The Housing Bubble

The Sacramento Bee reports from California. “Sacramento-area home sales ticked up for the second straight month in November. But the excess supply and rising numbers of bank-owned homes continued to push down sales prices. Much of November’s slight sales increase can be traced to a rise in closings of new homes across the capital region, said DataQuick. Home builders reported 88 more closings in November than the previous month.”

“That’s a reflection of sales begun in late summer and early fall, a time when builders like K.Hovnanian boasted 47 sales in one weekend from splashy discounting efforts. But overall sales numbers are still at 1990s levels and prices have returned to 2004 levels across much of the region, DataQuick reported.”

“Sacramento County, where median sales prices of new and existing homes combined are now 18.3 percent below this time last year, is still California’s hardest-hit urban county for declining values.”

“Placer County’s median sales price for existing homes dipped to $382,000 from $400,000 in October. Sales prices in the suburban county are now down nearly 25 percent below their August 2005 peak of $505,000.”

The San Francisco Chronicle. “The Bay Area housing market showed no signs of recovery in November, with sales hobbling along at a two-decade-low pace and buyers still struggling to find mortgages.”

“A total of 5,127 new and existing houses and condos traded hands last month, down 36.2 percent from November 2006, according to DataQuick. That’s the lowest sales count for the month since at least 1988, when the firm began tracking the market. It is the 34th consecutive month of declines.”

The Recordnet. “In California, there were 39,992 foreclosure filings in November, down 21 percent from the previous month but up 108 percent from a year earlier. RealtyTrac said California cities accounted for five of the nation’s top 10 metro foreclosure rates last month.”

“Broker Steve Clark said he hasn’t seen any signs that the foreclosure scene is improving. A lot of people still come into his office hoping to list their houses in hopes of selling to avoid foreclosure, he said. Typically, though, they owe at least $100,000 more on the house than they could get for it, he said.”

“‘We can’t list it,’ he said he tells them. ‘Nobody will buy your home and help you out of this mess.’”

“There have been hardly any sales all this year, anyway, he said, adding that his office mainly handles property management for rental homes - an active scene. ‘I don’t see a change any time soon,’ Clark said. ‘It’s terrible, and I have a hard time seeing where the silver lining is.’”

From ABC 7 News. “Stockton still has the highest foreclosure rate in the country, Solano County is number six. Antioch’s been hit hard too.”

“The signs are everywhere, a lifeless lawn, a neglected tree, a drained hot tub and an empty mailbox. On all too many streets in Antioch, there’s merely a house where there used to be a home. ‘It’s sad, it’s really sad, because I’m sure when these people bought their homes, it was their dream,’ said Sonya Polk.”

“Sonya Polk has lived here four years; long enough to see a once thriving neighborhood turn strangely quiet. ‘It’s not that ‘This is a nice neighborhood, it’s quiet.’ It’s quiet because it’s empty,’ said Polk.”

“According to Realty Trac, last month in Contra Costa County, there were nearly 2,400 new foreclosure filings.”

The Ventura County Star. “Ventura County continued to grow very slowly last year, fueled by a steady increase in births coupled with an influx of foreign immigration that barely neutralized the exodus of residents to other counties and states.”

“The trend, said Bill Watkins, executive director of the UC Santa Barbara Economic Forecast Project, is a reflection of economic reality: high housing prices coupled with fewer opportunities to land a job that pays enough to afford a house.”

“‘Opportunities are declining,’ he said, noting layoffs at the county’s two largest private employers, Amgen Inc. and Countrywide Financial Corp.”

“Bob Schrader, controller at Hilford Moving and Storage in Ventura, said his industry has not benefited by the number of people leaving.”

“‘Under normal circumstances, we have more people moving in than moving out,’ he said. ‘But these aren’t normal circumstances. You’ve now got people just walking away from their homes and taking nothing with them except a few personal possessions.’”

