The Housing Bubble

The Sacramento Bee reports from California. “Lots of developers are putting up ‘loft’ housing in the downtown-midtown area. But Jeff Kraft says his 42-unit condo project is the real deal. ‘Not to knock the other projects; they’re great. But they’re more ‘apartmenty,’ says the president of Habitat Construction Inc. in Roseville. ‘We’re building true loft space.’”

“Now, even though the building looks far from finished, Kraft expects the first units to be ready for occupancy next month. Prices range from $213,000 for a 395-square-foot studio to $699,000 for a two-bedroom, two-bath, 1,249-square-foot unit.”

“Can Habitat unload them when home sales are tanking and larger high-rise condo projects have flopped? ‘We just think there’s a pent-up demand from people who want to buy,’ Kraft says.”

“Kraft’s team also is optimistic about quickly leasing or selling nearly 10,000 square feet of retail space on the project’s ground floor. Allure Salon already has agreed to buy one spot, says David Herrera of Colliers International, who is handling the project’s retail portion.”

“A second space could be occupied by either a local spa or a sake bar, according to Kraft.”

The Times Herald. “Rozalind Sinnamon-Johnson said she opened Ethnic Notions on Georgia Street two years ago, assuming downtown redevelopment was imminent. ‘I was told in 2005 that Triad would break ground in April 2006,’ she said. ‘I’m a little disappointed that we don’t have the bustling downtown I’d expected.’”

“Vallejo’s downtown building owners and merchants said they’re determined to resurrect the area, despite continued delays by the firm hired to redevelop it.”

“‘Triad is absolutely still committed to downtown Vallejo, and that commitment has never wavered,’ said spokesman Mark Ruebsamen. But costs have risen as home sales prices have declined, making an already challenging project even more so, Ruebsamen said.”

“Meanwhile, several businesses have tried and failed downtown in the past several years, though several others have opened and flourished, said Bill Neads, downtown Vallejo property and business owner.”

“Vallejo City Manager Joe Tanner said recently he doubts the Triad project will ever materialize. This week, the City Council is set to consider allowing the project to terminate if it is found to not to be feasible in a year.”

“‘I think their ‘profit margin’ is marginal and the United States’ credit markets are in the tank - not just for Triad, but for everybody,’ Tanner said. ‘Taken together, both create a brick wall between success and doing nothing.’”

“‘A couple second-hand stores have closed, but Gracie’s Family Barbecue opened, and Baci Ristorante Lounge & Caffe and the new Angie’s Famous Hot-dogs are all crowded at lunch. So is China Wok and the Georgia Street Grill,’ Neads said. ‘And Gracie’s and Baci have live music on Friday nights. When was the last time we had that downtown?’”

“The types of stores able to wait out Triad’s delays, Neads said, are those like his, with an appeal attracting more than passing foot traffic. ‘Vallejo Antiques brings people from out of the area. Ravens Fire, the belly dance place, does, too,’ he said.”

“‘Downtown needs two things - home owners and businesses that are successful,’ said Vallejo Main Street president Robert Briseño. Briseño said it took decades for Vallejo’s downtown to degenerate and it will take a while to recover.”

“Catering to the working class is exactly what Triad had in mind - and then some, said spokeswoman Hatti Hamlin. Suit-and-tie types can coexist with artsy types and blue-collar types, and do quite nicely in other areas, said Hamlin. ‘It’s a perfect fit for Vallejo.’”

“‘There’s a national demographic trend toward young people being attracted to more urban, edgy, diverse areas,’ agreed Triad’s Ruebsamen.”

“A $10,000 donation from Umpqua Bank to Vallejo Neighborhood Housing Services Inc., will go toward helping residents buy homes and avoid foreclosures, an agency spokeswoman said. VNHS is a national nonprofit created to assist local communities by combating deterioration in Solano, Napa and parts of Contra Costa Counties.”

“As a developer as well as an agency helping first-time home buyers, VNHS has been hard-hit by the subprime mortgage crisis and subsequent downturn in the market, said agency executive director Renee Walton.”

“‘Fifty percent of our staff had to be laid off, so we hope prices don’t fall too much further,’ she said. ‘But we’re beginning to see a shift. More people who couldn’t afford the houses here at the higher prices, are coming back and finding more houses in their price range.’”

“Five of the six loans the agency closed in the past six months were for foreclosed-on properties, she said.”

“‘This is a good thing,’ Walton said. ‘It means homes that might sit empty and contribute to blight are going back into the hands of homeowners. If there’s a silver lining to the local real estate market’s downturn, that’s it.’”

“In 2005, VNHS provided 458 families with pre-purchase and post-purchase housing counseling through the Home Buyers Education program, according to a press release.”

