The Housing Bubble

The San Francisco Chronicle reports from California. “The Bay Area housing market showed no signs of recovery in November, as sales fell to a nearly two-decade low and buyers still struggled to find mortgages. There’s little to suggest that this month is shaping up any better than November. ‘Properties are just sitting on the market,’ said Barry Pilger, broker in Oakland. ‘My theory is that people are standing aside until jumbo loan rates come down.’”

“Mark Corrallo and his wife hope to move from their 2,500-square-foot, four-bedroom home in Oakland’s Montclair district to a quiet, cul-de-sac in Walnut Creek. The couple listed their home in October at $1,119,000 and quickly reduced it to $1,079,000. They haven’t had a single offer and plan to pull the listing on Monday.”

“‘It seems the market has simply died in Montclair,’ he said. ‘The big question is whether that’s an indication of a prolonged slump in the higher-end market that will continue into the new year, or if it’s simply a seasonal slowdown that will correct itself in the spring.’”

The Mercury News. “At first glance, Santa Clara County’s housing market might seem to have entered a kind of twilight zone. Just 750 existing detached houses were sold in November, down about 42 percent from November 2006, according to DataQuick. That’s the fewest sales for that month since the research outfit began tracking such statistics in 1988 and the lowest number for any month since February 1995.”

“Yet despite the apparent anemic demand for housing here, the median price of those 750 houses shot up 9.5 percent from a year ago to $799,000.”

“So what gives? The answer has a lot to do with the yawning disparity between Silicon Valley’s affluent and less-well-to-do areas, say some real estate experts.”

“‘Some of your most affordable neighborhoods aren’t contributing many sales,’ which boosts the median sale price, said DataQuick analyst Andrew LePage.”

“Richard Calhoun also sees evidence of that in the data he compiles as owner of Creekside Realty in San Jose. Although San Jose’s relatively inexpensive east, central and south areas accounted for 16 percent of existing single-family houses sold earlier this year, he said, that’s down to 7.5 percent now.”

“Over about the same period, the median price of houses in those areas also dropped from about $660,000 to about $580,000, he said.”

“Based on the current pace of transactions, Calhoun estimates, it would take 246 days to sell the houses on the market in Santa Clara County. But it would take 599 days in San Jose’s east, central and south areas, whereas only 46 days would be needed in Mountain View, Los Altos and Palo Alto.”

“Some new home developments also are dropping prices and offering discounts on such things as landscaping and granite countertops. Their builders typically owe substantial bank loans, LePage said, and they’re worried the houses ‘aren’t flying off the shelf.’”

The Contra Costa Times. “In Alameda, Contra Costa, San Joaquin and Solano counties, sales were the lowest since DataQuick began keeping statistics in 1988. San Mateo County sales reached the lowest November since 1991.”

“The percentage of all Bay Area home purchases financed with jumbo loans, or those exceeding $417,000, rose to 44.1 percent in November from 42.6 percent last month. In the first seven months of the year, before the credit crunch, 62 percent of all Bay Area purchases were jumbo-financed. Those with loans of more than $417,000 fell 58 percent from last year.”

“DataQuick reported that price declines might be spurring more sales in the new-home market. In Solano County, new-home sales rose nearly 19 percent from October to November. That may be bittersweet news, because the county’s sales dropped more than half from last year.”

“Thornberg was skeptical that some regions were faring better than others, saying that the greater Bay Area is intertwined.”

“‘While maybe (San Francisco or San Mateo counties) like to think they’re separate from the other areas, their economies are linked,’ he said. ‘There’s no way this eventually won’t have an impact on that area.’”

“Bryce Ellsworth, a real estate broker in Brentwood, said that he was showing 10 properties in the mid-$200,000s in Antioch and Oakley, with many of them receiving offers.” “‘Two years ago, we had nothing in the $400,000s,’ he said.”

From ABC 7 News. “‘Executives coming into hi level jobs in the Silicon Valley just want park someplace for about a year. They choose to rent,’ said South Bay housing specialist Warren Winsness.”

“Reza Sadeghi is one of them. The IT executive is living his dream in an Alum Rock rental. He pays $2,500 hundred a month for a four bedroom. Though he makes six figures a year, he refuses to buy.”

“‘It just doesn’t make sense to buy property right now because of the uncertainty with what’ going to happen with the market,’ Sadeghi.” “He can afford to wait and watch the market and when the bounce back does happen as predicted by analysts in about 18 months, only then will Reza Sadeghi buy.”

