable-rate mortgages are now due for a rate increase. The region’s ever-increasing home prices means many have been priced out of the market, yet were given subprime mortgages anyway.”

“‘They’re creeping up,’ Rooney said of local foreclosures. ‘They’ll be more visible in the new year, because a lot of adjustable rates are set to balloon up.’”

“Rooney also blames adjustable mortgage rates for the current crisis, saying that less than 10 years ago, the number of people with adjustable mortgages was 3 percent. Since 2005-2006, that number has increased to 33 percent.”

“‘A lot of people from the city came to Orange County and it started getting pricey; it started getting like another Rockland or Westchester County,’ she said. ‘What happened is that a lot of brokers gave what clients wanted — the lower rate — and this is because people are not educated on what ‘rate’ really is, because everyone, including the brokers, tell people that rate is the most important thing. It’s not.’”

“‘You can have a great low rate but a horrible mortgage,’ she said. ‘Since adjustable rates in most cases were lower than fixed rates, that’s what people thought they should get, not knowing that it’s a bomb waiting to explode.’”

“Home sales and prices fell across the region in November, according to data reported by county boards of Realtors. The decline across Orange, Ulster and Sullivan counties mirrors the slump playing out across large swaths of the country.”

“Paula Meloi, owner of ERA Meloi Realty in Port Jervis, whose firm does business in New York, New Jersey and Pennsylvania, said her business has been doing a lot of foreclosure work lately.”

“In another sign of the slowing market, homes are taking longer to sell. There are a lot of expired listings. People are jumping from Realtor to Realtor looking for answers,’ said Meloi. “The answer really is price.’”

The Advocate from Connecticut. “Potential bargains abound for home buyers in Stamford as the median price of a single-family house dropped in October to $610,750, its lowest October level since 2003.” “The median October price in Stamford reached a peak of $660,000 in 2005, up from $622,500 in 2004, the Warren Group said.”

“Many sellers in Stamford were seeking prices the market could not support, said June Rosenthal, owner of Juner Properties residential real estate in Stamford, and the subprime lending fiasco has hampered real estate markets nationwide.”

“‘Connecticut’s housing market has fared better than those of its neighbors throughout most of 2007, but July’s credit crisis hit New England hard,’ said Timothy Warren Jr., CEO of the Warren Group. ‘It didn’t spare the Nutmeg State this time. Those effects have spilled over from September, when they first became evident, and sales continued to plunge in October.’”

“The median October price of a single-family house in Greenwich was $1.45 million two months ago, compared with $1.15 million a year ago and $1.675 million in 2005, which was an all-time high, the Warren Group said.”

The Providence Business News from Rhode Island. “The median price for single-family homes sold in Rhode Island fell to $236,000 during October, the lowest since at least January 2005, according t The Warren Group. The October price is a 10-percent drop from the October 2006 price and a 4-percent drop from the $246,000 median price the state registered in September 2007.”

“CEO Warren said the October numbers are a further effect of the July credit crisis, which started affecting median prices during September.”

“‘And we’re not just seeing this trend in Rhode Island; Sales and prices in Massachusetts and Connecticut also started to plummet in September and have continued declining in October, so I think this is part of a bigger trend,’ Warren said. ‘Foreclosures also play a part in keeping prices down, even as they flood the market with more homes for sale.’”

The Worchester Business Journal from Massachusetts. “At a glance, things in the Central Massachusetts home loan industry look dismal. Many mortgage brokers have gone out of business, and many of those that remain have slashed their staff numbers by well over 50 percent. But some in the business say the current situation is more silver lining than black cloud.”

“‘I’m actually kind of happy,’ said Christopher Tremblay, CEO of Mortgage Dreams LLC in Worcester, which has reduced its staff from about 50 down to 15.”

“Tremblay and other mortgage executives say it has been obvious for years that many brokers and lenders were acting unethically, with strong support from banks and other lenders. They said both increased caution on the part of lenders and regulations now being passed at the federal and state level should help deal with that problem.”

“‘What I hope we can do is keep the undesirable people from coming in and out of our industry,’ said Jim Picciotto, president of Framingham-based Patriot Funding, which has laid off about two-thirds of its employees in the past two years.”