The Monterey Herald. “A new deal to keep the massive Dunes on Monterey Bay project moving despite the sour housing market and economic downturn will be up for approval Tuesday by the Marina City Council.”

“The proposed agreement with Marina Community Partners, developers of the city’s flagship Fort Ord redevelopment project, contains major changes in financial terms from the deal approved by the city two years ago.”

“The first phase of the project, a regional shopping center, is mostly completed, and the developer has done a lot of preliminary work on the next phase of the 430-acre project, which includes a mixed-use village promenade area and housing.”

“But the developers, citing a major slowdown in the housing market, asked the city in November to revisit financial terms of the development agreement because they said it wouldn’t make sense under current economic conditions to keep forging ahead.”

“‘This is an entirely different business plan from what we were looking at two years ago,’ project consultant Thom Gamble said.”

“Besides the shopping center, The Dunes calls for about 1,200 homes, a 43-acre business park, two hotels, a residential-retail village and a five-acre cultural arts district. Project forecasts said the completed development could provide 4,700 jobs, a $193 million annual payroll and 3,300 new city residents.”

“‘You don’t want a domino effect from this project not moving forward that could affect projects all across the county,’ said city Development Director Doug Yount.”

“The proposed changes call for more financial help from the city and the Fort Ord Reuse Authority, while the developer has agreed to substantially more favorable profit-sharing terms with the city. The changes should allow developers to move ahead with a focus on the commercial and economic development parts of the project, a council report says. Development of housing likely will be delayed from 12 to 18 months, Yount said, but the physical scope of the project would remain the same.”

“‘We’re prepared to start on residential as soon as the market allows, but it could be two years,’ said Scott Hilk, managing director of Marina Community Partners.”

“‘The project economics obviously are difficult. There has been a significant reduction in housing prices…and the speed at which houses are bought,’ Yount said. ‘Our goal, during these very difficult times, is to keep moving forward with this project.’”

“Without the new deal, Gamble said, ‘If we stop, the redevelopment (of Fort Ord) basically stops.’”

The Recordnet. “The migration of families out of California slowed last year, at least based on the proportion of households using moving vans either to move into the state or to leave.”

“United Van Lines, the nation’s largest household-goods mover, reported last week that 50.8 percent of its California moves left the state in 2007. Still, that’s the lowest outbound proportion for California in the past five years.”

“In 2006, 52.4 percent of its California moves left the state, down from 55.7 percent outbound moves in 2005.”

“Mark Plovnick, VP of economic development at University of the Pacific, said there are a couple of likely reasons for California’s drop in outbound households - both involving the harsh downturn in the state’s real estate market, which has steadily pushed down home valuations.”

“Unless homeowners slash their listing prices, selling has been difficult, he said.”

“And those who otherwise might be using their home equity in retirement - elsewhere, in less expensive states - have seen their worth shrink in the market for now.”

“‘So maybe they’re just staying,’ he said. ‘What we’re not seeing is elective home selling.’”

The Greeley Tribune reports from Colorado. “Banks and lenders foreclosed on 2,869 Weld County homes in 2007, a 38 percent increase from record-setting 2006. That’s not quite to the level of Denver’s 41.5 percent increase to more than 26,000, but it dwarfs Larimer County’s 1,578 foreclosures for the year. The boom of the past few years prompted an inordinate number of home sales in the region, with brokers helping many new homeowners into homes they could not afford.”

“High foreclosures have helped push down home values in the area, which mean homeowners aren’t gaining the equity they expected in their homes. Without equity or money down, refinancing to get out of bad loans isn’t possible, said Angell Fuchs, a mortgage consultant in Greeley.”

“‘We can’t lend them more than 100 percent, and in order to pay closing costs and loans, and maybe a couple of months (in late payments), you have to have equity,’ Fuchs said. ‘They may not have as much down and now the values have dropped and now they’re upside down. They see their rates are going to adjust and they say, what’s the point? That, I think, is part of the problem we’re seeing with the bailout.’”

“For those who cannot avoid foreclosure, all is not lost, Fuchs said. ‘It’s not a death sentence to have a foreclosure,’ she said. ‘After three years, you can buy another home. People can’t feel like they’re failures. This was a very difficult situation and they were trusting everyone around them to know what they were doing.’”

The Arizona Republic. “Home buyers, sellers, real-estate agents and lenders all rely on comparable prices as the benchmark for an area’s home values. But in many Valley neighborhoods, those comps can’t always be trusted. Bad appraisals are often to blame.”

“It’s becoming apparent that inflated appraisals are behind many problems plaguing the Valley, say regulators, market watchers and many appraisers. ‘Almost all the mortgage fraud and foreclosures in the Valley now can be linked to appraisals that were too high,’ said Drue Bates, who has been a Valley appraiser for 18 years. ‘When a home appraises for $400,000 but recent comps of similar houses on that block are $300,000, it’s easy to see something is wrong.’”

