The Housing Bubble

Money Magazine reports on California. “When Patty Marquez graduated from the University of Minnesota more than five years ago and moved to Southern California, she thought about buying a house. But with prices already sky-high in the Southland market, ‘I was scared,’ says Marquez. So she rented for more than four years. But…she kept thinking to herself: Isn’t owning a home the right thing to do?”

“Last February the school psychologist, who now makes $77,000 a year, took the plunge and purchased a $600,000 duplex, putting 3 percent down on a 40-year fixed-rate mortgage.”

“Since Marquez bought the property in Signal Hill, Calif., just north of Long Beach, home values in her area have fallen more than 3 percent, and they’re expected to drop an additional 9 percent in 2008.”

“Becoming a homeowner hurt her net worth in more ways than one. After she bought the duplex, Marquez’s monthly housing expenses jumped from about $850 when she rented to $3,000.”

“Marquez wonders if her house is mortgaging her future. ‘I don’t want to put a halt to saving,’ she says, ‘but I won’t be able to save as much as before.’”

“Her mortgage is the $582,000 elephant in the room that she can’t ignore. In order to afford it, Marquez had to stretch her loan out to 40 years, fixed at 5.1 percent, with the first 10 years being interest-only.”

“During the initial interest-only phase, she won’t build any equity at all. Plus, once this period ends, her total monthly payments will jump to nearly $4,000, which will make it that much harder to afford her home while saving for retirement.”

“There’s no easy way out of this bind, says Sandra Field, a financial planner in Los Alamitos, Calif. If Marquez were to sell now, she might not get enough to pay off her mortgage.”

“‘This is a transitional period for me,’ Marquez says. ‘There’s a lot of change, but I’m hoping to find my way through.’”

Inside Bay Area. “For real estate agent Dick Gay, selling homes is a tough way to make a living these days. ‘A lot of people got spoiled,’ said Gay, who has seen good and bad times in the industry. ‘But a lot of homes are sitting now.’”

“Gay, a Cashin Inc. agent in San Carlos, remembers the days when every home was rising in value in San Mateo County and many people lined up to buy them. But with home sales down nearly 20 percent this year countywide, lots of real estate agents are moving out of the business, or retiring, he said.”

“‘You see agents who are no longer working,’ said Gay, who sold two houses this year compared to five in 2006. ‘They seek other employment and, all of a sudden, they don’t show up in the office.’”

“The total value of homes in San Mateo County is off by 11 percent through November compared with the same period in 2006, said Rick Turley, president of Coldwell Banker’s San Francisco Peninsula division. From his vantage point, home sales transactions are off 18 percent year-to-date countywide, and 13 percent for Coldwell Banker. He doesn’t expect sales to improve next year.”

“‘There’s a whole circle of money that’s not circulating anymore,’ said Denise Lawrence of All California Mortgage in Redwood City. ‘With fewer houses selling, there’s fewer loans to be made.’”

“The home sales downturn in San Mateo County is dragging lots of people through the mud. ‘There’s a lot of people out of business right now,’ said Geoff Craighead, president of the San Mateo County Association of Realtors. ‘Lots of people came in to get rich in the last few years, and now they’ve got to get realjobs.’”

“Craighead is talking about the shrinking number of real estate agents countywide. But he could be talking about the many industries struggling to survive as home sales on the Peninsula fell by 30 percent or more during a number of months this summer and fall compared to last year.”

“Home sales for the year are down 20 percent compared to 2006, as ‘price reduced’ signs continue to pop up more often in local neighborhoods.”

“‘I’ve lost jobs even after people sign contracts,’ said Bob Monsen, owner of a small construction company in Pescadero that operates on the Peninsula. ‘They still back out.’”

“With fewer jobs around, the competition is brutal. Monsen said he recently put out two bids in the $145,000 range for remodels that competitors won for between $80,000 and $90,000. Monsen is convinced his rivals can’t make money doing the work at those prices.”

“‘We sometimes have to take jobs at cost or less just to keep going,’ he said.” “Construction worker Mario Torres can attest to that. He sees fewer and fewer remodeling and fixer-upper jobs.”