The Sacramento Bee. “As the toughest year yet in this slumping real estate market comes to a close, November’s housing numbers point to the same old story. This is a lousy time for sellers as home prices continue their steady decline. But for buyers, life is looking better by the day.”

“‘Pessimism for sellers is one of the greatest things for buyers,’ said Roseville real estate agent Bob Montuori, who steers buyers to homes repossessed by banks.”

“Median sales prices in much of the Sacramento region are at a 3 1/2-year low, according to DataQuick.”

“DataQuick reported that in November 2,503 homes closed escrow in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That’s an 11-year low for a November. By comparison, sales in Southern California and the Bay Area are at 20-year lows.”

“In Sacramento County, the largest piece of the area’s real estate market, 13.4 percent of November sales were for homes priced below $200,000, the Sacramento Association of Realtors reported. That’s up from 9.5 percent in September.”

“Homes selling for less than $250,000 represented 30 percent of November’s closings, statistics indicated. ‘We never dreamed we’d see that again,’ said Mark Welch, executive manager of Connect Financial Services in Roseville.”

“The Realtors association and TrendGraphix, a Sacramento real estate firm, say the falling prices are likely behind a rise in pending sales that will be finalized this month and reported in January.”

“Many of these sales are for homes lost to foreclosures and repossessed by banks. Banks are becoming formidable competitors to home builders and individual sellers regionally and are desperate to unload homes, said Montuori, the Roseville agent.”

“‘I will tell you the banks are cannibalizing each other over the past several weeks,’ he said. ‘They are fighting each other to get their stuff off the books.’”

“Home builders like to clear inventory off their books before the year ends. Last year they reported a late surge of December sales. But ‘there’s no indication of an upward trend’ this year, said Jane Enger, analyst with a home builder consultant in Danville.”

The Fresno Bee. “Like a mini Gold Rush, the region a couple of years ago drew thousands of home buyers and construction workers taking advantage of the sizzling housing market. But as the home building slowed, so did the movement of people.”

“‘A lot of those people came for those jobs — and they’re gone,’ said Joseph Penbera, a Fresno-based economist who has long studied Valley growth.”

“Madera, like other counties, benefited from the housing boom in recent years, drawing transplants from the east Bay Area, said Walter Diamond, executive VP of the Fresno division of Beazer Homes, one of the first national builders to stake a claim in Madera.”

“But activity has slowed down. Beazer Homes sold its last Madera home lot in December 2006.”

“‘Right now, everybody’s just kind of holding tight,’ Diamond said.”

The LA Times. “Federal regulators are looking into allegations that mortgage lender Washington Mutual Inc. pressured First American Corp. of Santa Ana to inflate appraisals of homes nationwide.”

“The allegations were first raised by New York Atty. Gen. Andrew Cuomo in a fraud suit he filed Nov. 1 against First American, a giant real estate services company that operates a large home-appraisal unit.”

“Cuomo called the case ’symbolic of an industrywide problem and a long-term problem.’”

The Orange County Register. “Orange County employers shed 2,200 jobs in the 12 months through November, a drop of 0.1 percent, the state’s Employment Development Department reported today. On a year-over-year basis, the financial activities sector, which includes mortgage lenders and real estate, lost 6,900 jobs, while construction lost 3,700.”

The Daily Pilot. “At least two Costa Mesa mortgage companies have been evicted from their headquarters in the city’s upscale north end, a spokesman for the Orange County Sheriff’s Department confirmed Wednesday.”

“Sheriff’s spokesman Jim Amormino said Quick Loan Funding and Loyalty Funding, both owned by businessman Nazih Daniel Sadek, officially left their offices at 11:05 a.m. Tuesday.”

“The Harbor Justice Center in Newport Beach had ordered the eviction Dec. 11, Amormino said. The recent housing market rut, he said, had led to a rise in eviction notices.”

“‘Because of the slump in housing and loans being readjusted, there’s more now than there has been,’ Amormino said. ‘But it seems to be concentrated on mortgage companies.’”

“Ed Fawcett, the president of the Costa Mesa Chamber of Commerce, said none of Sadek’s four companies were members of the chamber and that he hadn’t personally heard of any of them. He added, though, that he wasn’t surprised to hear about another group of lenders going out of business.”

“‘There were some egregious violators of lending out there,’ Fawcett said. ‘Just on a personal basis, I’ve heard from brokers who were pretty much honest and up front, and there were some out there that were really working the system. This may have been one of those.’”