“Home buyers in areas with inflated home values could have paid too much for their home and now owe more than it’s worth. People ‘upside down in their homes’ are now driving Valley foreclosures to record levels.”

“Heather Minton lost her home to foreclosure. A year after she bought her Pinal County home, it appraised for $200,000, about $75,000 more than she paid in 2004. So she applied for a home-equity loan based on her neighborhood’s new, higher comps.”

“She fell behind on her payments and tried to sell last year. By then comps in her neighborhood showed her house was worth only $150,000, so Minton ended up losing it to foreclosure.”

“‘We believed that we had that equity because that’s what our new neighbors seemed to be paying,’ Minton said. ‘Our appraisal came in at $200,000. We got the loan.’”

“In metro Phoenix, the problem worsened during the housing boom when home prices in many neighborhoods were jumping 5 to 10 percent just about every month. Appraisers couldn’t count on neighborhood comps to keep up with rising values. That opened the door for some inflated appraisals that continued even after the market slowed.”

“‘People in the Valley are in denial about how hard inflated appraisals have hurt the housing market,’ Bates said. ‘I am still seeing cash-back deals and inflated appraisals that are going to lead to bad loans. There needs to be more regulation in the mortgage business or it won’t stop.’”

“The final tally is in. No drum roll please, because it’s nothing to celebrate. Last year, more than 10,000 homes were foreclosed on across metropolitan Phoenix.”

“Almost 90 percent of those houses were taken back by the lender, which means most struggling homeowners couldn’t sell before foreclosure. Most of those homes are sitting empty, and when they do sell, it will probably be for less than what other homeowners in the neighborhood paid a few years ago.”

“The worst came in December when a monthly record 1,617 Valley homes were foreclosed on, according to Information Market.”

“The number of notice-of-trustee sales filed soared to 30,124 in 2007. And these precursors to foreclosure reached a monthly high of 3,852 in December, which isn’t a good signal that Valley foreclosures are going to slow anytime soon.”

“But here’s the good news for Arizona. Nevada has a higher rate of foreclosures.”

“Clark County, home to Las Vegas, had more than 26,000 pre-foreclosure filings in 2007. Maricopa County is more than twice the size of Clark County, but the Valley has only about 3,000 more pre-foreclosures.”

In Business Las Vegas from Nevada. “Southern Nevada’s white-hot growth trends hit a brick wall in 2007 with housing slumps and foreclosures making the biggest business headlines of the year. The price correction that many predicted started to unfold and is likely to continue in 2008.”

“By the end of 2007, the median price of resale homes had fallen to $257,000, down 13 percent from its peak of $290,000 in 2006. The price drop is attributed to the inventory of existing homes that was about 26,000 in December.”

“The sale of existing homes was off about 40 percent in 2007. In the new-home market, the housing recession was evident with sales down about 45 percent for the year.”

“The winners were consumers who saw builders go back to the drawing board to redesign homes to make them less expensive and more to buyers’ liking. Many builders touted prices of less than $200,000, and by December the median price was more than $80,000 below the market peak in April 2006.”

“Nevada has garnered national and international attention for its No. 1 ranking in the country in property foreclosures, In Business’s No. 3 story. Media have come to Las Vegas to document the housing market woes worsened by a large number of investors who bought homes with the anticipation that the high rate of appreciation would continue.”

“When it didn’t, many could no longer afford payments and some neighborhoods turned into ghost towns.”

“The tough times may not be over for the housing market in 2008 unless demand picks up dramatically. That’s not expected to happen until the openings of resorts in 2009 attract workers to Las Vegas.”

“Buyers had some the best bargains in years. The median price of existing homes reached $290,000 in 2006, but fell to less than $260,000 by the end of 2007 — the lowest prices have been since January 2005.”

“Las Vegas housing guru Richard Lee, first VP of First American Title, predicted the decline in 2007 when a year ago he said prices could fall as much as 15 percent. Lee said prices will continue to fall in 2008, but doesn’t have an amount.”

“‘There is an opportunity for those in a cash position with a high (credit) score can take advantage of the marketplace,’ Lee said. ‘This is the first time in four to five years that people can find an affordable house.’”

“It’s getting to the point where there will be opportunities to purchase homes and rent them and possibly break even, Lee said. That hasn’t been the case in recent years.”

The Review Journal from Nevada. “Some people are losing their homes, life savings and good credit as a result of mortgage scams that have become increasingly prevalent in Southern Nevada’s weak real estate market.”