“‘When there’s not much work, it’s tough, because everything is so expensive around here,’ said Torres, who pawned a couple of necklaces last month to pay for his cell phone bill. ‘It’s sad. There’s going to be a lot of unemployed people. There used to be a lot of work around here.’”

“‘Things are getting worse, not better,’ said Suzi Nelson, part owner of Wisnom’s hardware store in San Mateo, which has been in business for more than 100 years. ‘Everybody is so conscious of price and looking for a bargain.’”

“‘Sales are off big-time, and we were rarely ever slow,’ said Ron Miller, owner of B & B Floors in Belmont. ‘Everybody’s in the same boat.’”

“Patrick Reilly of Redwood City, who operates under the name Inspector Homes, scrutinizes houses for buyers and sellers ‘from the roof to the foundation.’ ‘The market’s way down,’ Reilly said. Last year he did 200 inspections compared to this year’s 120.”

“Painting contractor Orlando Trujillo of San Mateo said business is the worst he’s seen in 15 years. ‘Nothing’s moving,’ said Trujillo about homes on the market. ‘People used to paint their homes to sell all the time.’”

“Jim Harris, manager of San Mateo Lumber Co, is afraid that when people feel like they’ve lost equity in their home, they put off paying builders and contractors for projects. That means Harris’ payments come in late, too.”

“‘The subs for contractors — electricians, plumbers and painters — are usually booked in advance, but not these days,’ he said.”

The LA Times. “Lorenzo Martinez, an illegal immigrant who has lived in Los Angeles for six years, has a message for his kin in Mexico’s Hidalgo state: Stay put.”

“The steady construction work that had allowed him to send home as much as $1,000 a month in recent years had disappeared. The 36-year-old father of four said desperation was growing among the day laborers with whom he was competing for odd jobs.”

“‘Better not to come,’ Martinez said of anyone thinking about crossing into the U.S. illegally. ‘The situation is really bad.’”

The Merced Sun Star. “If 2005 was the year Merced’s real estate market slipped the surly bonds of earth, then 2007 was the year it came crashing back. Home prices dropped so far, so fast — a 13 percent decrease in the third quarter compared with 2006 — that Merced led the nation in home value depreciation.”

“Instead of approving new subdivisions, the City Council struggled to maintain foreclosed properties. Instead of enjoying a budget bursting with development-related revenues, City Manager Jim Marshall said this year’s finances warranted a ‘yellow flag.’”

“Residents saw the media catchphrase ’subprime meltdown’ play out in very real terms in their neighborhoods. A record number of homeowners stopped paying their mortgages and abandoned their houses, leaving behind brown lawns and green pools.”

“Building activity slowed to a near halt, with builders pulling 675 permits through the end of November, compared with 1,990 permits for the same period in 2007.”

“Sharon and Mike Southern have reduced the price of their home, which has been on the market since September 2006, almost $30,000. The local housing market has come to a screeching halt in recent months with several foreclosures and new homes for sale.”

The Daily Press. “The decline in the housing market that has caused the increase in foreclosures is expected to drag on into 2008 as the market continues to correct itself, said Carolyn McNamara, a local real estate agent.”

“McNamara said that 22 percent of the listed properties in the multiple listing service are repossessed homes, a number that continues to rise. In the last housing downturn during the early 1990s the percentage of repos reached 60 percent.”

“The hardest-hit community in the Victor Valley is Adelanto with 39 percent of listing being repossessed homes, followed by Victorville with 31 percent.”

“‘People got into homes that had no business in them,’ McNamara said of the high number of foreclosures, adding that the inflated market was caused by a low inventory and too much creative financing.”

“McNamara, who has been doing business in the High Desert for nearly two decades, expects the trend to continue as the market continues to correct itself. What she calls the ‘get-rich infomercial people and house flippers’ aren’t going to make it in this market.”

“Despite earlier predictions that the housing market would recover early next year, the Victor Valley’s growing foreclosure trend looks like it will continue, making for a bleak 2008 in the real estate world.”