Some housing bubble news from Wall Street and Washington. Reuters, “An estimated 2.5 billion euro ($3.59 billion) writedown at French bank Credit Agricole raised fresh concerns among analysts on Friday over Agricole’s risk management and investment banking arm. France’s biggest retail bank said late on Thursday the writedown related to super-senior collateralised debt obligations and took into account a decision by ratings agency Standard & Poor’s to cut to junk status the rating on bond insurer ACA Financial Guaranty Corp.”

“Credit Agricole added that its Calyon investment bank would have ‘negative results’ for 2007. CM-CIC Securities estimated Calyon’s annual loss at 400 million euros, while JP Morgan put it at 154 million.”

From PR Newswires. “Impac Mortgage Holdings, Inc. reports third quarter 2007 net loss of $1.2 billion for the third quarter 2006. The net loss was primarily the result of a $789.4 million provision for loan losses as a result of deteriorating market conditions, higher delinquencies and higher severities.”

“Nomura Holdings Inc, Impac Mortgage Holdings Inc and Bear Stearns Cos Inc last year issued the worst-performing securities backed by so-called ‘Alt-A’ mortgages, Standard & Poor’s said on Thursday.”

“Severe delinquencies on the $4 billion in Alt-A mortgage bonds issued by Nomura hit 9.83 percent as of September, more than twice the 4.61 percent average, the report said.”

“Poor performance of loans in U.S. mortgage bonds ‘at first seemed limited to the subprime mortgage sector, but has since filtered through to virtually every corner of the non-prime mortgage industry,’ S&P said in the report.”

“Impac’s $6.6 billion 2006 Alt-A loans are 8.31 percent delinquent, while 7.13 percent of Bear Stearns’ $46.7 billion in Alt-A issuance are more than 90 days in arrears, S&P said. Morgan Stanley and Deutsche Bank AG round out the worst five, with 6.95 percent and 6.32 percent, respectively.”

Business News Americas. “Puerto Rico’s Popular, parent of the island’s largest bank of the same name, will report a pre-tax loss of US$90mn-165mn for the fourth quarter this year due to charges stemming from accounting changes. Popular said it would have to reclassify 21 mortgage loans held in securitization trusts that do not qualify for sale accounting treatment, resulting in a US$20mn-95mn charge for the fourth quarter.”

“The move will reduce Popular’s US$3.1bn subprime mortgage portfolio by around US$2.4bn.”

“Coupled with this, a US$175mn impairment charge on the goodwill and trademark value of Popular’s E- LOAN subsidiary will lead to net loss in 2007. ‘The restructuring and scaling back of E-LOAN reflects the realities of the market as well as management’s focus on reducing underperforming businesses,’ Fitch analyst Joseph Scott told BNamericas.”

The St Paul Business Journal. “U.S. Bancorp is taking a $325 million hit in the fourth quarter over litigation involving Visa and for troubled money-market funds stung by the subprime crisis, the company announced Friday. Recent guidance from the Securities and Exchange Commission required U.S. Bancorp and similarly situated banks to take the write-down.”

“U.S. Bancorp will also recognize a $110 million charge for asset-backed securities it purchased from rated money-market funds managed by its mutual-fund unit, FAF Advisors.”

“In the fall, U.S. Bancorp said it would prop up the troubled $18 billion money-market fund First American Prime Obligations Fund if necessary. The fund spun off or restructured some of its securities that were collateralized by mortgages, credit-card receivables and auto loans, among other things.”

The Associated Press. “KeyCorp said Thursday that it expects to post a fourth quarter loss as the Midwest regional bank sets aside additional reserves for loan losses and eliminates 1,040 jobs. KeyCorp said it expects to report net loan charge-offs of $110 million to $120 million, fixed-income losses of $55 million to $65 million, and layoff expenses of $26 million for the fourth quarter.”

“KeyCorp said the loan charge-offs are because of deteriorating market conditions in its residential portfolio, primarily in Florida and California. It also said it will no longer make loans to real estate developers outside of the 13-state region where it does business and also will stop making most home-equity loans out of the region.”

“It has transferred approximately $1.1 billion of homebuilder-related loans and $800 million of condominium exposure to its special asset management group.”