“Tremblay said the number of mortgage brokers across the country ballooned since the 1990s, from 100,000 to 500,000, due in part to people looking for easy money. Massachusetts began licensing mortgage lenders and brokers in 1992 and saw the number of licensed companies go from 540 in 1997 to more than 2,000 today.”

“‘You could have put a monkey behind a desk and they could have got somebody financed,’ he said.”

The Eagle Tribune from Massachusetts. “A growing number of homeowners across the Merrimack Valley and Southern New Hampshire are in danger of losing their homes - or have already lost them - because they can no longer afford their mortgages, according to statistics.”

“The culprit? Adjustable-rate mortgages with low ‘teaser rates’ offered by unscrupulous brokers to people who really couldn’t afford the homes they were buying in the first place. The result? Hundreds of homes in Lawrence, Methuen and Haverhill, dozens more in Andover and North Andover, and scores more in New Hampshire are being foreclosed on at record rates.”

“In New Hampshire, staff members from the Banking Department are holding workshops across the state to reach out to homeowners who may be facing foreclosure. ‘Some of those folks we have helped,’ said N.H. Banking Department Commissioner Peter Hildreth. ‘Unfortunately, a lot of them are in houses they simply can’t afford.’”

“‘It’s created a perfect storm,’ said Tom Farmer, spokesman for the Massachusetts Housing Finance Agency. ‘In many cases the house is worth less than the loan. So if you owe $150,000 but the house is only worth $120,000 now, you need to get the mortgage company to eat the $30,000.’”

“From September 2005 to September 2006, 276 foreclosure petitions were introduced in Lawrence. That number jumped to 704 from September 2006 to September 2007. While Lawrence led the pack during that period, Haverhill came in second, with 206 filings in 2005-2006 rising to 398 in 2006-2007.”

“In New Hampshire, meanwhile, Hildreth, the banking commissioner, said 2,000 to 3,000 homes could be foreclosed on by the end of 2008. He said the problem is particularly pronounced in the more populated parts of the state and along the border with Massachusetts.”

“‘Rockingham County and Southern Hillsborough County will feel the brunt of it,’ he said. ‘That’s where housing prices were high to start with. People had to really stretch to afford some of those homes.’”

“Terence Egan, editor in chief at The Warren Group, said…as people fall behind in their payments, they normally would sell their homes to get out from under the loan. But declining home prices are making that impossible.”

“‘Home values going down has exposed a lot of problems,’ Egan said.”

The Telegraph from New Hampshire. “The foreclosure situation in New Hampshire will get worse before it gets better, with around 6,000 state families facing the possibility of losing their home this year and about that many in the same boat in 2008.”

“The current inventory of houses on the market is at about 13 months, meaning it would take more than a year to sell them all at current rates, even if no new homes were put up for sale.”

“‘That is the highest (rate) we had seen in well over 10 years,’ said Dean Christon, executive director of the New Hampshire Housing Financing Authority. On average, prices have declined less than 5 percent from last year’s peak through this past summer.”

“New Hampshire has a lot of adjustable-rate subprime loans, where much of the problem lies. ‘The only surprise is that the subprime piece was significantly larger than some may have realized,’ Christon said.”

“In the second quarter of this year, 6 percent of all loans in the state were subprime adjustable – meaning they were loans given with relatively few checks on income or credit and had low interest rates that would increase sharply after a couple of years. That category of loan did not even exist during the last housing crunch.”

“They account for a whopping 49 percent of all foreclosures in the state.”

“As happened in the rest of the country, the popularity of these loans has skyrocketed in New Hampshire. In 2004, 10 percent of new loans were subprime, either fixed rate or adjustable; in 2006, that tally had risen to 22 percent.”

“The more rural counties had more suspect mortgages – in Coos County, for example, 38 percent of loans were subprime – which seems to cast doubt on the commonly expressed theory that many such loans were taken out by first-time homeowners moving over the border from Massachusetts in search of lower taxes.”

“‘A lot (of subprime loans) did get used for refinancing,’ Christon said.”

Bits Bucket And Craigslist Finds For December 12, 2007

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