The Contra Costa Times. “It has been the year of the subprime mortgage meltdown, tainted spinach, toy recalls and the housing slowdown. In fact, 2007 was singularly lacking in stellar business moments.”

“Here are some examples of bloopers, slip-ups, miscalculations and full-on pratfalls taken by unfortunate companies, executives and financial experts in 2007.”

“We’re leading with this prediction for reasons that will become obvious.”

“Christopher Cagan, who at the time was director of research for Santa Ana-based First American CoreLogic, said the 7.7 million adjustable-rate mortgage loans made since 2004 would not have a significant effect on the economy when the loans adjusted and payments went up.”

“‘It’s unpleasant, but it will not break the economy or the real estate market,’ Cagan said. He made the prediction in 2006, but the true extent of this blooper, as thousands of individuals lost their homes and lending institutions suffered huge losses, became apparent this year.”

Some housing bubble news from Wall Street and Washington. CNN Money, “Home prices fell 6.7 percent in October, compared with a year ago, according to the S&P/Case-Shiller 10-city home-price index, a record drop as housing markets continued to deteriorate. It marked the 10th consecutive month of price depreciation and 23 months of decelerating returns. Large inventories have created an 11-month supply of homes for sale; a spike in foreclosures has added to the supply; and the increase in sellers of vacant homes desperate to move.”

“Miami was hit with a 12.4 percent decline in the month, the most of any area. Tampa fell 11.8 percent and Detroit, 11.2 percent. Sun Belt cities have suffered deep losses with San Diego down 11.1 percent in the past year, Phoenix off 10.6 percent and Las Vegas 10.7 percent. In Los Angeles, a huge market, home prices have fallen 8.8 percent.”

“Lawrence Yun, chief economist for the National Association of Realtors and among the most optimistic of industry insiders, conceded that large inventories will mean further price declines. ‘Price growth during the boom was clearly unsustainable. This is the payback,’ he said.”

The Star Ledger. “Hovnanian Enterprises has grown into the nation’s sixth-largest homebuilder, snapping up smaller businesses and expanding into a total of 19 states. Riding the great housing boom of the past decade, the company built developments as fast as it could, with homebuyers queuing up overnight to sign sales contracts like groupies camping out for Hannah Montana tickets.”

“The credit crunch and a glut of unsold homes has put an end to those glory days, however. Hovnanian last week reported dismal results for the fourth quarter and fiscal 2007, which ended Oct. 31 for the company.”

“Hovnanian has a large exposure to the southwestern Florida housing market, where demand has plummeted. In the Fort Myers-Cape Coral area, the company has an unusual arrangement in which homeowners buy lots, then arrange for third-party financing to build their home. In some cases, homeowners are backing out of the construction loans, and the defaults are eating into Hovnanian’s profits, analysts said.”

“In California, another big market for the company, home prices have begun to slide dramatically. In one Northern California community, average sales prices have fallen 28 percent in less than a year, once Hovnanian’s sales discounts are factored in, CEO Ara Hovnanian said on a conference call last week. In a second town in Southern California, average prices have slipped 35 percent.”

“‘I wish I could say these are the exception in California, but they are not,’ Hovnanian said.”

“One selling point for the company is that the family has been in business since 1959, and has seen its share of down cycles. ‘2007 is a very sharp correction, but it’s not unprecedented,’ Hovnanian said.”

“In both 1975 and 1981, housing starts also plummeted. But in both cases, the economy was in recession and interest rates were much higher than current levels, Hovnanian said.”

From Bloomberg. “Look at almost any major homebuilder’s balance sheet these days, and it practically screams at you: ‘Don’t believe Mr. Market. Trust me!’”

“Either homebuilders as a class are grossly undervalued, or their assets are worth much less than their financial statements say. Odds are it’s the latter. Home prices still show no sign of bottoming.”

“Hovnanian Enterprises Inc. last week reported a $466.6 million net loss for its fiscal fourth quarter ended Oct. 31, including $382.7 million of pretax writedowns. The company said it had $3.5 billion of inventory at Oct. 31 and a $1.3 billion book value. Its market value is just $448 million. Hovnanian spokesman Jeff O’Keefe declined to comment. The company’s stock is down 79 percent this year.”