From CNN Money. “First Horizon National Corp. expects its mortgage business to lose money in the fourth quarter as sinking property values handcuff borrowers’ access to cash. First Horizon, which runs about 600 branches, expects to set aside an additional $150 million in anticipation of unpaid loans.”

“This provision prepares for defaults from residential developers that borrowed money to buy properties in Florida, California, Virginia, Georgia and Nevada.”

“Because this real estate is losing value in the midst of a protracted housing slump, these borrowers are not able to tap their properties for as much cash and are thus more likely to default on their loans.”

“First Horizon expects to record a $70 million ‘goodwill adjustment’ to its mortgage business for the fourth quarter.”

The Honolulu Advertiser. “Financial difficulties deepened yesterday for the owner of the Turtle Bay Resort. A $283 million mortgage foreclosure lawsuit was filed against Kuilima Resort Co. in state court by international lender Credit Suisse. The suit seeks to foreclose on the resort property because of delinquent principal and interest payments.”

“Kuilima Resort has been looking for a buyer or a development partner since June 2006 to help finance the expansion of the 880-acre Turtle Bay Resort that would add up to five new hotels with 3,500 rooms and condominium units, as well as four public parks.”

The Financial Times. “The investments are off-balance sheet, their underlying assets have plunged in value, and their risks are difficult to quantify. Sound familiar? Many structured investment vehicles would fit that bill. But so would the hundreds - perhaps thousands - of opaque joint ventures formed in the past 15 years by US homebuilders.”

“The proliferation of complicated JVs by some builders, including KB Home, Centex, and particularly Lennar, is now depressing their share prices and scaring off buyers of distressed land holdings. The top 15 public builders have taken $16.5bn in writedowns since the start of 2006. Of that, $1bn stemmed from JVs according to Standard & Poor’s.”

The Columbus Dispatch. “Dominion Homes’ president and chief operating officer, Jeffrey Croft, will leave the company at the end of the year, the company announced. The Dublin homebuilder also announced that it’s out of compliance with Nasdaq Stock Market rules and risks being delisted next year.”

“U.S. regulators, led by the Securities and Exchange Commission, are probing how financial firms priced mortgage securities on their books and whether they should have told investors earlier about the declining value of those securities, The Wall Street Journal reported on Friday.”

“The SEC has set up a working group to tackle some three dozen probes, which are in their early stages, the article said.”

The Wall Street Journal. “‘As in most investigations, the issue comes down to what did people know and when did they know it,’ said Mark Schonfeld, director of the SEC’s New York office.”

“Barclays’ lawsuit against Bear Stearns is not the first claim to emerge from the wreckage of the US subprime mortgage market. However, the fact that a large UK bank is prepared to go public with its case against a Wall Street securities house suggests that some epic legal battles might arise from the past six months of market turmoil.”

“The lawsuit, filed in New York on Wednesday night, comes after Barclays was a victim of the collapse of a Bear Stearns-managed hedge fund that invested heavily in complex subprime securities.”

“Barclays is understood to have spent several months in high-level discussions with Bear Stearns before deciding to press ahead with its claim. Given the scale of losses suffered by banks and investors as a result of the subprime collapse, the Barclays lawsuit may well be the first of many.”

From Marketplace. “Scott Jagow: ‘For a while, I was telling you every day about a huge bank loss because of bad mortgage debt. Now, it seems there’s a big foreign investment in one of those banks every day. This morning, it’s Merrill Lynch. The Wall Street Journal says the bank might get $5 billion from the Singapore government.’”

“‘At the same time, we’ve learned the identity of a mystery investor in the Swiss bank UBS. It’s Saudi Arabia, according to The Financial Times. UBS shareholders are not happy with this deal.’”

“Haig Simonian, who covers UBS for the Financial Times: ‘I think shareholders are probably resigned to the fact that the bank needs extra capitol. But shareholders are upset because in bringing in these new investors (is) to the disadvantage of existing shareholders. So in other words, your shares aren’t going to be as valuable as they were before, because new shareholders are coming in and taking very big stakes.’”

“Simonian: The problem in Switzerland with UBS isn’t nationalistic, it’s not protectionism. It’s more I think UBS shareholders had believed until now that their bank was, I don’t know, the real blue chip in the pack, one of the world’s best-run banks which had a reputation for being extremely risk-adverse. Suddenly, it turns out in a matter of months that that institution run up $40 billion worth of subprime portfolios doing their business.’”

From Bloomberg. “When California homeowner Christopher Aultman stopped writing mortgage checks, Charles Prince of Citigroup Inc. paid.”