The LA Times. “California’s population continued to grow modestly in the last fiscal year despite a significant exodus of residents to other states, according to a state report released Wednesday.”

“The annual study by the Department of Finance showed that 89,000 more people moved out of California than moved here from elsewhere in the United States. California’s population did grow in fiscal 2007, but the growth rested on births and the arrival of more than 200,000 immigrants from other countries.”

“‘If you’re someone in finance and you haven’t already been laid off…or if you’ve lost your job here and maybe your house, maybe you’re thinking that there are better prospects out there in other states,’ said Howard Roth, chief economist for the Department of Finance.”

“While the state lost many residents during the economic downturn of the 1990s, people had been steadily moving to California from other states since 1999.”

“But once the housing bubble burst, the trend reversed.”

“The story was repeated in Southern California, where every county except Riverside and San Diego saw a decrease in ‘domestic migration.’”

“The slowdown in Inland Empire growth will probably get worse next year as regional housing sales continue to slow, said John Husing, an economist who studies Inland Empire counties.”

“The number of houses sold in Riverside and San Bernardino counties in the first quarter of 2007 was about half the number sold in the first quarter of 2006, he said.”

“‘The slowdown in the housing market attacks the fundamental strength of the Inland economy,’ Husing said. ‘I personally think we’re heading into a recession here.’”

The Voice of San Diego. “The slump that has plagued the San Diego County housing market is beginning to show on the commercial side.”

“The trouble defies the industry mindset, prevalent even up until a few months ago, that commercial and residential real estate share little more than a surname, that the health of the real estate market for apartment investors, offices and industrial space would remain untouched by the housing market’s troubles.”

“‘I think we’d all like to think that the meltdown in the housing market hasn’t affected the commercial side,’ said Kraig Kristofferson, senior VP with CB Richard Ellis. ‘But the reality is people look at real estate in one big basket, often.’”

“National homebuilder Lennar, for example, recently listed 50,000 square feet of its office space for lease to other tenants in order to cut costs, said Jason Hughes, principal with local firm Irving Hughes. And then there are mortgage companies, title companies, escrow companies — going out of business or cutting back on staff, and space, he said.”

“‘It goes on and on,’ Hughes said. ‘Anyone that says that residential is not affecting commercial is nuts, because it simply is. There are a ton of tenants who are in a difficult situation because of the housing market, residential real estate offices are closing their doors. … And that’s happening at the same time as the credit crunch.’”

“With heavy losses sustained by such investors this summer due to soaring defaults on subprime and other mortgages, those investors grew skittish. Some lenders backed by them have stopped funding loans altogether.”

“‘The credit crunch has probably taken out 75 percent of buyers who were out kicking tires a year ago,’ Hughes said.”

“In another subsector of commercial real estate, values are shifting in apartment buildings after years of significant increases in prices from investors looking to convert apartments and sell them as individual condos.”

“Robert Vallera, principal with local firm Commercial Realty Advisers, referred to an apartment property about to close in El Cajon that is selling for ‘perhaps 25 percent below where it would’ve sold two-and-a-half years ago.’”

“‘Apartment prices a few years ago, mid-decade, were primarily based upon condo-conversion economics,’ Vallera said. ‘We’re seeing some properties come on the market now where the prices have made a substantial correction.’”

“‘[Would-be buyers] read the paper just like everybody else,’ said Brandon Keith, another principal with Commercial Realty Advisers. ‘If it’s their first commercial purchase, they maybe think, ‘If housing prices are going down, then maybe commercial prices will, too.’”

From Reuters. “The surge in home foreclosures in California…may help send the state’s home prices tumbling by adding properties to already swollen listings of homes for sale, said John Burns, an Irvine, California consultant to home builders.”

“‘That scenario is a real possibility. Home prices are completely out of line with people’s income,’ Burns said.”

“‘It’s a total buyer’s market,’ he said during a telephone interview with Reuters. ‘There is a tremendous number of homes for sale out there.’”