“Mortgage fraud is being conducted through a system that is broadly referred to as ‘equity skimming,’ Secretary of State Ross Miller said. His office is investigating mortgage fraud complaints totaling hundreds of millions of dollars, stretching investigators’ loads to near capacity. ‘And it’s only the tip of the iceberg,’ Miller said.”

“It’s not just sellers who get caught up in mortgage fraud, Steve Hawks of ReMax Platinum said.”

“Thousands of unsuspecting home buyers in Las Vegas become victims through cash-back deals involving the seller, mortgage lender, appraiser and other essential parties in real estate transactions. Almost every one of them is pitched as an investment, he said.”

“‘Let us use your credit and you’ll get $5,000 back,’ Hawks said. ‘Little do they know that there’s anywhere from $25,000 to $180,000 getting kicked back to a third-party LLC (limited liability corporation) that the buyer doesn’t know about.’”

“The houses were never worth what they were sold for in the first place, Hawks said.”

“The Greater Las Vegas Association of Realtors’ MLS showed a Feb. 1, 2005, sale price of $490,000 for a house in Henderson. However, the Clark County Assessor’s Office has a recorded value of $800,000 for the sale. The home apparently went into foreclosure and was purchased from U.S. Bank trustee’s deed in September for $375,000.”

“‘Buyers don’t find out it’s happening until they get a notice of default. The third party rents the house and pays no mortgage. Now when the buyer tries to sell the house, they’re overpriced,’ Hawks said. ‘It’s happening to thousands of people.’”

“Jim Garvey of Las Vegas said he got suckered into real estate investing through a client in his automobile detailing business. Garvey ended up buying five homes that were supposed to be recorded under a limited liability corporation.”

“He got suspicious when his sister, who joined the real estate investment venture, called and said her name was on a foreclosure list. All of the homes have started foreclosure and are up for short sale.”

“Hawks said he examined title work on several homes and found that someone had removed an addendum that instructs the title company to issue checks to a third-party limited liability corporation. The document is removed or hidden, either way with same result, he said.”

“For example, a $500,000 listing is bumped to $800,000 and $300,000 gets kicked back to the third party through the addendum. If the institutional investor knew about the $300,000 cash, they would never buy the loan. That’s why the addendum has to be pulled or hidden, Hawks said.”

“‘This is why Credit Suisse and other institutional investors are pulling out of Vegas. This is why Vegas is going to take a dive worse than anyone thought,’ he said.”

Some housing bubble news from Wall Street and Washington. Independent, “A report by real estate giants CB Richard Ellis says that a 15 per cent drop in the value of new homes has been disguised through ‘incentives’ offered by developers to prospective buyers to encourage them to buy properties. The report also drives home the fact that Irish homeowners have seen the last of double-digit price growth.”

“‘Developers gave incentives to get people to buy their properties instead of lowering the price of new homes. These incentives equated to as much as 15 per cent of the value of the property so in real terms, the value of new homes probably fell by 15 per cent last year,’ said Marie Hunt, director of research with CB Richard Ellis and author of the upcoming report. ‘The decline in the value of new homes last year was not really as evident as it was in the second-hand market.’”

“First-time buyers who bought new homes last year are now sitting on losses of as much as €40,000 because the property slowdown has knocked up to 15 per cent off the value of their homes. This will push thousands more first-time buyers into negative equity this year.”

“‘The days of double-digit house price inflation are well and truly over,’ said the report, which also found that land values have fallen by 20 per cent over the last year.”

“‘The development land market continues to suffer from a slowdown in the Irish housing sector and the ongoing difficulties in obtaining banking funding,’ said Guy Hollis, managing director of CB Richard Ellis, Ireland.”

The Scotsman. “The £10-15 billion financing package for the rescue of Northern Rock looked on a knife-edge this weekend as it seemed that fears of a potential house price crash were unnerving some potential backers.”

“It is said that Royal Bank of Scotland, Citigroup and Deutsche Bank are increasingly concerned that it is difficult to value Northern’s assets – against which their lending would be secured – against a backcloth of a fast-weakening property market.”

“One analyst said: ‘It is a fast-moving situation, and the worse the property market is looking the more difficult a call it is for those banks to make on what would be very big loans to the rescue-bidders.’”

“One sticking point with the RBS/Citigroup/Deutsche funding is said to be the Treasury’s insistence that banks take as collateral part of Northern’s entire mortgage book, including lower-quality as well as top-quality mortgage assets.”

“One source said: ‘One problem is that there has been a noticeable slump in the outlook for the housing industry in Britain between September, when the Northern crisis became public, and now. In some ways, it is the worst possible situation to try and mount a rescue operation for the bank.’”

From Bloomberg. “Banks may be required to set aside more capital to offset the risk of losses on new collateralized debt obligations and other complex securities, according to Moody’s Investors Service.”