“Some of the $16.6 billion that Prince’s New York-based bank estimates it lost on wrong-way subprime bets flowed to investors who for the first time were able to wager that U.S. mortgages would collapse.”

“‘These structured products were crazy profitable for Wall Street until they blew up,’ says Randall Dodd, senior financial sector expert for the International Monetary Fund in Washington. ‘Ultimately it’s about excessive risk-taking and greed.’”

“The hedging offered by derivatives made investors feel invulnerable, says Paul Kasriel, chief economist at Northern Trust Co.”

“‘Derivatives don’t reduce risk, they shift risk,’ Kasriel says. ‘The development of the derivatives market enabled investors to shift risk at a lower cost, and that encouraged them to take on more risk.’”

“Many of those responsible for the economic upheaval caused by subprime derivatives have also been its victims.”

“Mortgage salesmen peddled loans ‘based on the borrowers’ ability to refinance rather than the borrowers’ ability to repay,’ said David Einhorn, co-founder of Greenlight Capital LLC…and a former director of New Century Financial Corp., the second-biggest subprime lender in 2006.”

“Daniel Sadek, who says his Costa Mesa, California, subprime lender Quick Loan Funding catered to borrowers with credit scores as low as 420 out of 850, had to close shop in August when Citigroup cut the company’s $400 million credit line.”

“‘I’m surprised they went under,’ says borrower Kathy Cleeves of Tenino, Washington. ‘They made a fortune off us.’”

“Morgan Stanley, the second-biggest U.S. securities firm, wrote down $9.4 billion in mortgage-related investments this week.”

“‘Our assumptions included what at the time was deemed to be a worst-case scenario,’ Chief Financial Officer Colm Kelleher said on Dec. 19. ‘History has proven that that worst- case scenario was not the worst case.’”

“Sadek’s Quick Loan Funding had 700 employees at its 2005 peak. Now Sadek is making payments on three residential properties he mortgaged in a failed attempt to keep his firm afloat.”

“‘I’m under water,’ he says. ‘I’m trying to sell everything, and nothing is being sold.’”

“Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years.”

“It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm.”

“Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged. In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker.”

“The palm-tree-lined mansion they purchased with Bear Stearns’s $1.8 million recently sold out of foreclosure for just $1.1 million.”

“In 2006, losses from fraud could total a record $4.5 billion, a 100% increase from the previous year, says Arthur Prieston, chairman of the Prieston Group, which provides lenders with mortgage-fraud insurance and training.”

“‘We’ve created a culture where a great many people know how to take advantage of the system,’ says Mr. Prieston.”

“It didn’t take a rocket scientist to steal a fortune from mortgage lenders in recent years. That much is clear from the Atlanta scheme. It was perpetrated in large part by a 23-year-old college dropout named Gregory Jerome Wings Jr., aka G-Money.”

“His accomplices included a young nightclub owner, along with the director of an underground documentary called ‘Crackheads Gone Wild,’ a cautionary tale about drug addiction.”

“Recruited into the scheme by an acquaintance in Atlanta, Mr. Wright, with the help of ring leaders, diverted hundreds of thousands of dollars from that Bear Stearns mortgage to himself, to Mr. Wings and to others in the scheme, according to a federal indictment.”

“In the very same week, Mr. Wright obtained a $1.9 million mortgage on a second value-inflated mansion near Atlanta, this time from BankFirst.”

“‘It was so easy, it’s incredible,’ says Akil Secret, attorney for Mr. Wright, who has pleaded guilty to bank fraud and is awaiting sentencing.”

“Particularly illuminating was the testimony of Lucy Lynch, a former VP of mortgage operations at BankFirst. ‘Fraud was not really a consideration in our world,’ Ms. Lynch testified, according to a trial transcript.”

“Asked in court why the pattern of payouts didn’t raise any red flags, Ms. Lynch responded: ‘Do you have any idea how many loans came into BankFirst during that time period?’ She said BankFirst typically allowed a ‘15-minute window’ from the time it received closing documents by fax to the time it released the loan proceeds to the borrower.”

“In the neighborhoods where the Atlanta scheme operated, values have plummeted. Many homes associated with the scheme are now in foreclosure. Some have sold for as low as 50% of what buyers in the fraud ring paid.”

“‘The banks are getting more and more aggressive in their pricing because they don’t want to own these homes,’ says Warren Lovett, a real estate agent with Coldwell Banker in Atlanta.”