“Comerica Bank Chief Economist Dana Johnson said in a report this week the state is likely heading into a ‘multiyear period’ marked by home prices lagging national trends.”

“‘Something akin to the experience from 1989 through 1997 may re-emerge,’ he wrote.”

“Johnson noted that earlier this year California’s median home price peaked at 175 percent of the national median, a premium buyers attacked before the recent credit crunch with adjustable-rate mortgages and 100 percent financing.”

“Johnson noted that for two decades before the frantic homes market of the early 2000s, a ratio of California’s median home price and median income held to a narrow range of five to six, indicating affordability. Then speculation and lax lending, especially with subprime loans, sent the ratio soaring to 10.”

“Now only 24 percent of households in California can afford to buy an entry-level home.”

“For affordability to return to California’s housing market, its home prices must fall by at least 30 percent even after recent declines, Johnson said.”

“That is may not be out of the question given the mortgage crunch is sidelining so many prospective buyers while the backlog of homes for sale builds, Burns said: ‘There are very few people who are qualified under today’s underwriting criteria to buy an entry level home.’”

Some housing bubble news from Wall Street and Washington. BBC News, “Bear Stearns has posted its first quarterly loss in the company’s history, as bets on risky sub-prime mortgages in the US turned sour. It revealed it had written down $1.9bn in the period due to these woes. This was more than the $1.2bn it had earlier suggested, and reflected the reduced value of its sub-prime mortgage-related securities.”

The Associated Press. “‘We are obviously upset with our 2007 results,’ said CEO Jimmy Cayne.”

“Bear Stearns’ fiscal fourth-quarter loss, and collapse of two hedge funds it managed during the summer, prompted Cayne to pass on his 2007 bonus. Members of the company’s executive committee also will not receive year-end bonuses.”

“Bear Stearns has undergone three waves of layoffs since two hedge funds it controlled collapsed during the summer. Some 1,500 jobs have been eliminated from its staff of around 15,500. The company, one of the nation’s biggest underwriters of mortgage-backed bonds, may be the Wall Street investment bank most directly exposed to this year’s credit squeeze.”

“It faces a number of legal actions related to the funds’ collapse, including a suit filed by investor Barclays PLC.”

The Business. “Barclays has accused beleaguered investment bank Bear Stearns of using one of its two collapsed sub-prime hedge funds as places to offload troubled assets. The British bank called the funds’ combined $1.6bn collapse ‘one of the most high-profile and shocking hedge-fund failures of the past decade.’”

“In one of its harshest criticisms, Barclays accuses Bear Stearns of using one of the funds as a place to ‘unload excessively risky or troubled assets’ that it could not sell on to other investors.”

Dow Jones Newswires. “SunTrust Banks Inc. disclosed plans to buy $1.4 billion in securities Thursday held by two of its structured investment vehicles to prevent investor losses in ‘this unique environment.’”

“On the operating side, SunTrust anticipates $170 million net charge-offs on loans for the fourth quarter, with the loan-loss provision exceeding that by $ 190 million. As a result, loan-loan reserves are seen making up 1.06% of loans. The company’s net charge-off rate is seen rising to about 0.56% from the third quarter’s 0.34%.”

The Ottawa Business Journal. “Canadian Imperial Bank of Commerce is warning that it may have to take another $2-billion charge related to its U.S. subprime investments in its first quarter.”

“‘Although CIBC believes it is premature to predict the outcome, CIBC believes there is a reasonably high probability that it will incur a large charge in its financial results for the first quarter ending Jan. 31, 2008,’ the bank’s statement read.”

“The announcement came after news that Standard and Poor had reduced the credit rating of bond insurer ACA Financial Guaranty Corp – a hedge counterparty to Toronto-based CIBC – from ‘A’ to ‘CCC.’”

“CIBC said ACA’s insurance on subprime holdings was worth about $2 billion as of Nov. 30, and that it has hedged about $3.5 billion of its U.S. subprime real estate exposure with the New York-based company.”