“So, to believe Hovnanian’s balance sheet, Hovnanian’s inventory is worth almost eight times more than the stock- market value for the entire company.”

“One investor on Hovnanian’s Dec. 19 earnings call asked: ‘Can you believe the book value?’ Hovnanian’s chief financial officer, Larry Sorsby, replied: ‘We are just not in a position that we are going to make a projection.’”

“Pulte is one of five companies in the Standard & Poor’s 500 Homebuilding Index; the others are Centex Corp., D.R. Horton Inc., KB Home, and Lennar Corp. While the five companies have a combined book value of $22.7 billion, the stock market says they’re worth just $15.2 billion. Put another way, the market is signaling that their net asset values are inflated by more than $7 billion, mostly because of frothy inventory values.”

The New York Times. “The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said.”

“Reports of suspected mortgage fraud have doubled since 2005 and increased eightfold since 2002. Banks filed 47,717 reports this year, up from 21,994 two years ago, according to statistics from the Federal Bureau of Investigation and the Financial Crimes Enforcement Network of the Treasury Department.” “In 2002, banks filed 5,623 reports.”

“‘I don’t think any law enforcement agency can keep up with mortgage fraud, because it’s such a growth industry,’ said Chuck Cross, vice president of mortgage regulatory policy for the conference of state bank supervisors, an organization of regulators and bankers. ‘There’s too many cases, not enough agents.’”

“‘I could hire a dozen investigators and a dozen prosecutors and only scratch the surface,’ said David McLaughlin, a senior assistant attorney general in Georgia who coordinates prosecutions of mortgage fraud.”

“Losses involving federally insured banks totaled $813 million in the 2007 fiscal year, more than double the $293 million lost in the 2002 fiscal year.”

“These figures most likely represent ‘the tip of the iceberg,’ said the Mortgage Bankers Association, because they do not cover mortgage brokers, who arrange more than half of new mortgages. The industry estimates the total loss this year at $4 billion.”

“‘Law enforcement is just absolutely overwhelmed,’ said Corey Carlisle, senior director for government affairs for the Mortgage Bankers Association, which has lobbied for more money to fight fraud. ‘Lenders say they have to market their cases to law enforcement,’ meaning showing extraordinarily high sums or multiple criminals.”

“Cases are likely to multiply, said Constance Wilson, executive VP of Interthinx, which develops fraud detection tools for the lending industry.”

“‘The cases we’re seeing today are from 18, 24, 36 months ago, when the market was still good,’ Ms. Wilson said. ‘Now we’re going to see an increase in mortgage fraud, because all those loan officers, brokers and appraisers who were making six-figure incomes, now their back is against the wall. If that loan doesn’t close, they can’t make their home payment.’”

“‘So you have a desperation cycle,’ she said. ‘There’s a lot of push for them originate volume.’”

The Union Tribune. “After more than a year of watching the real estate bubble pop and spatter over the economy, the Federal Reserve finally decided to pull the reins in on the mortgage industry.”

“Under new guidelines, borrowers will have to prove they’re making money before they can get a loan. What a radical concept! Lenders will be barred from making loans without first considering whether borrowers have enough money to pay them back. Amazing!”

“And get this: Lenders will also have to tell the truth about loans. Under the Fed’s new rules, you can’t advertise ultra-low ‘teaser rates’ for mortgages or issue loan documents for adjustable rates without clearly warning borrowers how high their interest payments might pop.”

“Why didn’t anyone think of that before? If the Fed had enacted those rules three or four years ago, many of our current problems could have been avoided. These rules are about three years too late to do much good in fixing the current mortgage crisis. And in today’s lending environment, they seem hopelessly retro.”

From Broker Universe. “As Boston was getting ready to celebrate another World Series victory, the mood at the Mortgage Bankers Association convention was pensive.”

“MARK: The question on everybody’s mind is when will we get to the bottom of the mortgage recession and how long will it take for the market to get back to a good, thriving, level of business?”