“Mr. Lovett has taken listings for about 60 foreclosed properties this year. He estimates that half of the foreclosures he’s encountered are due to fraud.”

The News Journal reports from Florida. “More than 900 area homeowners were notified last month they could lose their properties as local foreclosure activity continued at nearly triple last year’s level. The new monthly numbers from RealtyTrac place Volusia and Flagler counties among the more heavily distressed areas of the nation.”

“One homeowner trying hard not to become another statistic is Dean Murphy, who just knocked $17,000 off the asking price for his three-bedroom property in Ormond Beach. Murphy, who lives in DeLand, said he tried to sell the home for two years at $199,000, but now has lowered the price to $182,000, just enough to cover his two mortgages.”

“‘We had it rented for a while but now we’re losing almost $1,000 a month on it,’ Murphy said. ‘It’s not in foreclosure yet and if we can sell it in the next month or so, we may be OK. But we’re still going to take a bath on it because we put a lot into it.’”

The Sun Herald. “Southwest Florida’s circuit courts are reporting foreclosures at triple their 2006 levels and actually getting momentum as 2007 draws to a close. For example, the Charlotte County Clerk of the Circuit Court reports 1,992 foreclosure filings compared with 664 in 2006.”

“With Charlotte County sale prices down 10 percent or more from 2006 levels…the fact that Charlotte County has been built on retirement income doesn’t help either. Jobs in home construction, mainly for retirees, have become scarce.”

“This leads local attorney Kevin Russell to conclude that ‘next summer is going to be a test of will for a lot of us … we’re at ground zero in Port Charlotte and North Port for a lot of what’s going on.’”

“Following Hurricane Charley in August, 2004, speculators descended on storm-ravaged neighborhoods, buying up houses in the expectation that any structurally sound dwelling would fetch top dollar during an anticipated long recovery.”

“Roger Miller, attorney with the Farr law firm in Punta Gorda, said the vast majority of the 30-some foreclosures currently on his desk are investment deals gone bad.”

The St Petersburg Times. “The National Association of Home Builders released a tentatively optimistic report Thursday: New home construction should begin a slow recovery in the summer of 2008.”

“Unless you live and work in Florida.”

“Association chief economist David Seiders said the Sunshine State’s housing market was so ‘grossly overheated’ that it will require a ‘long workout period’ to stabilize.”

“He saved his harshest assessment for the state’s condo market. The glut is so bad in the Tampa Bay area, it would take close to three years, at the current sales pace, to clear away the inventory.”

“Home sales indexes tracking new home construction have fallen to a 22-year low, Seiders said. New-home builders report fewer cancellations as speculators and dabblers flee the market.”

“‘It’s hard to be thrilled when it’s still sitting at a record low,’ Seiders said.”

The Palm Beach Post. “The housing market won’t ‘hit bottom’ until 2009 - a year later than previously predicted, the chief economist for the National Association of Home Builders said Thursday.”

“Rather than bringing an end to the worst housing slump in 16 years, 2008 will simply be ‘another down year,’ Chief Economist David Seiders told reporters and analysts.”

“‘We really are in a danger zone,’ Seiders said. ‘We’ll be looking at further erosion in house values in 2008 and hit bottom in 2009.’”

“‘The essential story here,’ Seiders said, ‘is a major run-up in unsold inventory during the second half of 2005, through 2006 and into 2007. There are currently 2.1 million vacant homes for sale on the market,’ he added, ‘with 700,000 being excess compared to more normal times.’”

“Subprime lenders went belly-up, Seiders said, ‘and it cascaded down from there.’”

“Nationwide, home prices peaked in 2005, he said. In Palm Beach County, they peaked in November 2005, when the median price of an existing single-family home was $421,500, the Florida Association of Realtors says.”

“U.S. home prices fell at an annualized rate of 7 percent in the third quarter of this year, Seiders said, ‘and there’s little doubt that the fourth quarter will be down further.’”

“Seiders acknowledged that his estimates were dependent on the success of government attempts to help homeowners whose monthly subprime mortgage payments were due to jump.”

“If those 800,000 homes go back on the market, ‘we’re in deeper trouble,’ Seiders said.”

The Ledger. “Polk County home builders had a lean November, pulling their lowest permit total for the month since 2000. It marked the 21st consecutive month of annual declines in permitting activity, and was the lowest November figure since 221 in 2000.”