“‘The combination of financial innovation, opacity and leverage is generally explosive,’ analysts led by Pierre Cailleteau in London wrote in a report published today. ‘More capital buffers will be needed or required by counterparties and regulators.’”

“Merrill Lynch & Co. reported the biggest quarterly loss in its 93-year history in October after $8.4 billion of writedowns, almost double the New York-based firm’s forecast three weeks earlier.”

“‘We need to restore confidence in financial results by instilling a more probabilistic view, based on the margin of errors for estimating the value of these positions,’ Cailleteau said. ‘There is a call for more information, but the emphasis should be on intelligibility rather than quantity.’”

“Citigroup Inc., the biggest U.S. lender, and HSBC Holdings Plc in London led banks that took on more than $100 billion of assets from structured investment vehicles they managed as the value of the funds plummeted since August. SIVs had the highest AAA grades from all three rating firms.”

“The net asset value of SIVs…fell below 70 percent as U.S. home foreclosures rose to a record last year, according to Fitch Ratings. Mortgage debt made up 23 percent of SIV assets, with most having no direct subprime link, Moody’s said in July.”

“Moody’s, Standard & Poor’s and Fitch Ratings have been criticized for giving investment-grade rankings to structured securities linked to subprime mortgages.”

“In the past, policy makers have had a ‘Faustian pact’ with banks in which they accepted the risk of occasional crises that comes with financial innovation because the products helped to maximize growth, Cailleteau wrote.”

The Chicago Tribune. “The worst housing slump since World War II is showing no sign of abating. The mistakes banks and brokers made with mortgage-related bonds have left a lingering credit crunch, or a reluctance by lenders to make affordable loans to consumers and businesses.”

“Options are dwindling for the people who will be strapped. About half of the borrowers have less than 10 percent equity in their homes, said Lehman Brothers economist Michelle Meyer, and as foreclosures quadruple to about 1 million in both 2008 and 2009, the supply of discounted homes on the market will cause prices to fall further.”

“Certainly, if this cycle turns out as bad as some imagine, analysts will look back at a plethora of warnings that should have been taken seriously.”

“Merrill Lynch economist David Rosenberg was among the economists sounding the early warnings. In September 2004, he said there was a clear housing bubble, and it could turn ugly. In particular, he raised concerns about consumers overindulging in adjustable-rate mortgages.”

“When Rosenberg wrote his report, home prices in such markets as San Diego and Los Angeles already had climbed 80 percent, and Rosenberg described classic bubble characteristics: overheated prices, overownership, too much debt, speculation, complacency and denial.”

“‘About a third of first-time buyers,’ he said at the time, ‘have strapped on so much mortgage debt that roughly a third now pay at least 30 percent of their after-tax income on shelter, and half of the lowest-income households spend at least 50 percent of their income on housing.’”

“Citigroup economist Steven Wieting raised similar concerns. Morgan Stanley economist Stephen Roach also referred to an ‘ominous surge in demand for adjustable-rate mortgages,’ especially among lower-income people who wouldn’t be able to afford higher payments.”

“Roach noted that from 2001 to 2003, ARMs amounted to about 20 percent of new mortgages, but by May 2004 half of the people getting loans were taking chances on them.”

“Meanwhile, Yale economist Robert Shiller emphasized to Barron’s magazine that home buyers were making the dangerous assumption that ‘nothing beats a home as an investment because prices just keep rising.’”

“While the economists were flashing warnings, consumer advocates also were busy asking Congress and the Federal Reserve to stop lenders from tantalizing homeowners with loans they would not be able to afford.”

“Despite numerous hearings, Congress and the Federal Reserve failed to adopt the protections that consumer advocates were requesting. Advocates say they ran into heavy lobbying by mortgage lenders and Wall Street firms involved in securitization.”

“In a House of Representatives hearing in November 2003 titled ‘Protecting Homeowners: Preventing Abusive Lending While Preserving Access to Credit,’ Cameron Cowan of the American Securitization Forum testified on behalf of the fast-growing $6.6 trillion industry.”

“By fabricating bonds from the payments people are expected to make on everything from credit cards to mortgages, he said, the industry was making it possible for more people to get loans at low prices.”

“Cowan urged Congress to avoid regulation and also to stop state and local governments from measures aimed at curbing predatory lending.”

“The hearing, of course, occurred about four years before Wall Street’s subprime-mortgage-related bonds turned into a debacle and a threat to banks and the economy. Cowan concluded his remarks at the hearing this way: ‘Regulation in this area could easily cause more harm than good.’”

“In early 2001, economist Stephen Roach raised a warning flag that enraged many peers: The U.S. risks repeating Japan’s mistakes of the 1990s.”