“‘It is not known whether ACA will continue as a viable counterparty to CIBC,’ the bank said.”

From Reuters. “One analyst said a $2 billion charge likely isn’t enough to clear CIBC’s subprime exposure, which is held via complicated structured finance deals called collateralized debt obligations, most of which are hedged.”

“‘There was a collective sigh across (financial centers) Toronto and Montreal, but it wasn’t a sigh of relief,’ when CIBC’s statement came out, said Genuity Capital Markets analyst Mario Mendonca.”

“‘It is unfortunate that the bank has decided to bleed that out. They should take a charge so that most investors will say it really can’t be any larger than that,’ Mendonca told Reuters.”

“The New York Times reported on Wednesday that Merrill Lynch & Co Inc, Bear Stearns Co Inc and other large banks were in talks about bailing out ACA, citing two people briefed on the situation.”

“But Mendonca said that even if ACA is bailed out, those who it owed money would have to ’suck up some loss.’ ‘To say a bailout would reduce the possibility that CIBC would lose money is very simplistic,’ he said.”

“CIBC, with some $11 billion tied to subprime mortgages, has by far the largest exposure to this market of Canada’s banks.”

The New York Times. “Citing deepening problems in the mortgage market, Standard & Poor’s cut the rating of one troubled bond insurer on Wednesday and assigned a negative outlook to four other companies that guarantee debts linked to home loans.”

“S.& P. affirmed AAA ratings for MBIA, Ambac, XL Capital and Financial Guaranty Insurance, but assigned a negative outlook to them. And it left unchanged the ratings of five other bond insurers.”

“ACA has insured about $26 billion in mortgage-related collateralized debt obligations, some of them considered at high risk of loss as more homeowners fall behind on payments and end up in foreclosure.”

“Derrick Wulf, a portfolio manager at Dwight Asset Management, said investors were trying to price bonds assuming that the insurance on them was worthless. ‘Given the fact that so much depends on what the ratings agencies ultimately decide, which can be very difficult for investors to forecast,’ he said, ‘there isn’t a heck of a lot of trading.’”

From Bloomberg. “MBIA Inc. tumbled the most since 1987, and the risk of default soared after the world’s biggest bond insurer revealed that it guarantees $8.1 billion of collateralized debt obligations repackaging other CDOs and securities linked to subprime mortgages.”

“‘We are shocked management withheld this information for as long as it did,’ Ken Zerbe, an analyst with Morgan Stanley in New York, wrote in a report. ‘MBIA simply did not disclose arguably the riskiest parts of its CDO portfolio to investors.’”

“‘How is confidence expected to return to the capital markets when these types of surprises continue to pop up?’ said Peter Plaut, an analyst at New York-based hedge fund manager Sanno Point Capital Management.”

“MBIA said its total exposure to bonds backed by mortgages and collateralized debt obligations is about $30.61 billion. Included in that exposure is a pool of about $8.14 billion in CDOs backed by a combination of other CDOs and mortgages, which some analysts consider the riskiest part of an investment portfolio.”

“Fitch Ratings on Thursday changed its outlook on Bank of America Corp to negative from stable, indicating that a downgrade is more likely in the next one to two years.”

“The change in Bank of America’s outlook ‘reflects the fact that (its) earnings have a significant level of sensitivity to trends in the deteriorating residential mortgage market,’ Fitch said in a news release.”

“Moody’s Investors Service on Wednesday cut its rating for home builders D.R. Horton Inc and Ryland Group Inc to junk status, citing persistent troubles in the U.S. housing market.”

“‘Moody’s does not see a sector recovery beginning before well into 2009 at the earliest, with any housing recovery likely to be very measured for some time thereafter,’ the bond-ratings firm said in a news release.”

“The size of the U.S. commercial paper market suffered its biggest weekly shrinkage since late August, after credit market turmoil first erupted, the Federal Reserve reported on Thursday.”