“‘Right now the builders aren’t adding to inventory when they have existing inventories to move. That’s why you’re seeing these permits down,’ said Joel Adams, executive VP of Lakeland-based Highland Homes.”

“Permits fell in nearly every city. Auburndale dropped to one from 18 a year ago, while Bartow had just three in November versus 14 last year.”

“Adams said he expects 2008 to be another tough year for most in the industry.”

“‘There could be some perception among buyers that prices haven’t hit rock bottom. I’m not sure that’s the case. Over this past year new home builders have probably done all the price cutting they can,’ he said. ‘It’s going to take time to chew up this unsold inventory and get the equilibrium back in, and I think it’s going to take most of 2008 to do that.’”

The Bradenton Herald. “Some local builders think the Manatee-Sarasota market is already looking up. Auctions, foreclosures, short sales, vulture funds and discounted new home prices are part of the reason the move is in a positive direction, they said.”

“‘The bottom has been established,’ said Jerry Blumberg, co-owner of Gibraltar Homes.”

“John Cannon Homes, along with Gibraltar Homes and other local builders, are approaching 2008 like a normal year, with new models already under construction and set to open in the new year.”

“‘I don’t think it’s going to be a boom year, but it will be healthy,’ Blumberg said. ‘We were the first up, the first to bottom and the first to climb back.’”

The News Press. “Fallout from the housing downturn and an accounting charge helped Hovnanian Enterprises Inc.’s fiscal fourth-quarter loss nearly quadruple.”

“Hovnanian operates in Lee County as First Home Builders, whose assets Hovnanian bought in August 2005 for an undisclosed amount. The company has been particularly hard hit in Lee County, where it is now largely out of business.”

“It has a skeleton crew of about 50 employees, down from nearly 1,200 during the height of the boom in late 2005.”

“On Nov. 5, Hovnanian sold 812 lots in Cape Coral to Ocala-based Deltona Corp. for $16.2 million. The company’s Lehigh Acres lots are also for sale.”

“Two of the main lenders for First Homes construction loans are also in financial trouble: Colorado-based Norlarco Credit Union and Michigan-based Huron River Area Credit Union were taken over by the National Credit Union Administration because of bad debt due in part to their construction loans for First Home customers.”

“Hovnanian also faces lawsuits including a federal class action filed May 30 in Fort Myers by would-be buyers claims they were duped by First Home, the Gates D’Alessandro & Woodyard real estate agency and various lenders into financing houses at inflated prices with promises of a 14 percent return on their money.”

“The new-home building crunch has made a harsh impact, on Lee County impact fees. Impact fees are a one-time bill on new construction to defray the cost of providing and expanding services and facilities that benefit new development.”

“In the 2005 fiscal year the parks department collected $10.2 million for community parks, in 2006 it was $9.4 million. The recent market crash crushed the impact fees to just $3.5 million in the 2007 fiscal year, which ran from October 2006 to September.”

“‘I think overall it’s unwelcome,’ said John Yarbrough, parks and recreation director. ‘At the same time it gives us a chance to refocus, reprioritize and not that we don’t do that, but make sure our priorities are where they should be with the projects.’”

“Single-family home permits in unincorporated Lee, Bonita Springs and Fort Myers Beach have nosedived since fiscal year 2005 when 20,578 were pulled. In 2006 there were 17,141 and in the most recent fiscal year, 6,572…a 67 percent decline.”

“‘Our major funding source is tied to building permits, so that is the risk we run,’ said Dave Loveland, planning manager for Lee Department of Transportation. ‘The plus side is we are seeing bids come in less than our budgeted amount.’”

“The market turn has made construction companies eager for work, and they have become more competitive and are offering lower bids. In November, Posen Construction of Michigan’s bid on the $25 million Summerlin widening, came in $13 million under the county’s budget.”

“On Wednesday, the low bid for a widening project for Plantation Road expected to cost as much as $7.5 million came in at $4 million. ‘The cash is coming in less, but the bids are lower,’ Loveland said.”

“Michael Reitmann, executive VP of the Lee Building Industry Association, said the downturn should make the county consider other ways to generate revenue. ‘We need to get a handle on not just allowing impact fees to pay for infrastructure,’ he said.”

“The impact fees are deterring the building industry from pulling the permits and not to expect the new housing market to kick up anytime soon, he said. ‘We’ve got to get rid of the inventory because it doesn’t make any business sense to start building if you got homes out there.’”

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