“It was during the darkest days of the Nasdaq crash that Roach, then Morgan Stanley’s chief economist, began worrying Japan’s malaise could be repeated in the No. 1 economy. The concern was less about the loss of wealth than policy makers papering over economic cracks with easy money.”

“Roach called it the ‘bubble fix,’ a policy then-Federal Reserve Chairman Alan Greenspan is now at great pains to justify. Ben Bernanke hasn’t deviated from that strategy since succeeding Greenspan in February 2006.”

“At its core is a Bank of Japan-like belief that low short- term rates and liquidity are the cure for sliding stocks, plunging real estate prices and lost investor confidence.”

“‘The only lesson the U.S. has learned from Japan is how to clean up the post-bubble mess,’ says Roach, now chairman of Morgan Stanley in Asia. ‘America has failed to learn the much more important lesson; how to avoid dangerously destabilizing bubbles in the first place. The Greenspan/Bernanke ideology still places disproportionate emphasis on the former while ignoring the latter at great peril.’”

“For years, regulators and investors sold an appealing tale: The U.S. has become so sophisticated and efficient at managing risk that a financial meltdown is unthinkable. That was a myth, of course. The aggressive and profitable repackaging of credit risks in recent years made global markets more volatile, not less.”

“Faith is now being lost in the U.S. system. Look no further than Blackstone Group LP’s recent experience. On Jan. 1, PHH Corp., the New Jersey-based mortgage and auto-leasing company, scrapped a $1.8 billion sale to General Electric Co. and Blackstone after the buyout firm said banks reneged on an agreement to lend the money.”

“‘Banks facing further writedowns are reluctant to lend, so the extra liquidity from the central banks isn’t greasing the wheels of commerce as intended,’ says Simon Grose-Hodge, an investment strategist at LGT Group in Singapore. ‘When the likes of Blackstone are getting turned down, you’ve got a problem.’”

“What are the odds of the U.S. sliding into a Japan-like funk? While not great, there are at least two reasons why the risk can’t be dismissed: Denial and easy money.”

“There’s still considerable denial about the magnitude of the U.S.’s problems. Also, all low rates and capital injections from central banks offer markets is breathing room. They treat symptoms of the problem, not the underlying disease.”

From New Orleans City Business. “National homebuilder KB Home has scrapped 35 planned market rate homes in River Garden, the mixed-income development that replaced the St. Thomas housing project in New Orleans. KB Home was the first national homebuilder to invest in Louisiana following Hurricane Katrina.”

“‘It is not wise to flood the market with a number of homes that are not selling and we will not make a decision on what to do with the (remainder of the lots) until our homes sell,’ said Clint Szubinski, president of the Gulf Coast Division for KB Home.”

“KB has sold 11 homes in River Garden since the 2006 unveiling of a first model two-story shotgun home and plans to sell the 12 now under construction before stopping work on the candy-colored subdivision, where 58 market-rate homes were to have been built.”

“Slow sales and sinking prices at River Garden, which was developed by HRI Properties and remains under its management, factored into the KB decision to leave the state, Szubinski said.”

“‘Our lack of success contributed to our decision to not make any future investments here,’ he said.”

“Market rate sales began to lag soon after KB sold the development’s first market-rate home for $329,000 in February 2007. Prices plunged by as much as 30 percent on the remaining homes by November, said real estate agent Polly Eagan of Keller Williams Realty.”

“‘(KB) was motivated to sell, they offered a huge drop in prices and now the houses are selling,’ said Eagan.”

“But some River Garden residents worry what will happen in undeveloped vacant lots.”

“‘People are concerned about the way things are going,’ said Chris Daigle, who bought a new double-shotgun on South Chippewa Street last year. He paid $300,000 for the pumpkin-colored home before KB Home sheared prices.”

“A nearby yellow New Orleans-style home with a wraparound porch at 1901 South Chippewa St. is listed down 34 percent to $279,000 from $425,000. Daigle does not begrudge his new neighbors for getting a deal he missed. He said the development will lack the density and economic diversity promised to him when he bought in.”

The St Petersburg Times reports from Florida. “More than a couple of e-mailers to the newspaper can’t discuss the recent housing plunge without cackling with pleasure. They’ve got some support for their schadenfreude. In the past 18 months, the Tampa Bay area’s median home price has dropped 21 percent, from $239,600 to $189,100.”

“Naples, where median prices topped $500,000 in the fall of 2005, watched prices plunge to $415,000 a year later before shell-shocked Realtors stopped publishing the data.”

“But don’t expect a steal of a deal on every block. Subtract the speculators and inflation runs about 3 percent a year. Incomes have climbed over the years in Tampa, albeit slowly. Tens of thousands of people are locked into homes bought at boomtown prices. They won’t give away their money without a struggle.”