“The overall U.S. commercial paper sector shrank $54.7 billion to a total $1.784 trillion outstanding in the week ended Dec. 19; a development that was likely to increase concerns that strains in short term lending markets are intensifying at year end.”

“The U.S. asset-backed commercial paper market, which has been hard hit by its exposure to subprime mortgage securities gone bad in the U.S. housing slide, shrank for a 19th straight week.”

“The asset-backed commercial paper segment, which had once helped to fuel the housing boom, fell $27.5 billion to $763.5 billion following last week’s $10.3 billion fall. The size of the ABCP market is the smallest since August 2005.”

“As storm clouds gathered over New York on July 10, Standard & Poor’s started a 10 a.m. conference call to discuss why the credit rating company was about to take its most dramatic action in more than two years.”

“S&P analysts said they might cut ratings on $12 billion of the world’s worst-performing subprime mortgage bonds, some of them less than a year after they had been given investment-grade designations.”

“Blessed by the biggest credit rating companies as safe investments, these instruments offered higher returns than government bonds with the same ratings. Investment banks including Bear Stearns Cos., Deutsche Bank AG and Lehman Brothers Holdings Inc. sold $1.2 trillion of these securities in 2005 and 2006, said Brian Bethune, director of financial economics for Global Insight Inc.”

“None of this could have happened without the participation of Wall Street’s three biggest arbiters of credit — Moody’s Investors Service, S&P and Fitch Ratings. About 80 percent of the securities carried AAA ratings, the same designation given to U.S. Treasury bonds.”

“‘The rating agencies had an almost God-like status in the eyes of some investors,’ says Sylvain Raynes, a former Moody’s analyst. ‘Now, that trust is gone. It’s been replaced with a feeling of betrayal.’”

“Many institutional investors’ own rules, in addition to state or national laws, bar them from buying securities that don’t carry investment-grade ratings.”

“Issuers got guidance from rating companies on how to shape their subprime securities to win the ratings, says Joshua Rosner, managing director of the New York-based research firm Graham Fisher & Co. Investment banks used software distributed by the ratings companies to show them how to meet the requirements, then paid the companies to have the securities rated, he says.”

“‘The idea that the rating agencies are impartial in the world of structured finance is a joke,’ Rosner says. ‘The issuers use the publicly available model to structure a pool and then sit down with the rating agencies to fine-tune it until they reach the desired rating.’”

“One $720 million loan pool created by Tokyo-based Nomura Holdings Inc. was rated Baa3, an investment-grade rating, by Moody’s when issued in 2006. Now, it’s rated Caa1, seven levels deep into junk-bond territory, and priced at 32 percent of the original value after 29 percent of the mortgages defaulted.”

“Almost 40 percent of the loans in the pool were originated by Costa Mesa, California-based Quick Loan Funding, run by Daniel Sadek, a broker who started the subprime company in 2002 with the motto: ‘You can’t wait. We won’t let you.’”

“In coming months, subprime losses will reach into almost every home in the U.S. as pension funds reveal setbacks, the former Moody’s analyst Raynes says. ‘The smallest investor, not Wall Street, is the one who will pay the ultimate price because he trusted the fund managers who blindly followed the rating agencies,’ Raynes says.”

“Jose Sepulveda worked 34 years as a reading teacher and elementary school principal in southern Texas towns along the banks of the Rio Grande. Now retired, he says he thought he was as far as he could be from the mortgage crisis roiling markets in New York, London and Tokyo.”

“He wasn’t far enough. The Austin-based Teacher Retirement System of Texas, the manager of Sepulveda’s retirement money, holds $6 billion of securities backed by assets that include subprime mortgages, most of it rated AAA, according to a report on the fund’s Web site.”

“‘How could anyone think that investments backed by subprime loans were safe?’ Sepulveda says.”