“BOB: I don’t think we’ve addressed the option ARMs. We tend to talk about the resets on the 2/28s and 3/27s, but the option ARMs, we have a lot of those loans that are going to cap out in a little while too, and that is going to be a real nightmare.”

“MARK: Can any of these borrowers be refinanced into a 30-year fixed? The rates for those loans are still extremely attractive.”

“RON: The problem is the collateral. The value of the collateral has been declining before this whole thing started and I don’t see that rebounding. A lot of the markets were overpriced to begin with - California, the Northeast, the Detroit area - those are going to be problem areas geographically for refinancing.”

“RON: I think it is going to be a real problem, I think we are going to still see an increase in foreclosures. It will be like it used to be in the ’80s in Houston where during the oil crisis people just walked away from their houses.”

“MARK: Mailed in the keys. It wasn’t an expression; it actually happened.”

“BOB: The surprising thing was that 6% delinquency wasn’t the amazing number but that 94% of the people whose houses were worth half of what they paid for them were still making their payments. That happens in Texas, now I don’t know if in California we are going to have that same kind of customer.”

The St Petersburg Times reports from Florida. “The sales tactics were like nothing Tampa had ever seen. ‘A lot of food, a lot of dessert, a lot of liquor,’ said Fred Caldwell, who attended a party at Saddlebrook Resort. ‘They had a band. They had dancing.’ Four years later, the scenario sounds insane. But it marked an era when Florida’s housing industry wound itself into a speculative feeding frenzy, then deflated. Live Oak, cursed by timing, could be the poster child. Transeastern was destined for infamy.”

“Few would dispute that low mortgage-interest rates were the roots of the housing boom. Then came 2002.”

“‘All of a sudden, you almost have to fight off the lenders,’ said Wayne Archer, director of the University of Florida’s Bergstrom Center for Real Estate Studies. ‘It was a plausible market until the lenders went berserk.’”

“People were buying houses as investments, not dwellings, said analyst Marvin Rose, who has tracked home building since 1979. ‘We should have leveled off in ‘02, and we would have been okay,’ Rose said.”

“But as Transeastern flamboyantly showed, buying was not leveling off. It was speeding up.”

“Joe Berry moved from California to northwest Hillsborough County in 2004 for a job. Berry wanted to buy investment houses. A Realtor steered him to Live Oak, and Berry focused on a model home. He could buy it, full of upgrades and furniture, and immediately get a tenant, Transeastern. In summer 2004, Berry bought four models.”

“His first lenders balked because the prices were higher than Live Oak’s other houses. Transeastern suggested new lenders and new appraisers. Their numbers matched the deals perfectly.”

“‘That should have been a big red flag,’ Berry said.”

“Overstretched builders “were hiring people off the street,” said David Seidenberg, owner of Bayfair Properties, which did not build in Live Oak ‘You didn’t have your most qualified people doing the work.’”

“Skilled roofers, plumbers and dry-wallers traded their tools for cell phones, supervising inexperienced crews.”

“In 2004, four hurricanes tore through Florida. New money lured workers and materials from the home-building industry to the renovation industry. Prices spiked for steel, fill dirt and PVC. Suppliers rationed lime rock. So home prices surged again. Houses took longer to build. Investors could sign a contract to buy a new house and sell it at a fat profit when it was finished.”

“On Aug. 1, 2005, a joint venture controlled by TOUSA Inc. of Hollywood, Fla., bought Transeastern in a debt-heavy deal valued at $857-million. Almost simultaneously, the housing bubble sprang a leak.”

“Soon after the TOUSA sale, a Realtors’ report showed the supply of existing homes for sale in the Tampa area was increasing for the first time in years. The market slowdown left Live Oak, like many new developments, with investor-owned homes begging for buyers or renters.”

“Weeds are rampant at Joe Berry’s model homes, which he abandoned. Torn swimming pool screens flap in the breeze. Lenders are foreclosing. Of 10 former models, eight are empty and six are in default, said Realtor Karyn Glubis, who sold dozens of houses in Live Oak.”

“‘I see a lot of people hurt here,’ she said. ‘I see a lot of loss.’”