“I have a name for house hunters counting on a return to 1998 prices: lifelong renters.”

The Orlando Sentinel. “With four mortgages and six mouths to feed on one shrinking paycheck linked to the weakening Florida real estate market, Amy and Randy Rainey need to make dramatic money moves fast. Like a lot of families who were swept up in the real estate boom, the Raineys are faced with a need to sell some assets at a time when property values are falling.”

“And their situation is compounded because Randy is a construction worker who has seen business drop off sharply. ‘We need a way to survive and it looks like we have no options,’ the couple wrote in a letter requesting a Money Makeover.”

“Central Florida’s economy will be tested in 2008, and the battleground is close to home — in fact, is the home. Home sales, home construction and all the ancillary businesses and job generated by both, will shape much of the outcome of this pivotal year.”

“The trend lines coming out of 2007 are not good. ‘The eagle has now become an albatross around Florida’s neck,’ said Orlando economist Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.”

“Central Florida’s housing market will continue to snooze and wait in 2008. That’s the sober forecast from a number of local experts, including Frank W. Herring, one of the area’s veteran community developers.”

“‘We have a lot of inventory to work through,’ Herring said. ‘We’ve built more houses than we need.’”

“He predicted that, at least until 2009, the region’s home markets will see ‘lower prices, slower sales and more multi-family rental communities.’”

The Palm Beach Post. “For the second quarter in a row, Ameribank, which has an office in Palm Beach Gardens, received a two-star problematic rating from Coral Gables-based BauerFinancial.”

“Troubled loans at the bank showed no sign of easing. They increased from 11.2 percent of total assets at the end of the second quarter to 24.5 percent of total assets at the end of the third quarter, or from about $15 million to about $33 million in a three-month period.”

“Bank spokesman Tom Hartman said Ameribank’s problems stem from making one-year home improvement loans to investors who would renovate a house and then ‘flip’ it for a higher price to a seller in a short time.”

“Hartman said the practice only worked in a booming real estate market. As the real estate market declined and house prices dropped, the flippers were unable to make a profit on the houses they renovated, he said.”

“‘We made a bad investment,’ he said, but added he is confident Ameribank can work through its problems and persuade many borrowers to pay back their loans.”

“It seemed a good idea at the time: rent their house because the market wasn’t yielding buyers, and then move on with plans to move on with life. But it backfired because of delinquent renters and artificially inflated home valuations.”

“Now, facing foreclosure, David and Yvonne Hill are willing to sell the house they’ve owned a dozen years in Royal Palm Beach for just about anything - a short sale, as it’s known.”

“The Hills saw an opportunity in rising real estate values to use their home’s equity to pay for life’s surprises. Despite having bought low and long ago, the market fall still left them in a lurch because they speculated on the boom too - in this case, after they had bought the house.”

“‘We gambled on the fact that the house value would go up,’ David Hill said. ‘They dangle this money in front of you, and you need this money. It’s like a downward spiral once you get stuck into it.’”

“The house went on the market in early 2006 for $380,000. All year, not a nibble worth entertaining came in,They found renters who signed a two-year lease for the Royal Palm Beach house.”

“But the Hills never ran a credit check on their tenants. The future unfolded badly from there. Rent came late and only twice. Code enforcement visited a few times. The Hills tried to evict the renters, but it took months for that to go through.”

“Now the house is for sale for $248,000. Real estate agent Marianne Cojocar said she showed it about a dozen times in December. ‘The market is really soft,’ Cojocar said. ‘It has nothing to do with their house.’”

“During the housing boom, home builder Standard Pacific snapped up commercial land to build townhouses. Now the troubled builder is dropping those projects and selling land to - will the irony never end? - commercial developers.”

From Florida Today. “Regular customers of Mark Kirschner are accustomed to having the owner of Melbourne’s Magick Movers regale them with classical arias while moving their furnishings. Kirschner doesn’t have much to sing about these days, however.”

“‘People are staying put,’ Kirschner said.” “With the housing slump, Kirschner knew that many people wouldn’t have need for moving services. But he thought at least some customers might need a mover for help with downsizing. It hasn’t happened.”

“‘We expected a lot of moves from houses into apartments, but we haven’t seen a lot of that, either,’ he said.”

“‘In 18 years in the business, I’ve never seen it like this,’ said Chris Foti, dispatcher for Suddath in Palm Bay.”

“At Brevard Movers in Melbourne, manager Doug McClure seems to be fielding as many calls from job-seekers as from customers. ‘We get a lot of calls from people looking for work,’ he said. ‘The problem isn’t just in Florida. It’s everywhere.’”