The Kansas City Star. “Media coverage of housing trends often gives the impression that the market is worse off than it really is, according to the chief economist for the National Association of Realtors.”

“Lawrence Yun, in presentations Wednesday to Kansas City area real estate agents, said the media’s biggest mistake was too much reporting on nationwide real estate trends. National trends alone, he said, don’t apply to many parts of the country, and reporting of them usually lacks perspective.”

“For instance, Yun reported that the national median (or midpoint) home price this year was on its way to its first overall decline since the Depression. Already, he said, the media drumbeat is repeating the word ‘depression,’ thus depressing consumer confidence and keeping potential homebuyers out of the market.”

“Yun noted a recent newspaper article about the high level of foreclosures in Ohio.”

“‘People read it and think the situation here is the same as there,’ Yun said. ‘All real estate is local, and what’s occurring nationally, particularly on the coasts, may not be indicative of what’s happening locally.’”

“Metropolitan Kansas City, he said, has never seen the extreme ups and downs of coastal markets, and the median price decline in the area this year is ‘marginal.’”
“He also sought to disprove some forecasts calling for home prices to continue falling nationally next year. He suggested that such predictions were based on a widening gap between fast-rising home prices and slower-rising incomes.”

“To Yun, though, that widening gap is misleading because mortgage rates have fallen over time, so the same income today buys more house than in the past.”

The Star Exponent reports from Virginia. “The bleeding continues. In the past six weeks - from Nov. 1 through Dec. 12 - 46 homes went into foreclosure in Culpeper, according to the commissioner of the revenue’s office. For the most part, the town foreclosures occurred in the newer housing developments. Marcus Bulmer, with Piedmont Homes of Lakeview, like other real estate professionals, attributed the high rate of foreclosures to the ‘criminal’ and ‘unethical’ lending practices of national lenders attached to national builders in which people were approved for loans that they couldn’t realistically afford.”

“‘Rather than how much do you make it was how much home do want?’ said Bulmer. ‘There was always a new program. It became almost cliché.’”

“‘It was a panic pace,’ he said of the boom of a couple years back, ‘and nobody ever stopped to reflect on what they were doing,’ including the new homeowner. ‘These are people in their 20s or early 30s and it was a very emotional time for them. They heard what they wanted to hear - it was their own fault.’”

The Capital News from Maryland. “Robert Worcester remembers a time when he rarely saw a Pennsylvania license plate on Interstate 83 near his Baltimore County home. And if he did, ‘you could just assume it was someone driving through,’ said Mr. Worcester, a Baltimore native.”

“No more. Mr. Worcester, president of Maryland Business for Responsive Government, said ‘it’s at least 50/50 now’ between Pennsylvania and Maryland license plates on I-83 at rush hour. He added that, while rush hour used to be a breeze, now ‘you can expect to go around three to five miles per hour’ at some spots.”

“Mark Goldstein, an economist for the Maryland Department of Planning, said it was likely that many Marylanders are keeping jobs here and migrating across state lines to take advantage of cheaper real estate prices in Pennsylvania and West Virginia. Real estate agents in neighboring states say Marylanders are crossing the border in their housing search.”

“Jerry Pilgrim, a real estate agent just across the Maryland border in York County, Pa., estimates that 80 percent of his clients are Maryland residents, who can find a 4,000-square foot house in Pennsylvania for the cost of a town house in some Maryland counties.”

“‘I’ve got people commuting all the way down to the D.C. area, some as far as Reston,’ Va., Mr. Pilgrim said.”

“He said sales to Marylanders have slowed recently, but not because of problems in Pennsylvania. ‘We’re having to deal with renters because owners are not able to sell their houses,’ Mr. Pilgrim said.”

The Times Leader from Pennsylvania. “A group of Dakota Woods residents attended Tuesday’s board of supervisors meeting to ask for help in getting their townhouse subdivision completed. The developers have abandoned the site, residents said, leaving 30 homes left to be built and numerous infrastructure deficiencies.”