The Associated Press on Florida. “Jim Clark and Tom Jermoluk cut a swath through Silicon Valley in the 1990s with companies like Silicon Graphics, Netscape and WebMD. Five years after they decided to put their entrepreneurial talents and technology fortunes to work building Miami condominiums, the first two projects by their company, Hyperion Development, are plagued with delays and unhappy buyers.”

“Some residents at the first tower, named Blue, are threatening to sue the company for not delivering on amenities, while other owners at the 330-unit complex are trying to sell their condos for less than they paid.”

“Consultants say some buyers who put down deposits at the company’s second tower, the 516-unit Marina Blue, may decide not to close. Other Marina Blue buyers have sued to get their deposits back.”

“Mr. Clark and Mr. Jermoluk are not the only successful entrepreneurs who are struggling in Miami real estate. Another developer, Joe Cayre, who amassed a fortune distributing videotapes to Wal-Mart, faces lawsuits and delays on his 54-acre midtown Miami project.”

“Even Jorge M. Pérez, head of the Related Group, who is on the Forbes list of billionaires with Mr. Clark, has retreated in the face of lawsuits and losses.”

“‘It doesn’t matter who the developer is, where the project is located, what price range the units are,’ said Jack McCabe, a real estate consultant in Deerfield Beach, Fla. ‘Every project is going to take hits, some more than others. None are insulated, and it doesn’t matter whose name is associated with it.’”

“The slowdown, Mr. McCabe said, has developers in Miami trying to sell 52 multifamily sites that they once marketed as condos. Three other sites, he said, have fallen into foreclosure.”

“Mitesh Gandhi, an information technology consultant in North Brunswick, N.J., remembers spotting Mr. Clark’s photograph and mention of his link to Netscape when he walked into the Blue sales office in early 2005. He and his wife paid a deposit for a $555,000 condo.”

“But they were disappointed when the apartment was finished — they did not like the lobby and did not feel safe in the neighborhood. They also said they thought the building needed more amenities.”

“‘When we closed on the unit and walked through the lobby, we were like ‘O.K., this looks kind of bland,’ he said. ‘There’s nothing for me to do but try and sell it.’”

“The couple has priced the condo at $56,000 less than they paid. They have competition. Their broker, Samir Patel, said 88 condos are for sale in the 330-unit building at prices ranging from $300,000 to $1.25 million.”

“Bernd Schmitt, director of the center for global brand leadership at Columbia University Business School, said Mr. Clark’s problems in real estate should not be surprising.”

“‘You could ask the question whether it was a wise thing for him to use his name, which is very much associated with Netscape and the tech industry, to a real estate venture,’ Mr. Schmitt said. ‘That was stretching the brand quite far.’”

“Other wealthy entrepreneurs seem to have found themselves in unfamiliar territory as well. In 2002, Mr. Cayre, the videotape distributor, and fellow investors bought the 56-acre former Buena Vista Rail Yard to build offices, shops, a hotel and condos.”

“Today, his company faces roughly three dozen state and federal lawsuits over the project. Mr. Cayre told a reporter for a regional business magazine, that he did not expect to make money on his first condo tower, Midtown Two.”

“Stuart Weiss, a consultant representing private equity firms buying troubled projects, said that Mr. Cayre was at risk of losing even more money because of the neighborhood. ‘This is a real secondary location any way you cut it,’ he said.”

“The market changes have forced a third developer, Mr. Pérez, who has built 50,000 condos in Miami over the last decade with Related Group, into a defensive position. Now he is battling a lawsuit from buyers of 38 apartments at Harbour House and 26 condos at Biscayne Bay.”

“His company is operating in emergency mode. He has set up a team to raise capital to buy back apartments that he expects buyers will not close on. There are some things, he said, that even billionaires cannot control.”

“‘We are just in the down part of the cycle,’ Mr. Pérez said. ‘You can’t exclude yourself from the market.’”

The Montgomery Advertiser from Alabama. “Many cities and communities yearningly talk about it, but it appears the Huntsville area is doing it — attracting highly sought, younger professionals, and they’re coming in style. They’re blipping red hot on the local housing market radar.”