The News Press. “Supporters say it’s the magic ingredient that will put back the fizz in Florida’s stagnant real estate market, and ultimately, the state’s economy. Portability, the catchphrase in Florida’s latest taxpayer revolt, is the great unknown.”

“But critics say the theory is shaky at best. Portability applies a solution to the wrong end of a real estate transaction, said at least one expert.”

“‘If the market is depressed and there are homes for sale and nobody’s buying them, you can’t simply expect that offering more homes for sale will make a difference,’ said veteran Florida economist Hank Fishkind.”

“Fishkind isn’t a professional pessimist. He predicted in August the real estate market had already bottomed out and was showing signs of a turnaround. He has since revised that prediction, in light of the subprime mortgage lending crisis, and now predicts the turnaround will begin later this year.”

“Most of the media attention related to the real estate debacle focused on stratospheric pricing, speculator greed, unfair tax burdens and an insurance crisis, creating what some would call the perfect storm.”

“I’m convinced the cleanup will take longer than most category 5 hurricanes. I believe the reason, and the one most often swept under the rug, is the egregious debt level of most individuals and families.”

“I recently asked an owner who was losing his house how the job market looked, because he said he was out of work. His reply, as he took a drag of his $4-a-pack cigarette, was ‘nothing has come my way.’”

“Remember the ads: No money no problem, bankruptcy OK, repossessions, ‘Come on down.’”

“There used to be a stigma against bankruptcy. Your signature was something you took pride in. People that get ahead in life have, and keep, good credit. They do not have credit card debt. They do not buy ‘toys’ unless they can pay cash. They understand depreciation and inflation. They save 10 percent a year. They have a rainy-day fund. More importantly, they defer gratification.”

“The glut of available homes in Gateway has increased the need for Realtors to prevent cases of TMI — too much information — among home shoppers, according to Jennifer Buffington, a Realtor in Fort Myers.”

“Q: What advice do you have for sellers?”

“A: Lower the price or take it off the market. Think like a buyer. If you were out looking for a home to buy, you would try to get the deal of a lifetime. Most sellers are also buyers — once they sell they will most likely become buyers. It’s a buyer’s market. Think like a buyer.”

“Construction of the 104 Prentiss Pointe coach homes in Phase One was completed in July, said Mark Naumann, president of the Fort Myers-based Carlton-Naumann Homes, the development’s builder. He said work on the 36 homes in Phase Two is slated to begin in the second quarter of 2008 and be completed by the third quarter of 2009.”

“Sales have gone well at Prentiss Pointe, especially after prices were reduced over the summer, according to Patti Testa of Coldwell Banker, the listing agent for the development.”

“First-floor residences now start at $339,900, down from $399,000, Naumann said. Second-floor units…were as high as $489,900 roughly one year ago and now sell for $389,500, he added.”

The News Journal. “Home builders and city officials in the Volusia-Flagler area are riding out a slumping real estate market in hopes demand for new homes increases some time this year. ‘Obviously, we all hope the market will get better,’ said Bob Razler, president of Orleans Home Builders’ Florida division.”

“‘We’re hoping for a couple of hundred homes coming in, but I don’t know if that will happen,’ said Mark Rakowski, New Smyrna Beach’s development services director.”

“Razler said Orleans’ inventory peaked around July 2006, but has been worked down a bit since then. It will take increased demand from buyers to lower inventory levels much more. ‘I would imagine inventory levels will stay elevated through 2008,’ he said. ‘We just have to get used to lower levels of demand, and we’ve done that by cutting our overhead.’”

“‘We’re still seeing a lot of construction going on, but I don’t know what to expect,’ said Dale Arrington, DeLand’s community development director. ‘I think probably we’ll continue to hold steady because we’re still permitting new houses and new subdivisions.’”

“‘Certainly, sales are down . . . and margins are less,’ said Jerry Johnson, CEO of The Johnson Group and developer of the Venetian Bay community at New Smyrna Beach. ‘We’re not eating filet mignon, and maybe we’re eating chopped steak, but at least we’re eating.’”

“Johnson said sales have dropped from five or six units a week during the ‘crazy period’ to two or three units.”

“SeaGate Homes, which builds in Palm Coast, Daytona Beach, Edgewater and St. Augustinem has been successful because of its ability to offer a lot of value and to be flexible in its pricing, said Mike Sawdai, VP of operations.”

“‘A lot of builders have come and gone in this market,’ he said. ‘But we’re a local builder, and we really try to focus on affordability and quality.’”

“SeaGate will build more spec homes once it determines what the market will be able to accommodate. SeaGate has models that start as low as $99,900, not including a home site. And the company, which recently bought additional land in Palm Coast for future development, has some lots under $30,000, Sawdai said.”

“‘We’re optimistic we’ll be able to sell more homes in 2008,’ he said.”

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