“The residents stopped paying the maintenance fees to the developers because the money wasn’t being used towards maintaining the development. For the past several months, the residents have pooled their money to have the roads plowed, they told the supervisors.”

“One resident, Rod Azar, who’s owned his unit for a year, said developers ‘over-built’ and spent too much on the first units.”

“‘They didn’t have enough cash flow,’ he said, adding that the balance of the loan that the investors took out to finance the project well exceeds the value of the property.”

“Township solicitor Tom Brennan said that since Dakota Woods is a private subdivision, the township couldn’t take over the roads and maintain them. Brennan…advised the residents to consult with an attorney who specializes in real estate.”

The News Journal from Delaware. “Last month, Dilsheimer Communities launched its latest pitch to boost sales: Buy one of its homes, and the builder will cover the first year’s mortgage payments. It has attracted only a little interest, said Thomas Dilsheimer, VP of the Bala Cynwyd, Pa.-based company, which is developing LakeShore Village beside Garrisons Lake near Cheswold.”

“And it hasn’t been nearly enough to offset other factors dragging down the slowest market for new houses in decades. ‘The market is depressed, and there are too few buyers with too many houses to choose from,’ Dilsheimer said. ‘It’s pretty severe.’”

“Two to three years ago, he couldn’t build houses fast enough.”

“‘It was too hot,’ he said. ‘If a buyer walked in the door and didn’t buy, he knew the next guy in the door would.’”

“The evidence of the market’s depression is stark. The number of building permits issued in Delaware this year is down 40 percent from the peak in 2004, according to figures from the U.S. Commerce Department.”

“‘Many buyers who would be in the market are on the sidelines because they can’t sell their existing homes,’ Dilsheimer said.”

“Benchmark Builders president Steve Bomberger said the current slump is a healthy correction, albeit a painful one.”

“‘If you ask me about the good old days of ‘04 and ‘05 when we were selling houses like pencils on the street corner, I was uncomfortable with it from the beginning,’ Bomberger said. ‘It was unsustainable. You can’t manage a company at that pace.’”

“Delaware has a glut of existing homes on the market. So far this year, there have been fewer than 50 home sales for every 100 homes on the market, according to data from the region’s MLS. By contrast, there were about 75 home sales for every 100 homes listed in 2003.”

“Some builders have promoted their homes like car dealers shouting about huge blowout sales, especially for houses they’ve already built. Sandy Greene, a broker with Seacoast Realty in Bethany Beach, said some have held weekend sales with $100,000 discounts on $400,000 homes, just to clear out their inventory.”

“‘The big-name developers came down and went full tilt on everything they did, and then the market stopped,’ said Tim Rhodes, a broker in Bethany Beach. ‘Now they’re all in the same position of having lots of product and looking for ways to market it.’”

“Most incentives have been on builders’ most expensive homes, since those are the ones experiencing the slowest sales.”

“Rebecca Seweryn, an economist who studies Delaware for Moody’s Economy.com, said builders’ incentives obscure the actual price of a house. ‘It makes it harder to gauge the real value of these homes,’ she said.”

“Dilsheimer said builders have to offer incentives to counter the drumbeat of bad economic news that buyers are hearing. ‘When people read day after day how the market is down, they put their hands in their pockets and are much less willing to spend,’ he said.”

The Montclair Times from New Jersey. “Although they had yet to uproot the ‘for sale’ sign from their front lawn, Megan Hencinsky and her husband decided Monday to pull their Grove Street house off the market after it had not sold for four months.”

“When they first put it up for sale in August, they asked for $619,000 for their 1954 colonial, but gradually they rolled back the price to $529,000, slashing the figure multiple times along the way.”

“‘I can’t even tell you how many times,’ said Hencinsky.”

“According to the National Association of Realtors, existing home sales are expected to hit 5.67 million by the end of the year, the fifth-highest number on record, but a decline from the 2006 total: 6.48 million sales. That year marked the twilight of an eight- to 10-year boom in the market.”