“In the past, said Betty Hughes, outgoing president of the Huntsville Area Association of Realtors, said younger buyers were typically in their late 20s and shopping for smaller houses, but that is changing.”

“‘Now, it appears from my experience, they are buying a larger home anticipating personal growth,’ said Hughes.”

“There is a growing number of younger home buyers and the trend has been emerging for the last 10 years, said Cindy Allen, broker in Huntsville. Another interesting factor about these young buyers, Hughes said, is they’re not just buying to reside but also to invest.”

“More women are buying houses instead of renting, and even buying ‘fixer-uppers’ for investment, Hughes said. Overall, Hughes said, these are pretty savvy buyers who are looking for properties as long-term investments, including to aid their retirement.”

“‘Most make really good salaries, but have not saved a lot of money,’ Allen said. ‘They can make a substantial monthly payment because they don’t have a lot of debt at such a young age. Most of their debt is student loans, if any.’”

“Another appealing facet of the area is its abundant housing. ‘There is enough housing inventory to assist their needs in any direction of price range and more on the horizon,’ Hughes said.”

“Young professional couples who are typically in their 30s are buying higher-end houses in subdivisions. ‘A few years ago, younger first-time buyers were buying $85,000 to $125,000,’ Hughes said. ‘Now, it really has increased.’”

“‘They are much more aware of the importance to own versus rent,’ Allen said. ‘A monthly payment to own a home is right in proportion with renting, so why not buy? Home ownership is still the ‘American Dream,’ and still one of the greatest ways to feel a sense of accomplishment. It is also one of the best tax deductions, and for someone with a high-paying new job, the ability to claim interest on a mortgage will come in handy at the end of the year.’”

The Winston Salem Journal from North Carolina. “A glut of condominium projects in downtown Winston-Salem and the slowing national economy are causing some developers to change, withdraw or re-examine their projects.”

“Landex Development LLC, the company that is redeveloping the Brown & Williamson building into the Gallery Lofts condominiums, announced that it might change its focus from condominiums to apartment rentals.”

“‘Winston-Salem is a solid, good market, said Judy Siegel, the chairwoman of Landex. ‘It’s just that it’s shallow. With a project this big, that makes the difference.’”

“Half of the planned 77 condominiums had sold in the past two years, Siegel said. The company was close to its goal of selling the 60 percent of the condominiums required for financing on the project, but sales were taking too long.”

“The project had attracted a mix of 30- to 60-year-old empty nesters, professionals and downtown business people, Siegel said. Letters were sent to the Gallery’s buyers about the possible change, and about 10 people so far have asked for their deposits back.”

“Elsewhere around downtown, other developers are looking at delays and changes to their projects.” “Catherine Mitchell, the VP of the Charlotte company that is developing West End Village at the corner of Fourth and Broad streets, said that a planned third building, Fourth and Green, is on hold.”

“Agent Tammy Watson said that her company is selling the land where Pisco Holdings in Las Vegas had announced plans for 36 condominiums at 575 Liberty St. She said that the developer has decided not to do the project here.”

“Some downtown observers also have questioned the fate of the District, a group of three to five condominium buildings proposed for Trade Street, Martin Luther King Drive and Liberty Street. The project was announced earlier this year.”

“Jason Thiel, the president of the Downtown Winston-Salem Partnership, said that changes to development projects are not unusual, particularly in downtown development. Many of the 500 or so housing units that were built in the past five years sold fast because they were based on pent-up demand, he said.”

“Joyce Snelgrove, a listing agent with Prudential Carolinas Realty, which has two of its six live/work condominiums at Holly Village for sale, said that selling homes has been a problem for some of the buyers she has worked with.”

“Some of the sales have been to executives from out of state, she said. One of her prospects right now is waiting to sell a home out of state.”

“Thiel said that with all of the activity downtown, he expects more retail development to occur, and that will add another layer of diversification to the market. ‘I think we’ve established that housing works,’ he said, ‘and I think it’s a matter of absorption.’”

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