“Anthony Wizner said he saw the slump approaching in 2005, as inexperienced investors began speculating on land and residential property across the nation, but especially in ‘hot’ markets such as Las Vegas, Nev., and Florida.”

“Their goal was short-term: Buy, flip and make fast, easy money. ‘Everybody wants a quick buck,’ said Wizner, who owns A.B.A. Home Remodelers in Clifton.”

“Wizner watched as sellers in Montclair and the surrounding area put more than half-million-dollar homes on the market and, within 24 hours, received offers for $100,000 above the asking price. Never in his life had he seen so many people lining up to, in effect, drive up the cost of a house.”

“Adriana O’Toole, broker/owner of Montclair Realty, said that during the housing bubble, buyers could purchase a house and pour money into overhauling it, yet still make a profit, since over time ‘the market caught up to them.’”

“Investors gambled on residential housing that had not even been built yet. Buyers put money down to get their names on a 1 1/2-year waiting list for a new home, and eventually flip the prospective dwelling to the next person down the list for a profit, said Drew Fishman, president of the New Jersey Association of Realtors.”

“Wizner, the contractor, had seen these circumstances before and knew what came next. ‘It was pretty wild back then,’ said Wizner. ‘I knew the party was about ready to end here.’”

“Amid the craze, financial institutions made it possible for borrowers to buy property without a down payment.”

“In addition, banks failed to adequately scrutinize the credit risk being presented by mortgage applicants, partly to save on the cost of digging into credit histories, but also since they were caught up in the general ’speculative mindset,’ said Phillip LeBel, an economics professor at Montclair State University.”

“Lenders rationalized that even if they foreclosed on chancy customers’ mortgages, they could sell the houses and still make money — an assumption that proved to be false once the slump struck, LeBel said.”

“In this market, Realtors ‘have to counsel our sellers on how to best maximize their equity,’ said broker Bernard McNichol. They might recall what neighboring properties sold for and have difficulty accepting that their home won’t be purchased for that price today, he said.”

“Also, people need to take more of a long-term view of home ownership, McNichol said. They should think of their houses as places to live and enjoy their lives, rather than considering them short-term investments and wondering how much the properties appreciated over the course of the year, a consideration that can be ‘angst-ridden.’”

From Newsday in New York. “During the second half of this year, Long Island’s economy has progressed along two distinct tracks: Even as fundamentals like employment, job growth and occupancy rates in commercial buildings indicate stability, the housing market has fallen into a tailspin, dragging every related industry down with it.”

“As home prices and sales have dropped, new home construction has fallen off and foreclosures have risen dramatically. And local mortgage lenders, including American Home Mortgage in Melville and Delta Financial Corp. in Woodbury which have both filed for bankruptcy, have laid off thousands of employees since August.”

“Underperforming mortgages granted to high-risk borrowers spread through the financial services sector, bringing down not only subprime lenders but also institutions that had invested in their mortgages.”

“Between October 2006 and October 2007, Long Island lost 2,300 financial services jobs, according to Pearl Kamer, chief economist for the Long Island Association.”

“In August alone, more than 10,255 workers in New York State were laid off, according to job placement firm Challenger Gray & Christmas. The report only includes publicly announced job cuts, so the real numbers are higher.”

“Most experts say there’s no end in sight. In a recent research note, industry analyst Paul Miller wrote that as consumers take out fewer mortgages in the next year, the industry will have to eliminate another 130,000 jobs ‘to bring production levels in equilibrium with employment.’”

“According to Challenger Gray CEO John Challenger, ‘Nobody knows what the extent is going to be. .. ‘This situation is unprecedented.’”

“He compared Long Island’s situation to that of the auto industry in Detroit: Nobody wants to leave, but the industry is struggling and there is a glut of qualified people struggling for every open position.”

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