The Housing Bubble

The Mt Shasta Herald reports from California. “According to mortgage broker Jacob Barr, the Lake Shastina area has been hit to some degree with foreclosures, but the rest of Siskiyou County has largely escaped people losing their homes. Barr said the county is seeing ‘three or four homes foreclosed per month.’”

“‘They are all high balance foreclosures with no equity in the property and maximum financing,’ Barr said. ‘All have 100 percent financing.’”

“Barr said where Lake Shastina differed from the rest of the county was in the number of homes built.”

“‘There was more speculation in Lake Shastina than anywhere else in the county,’ Barr said. ‘There were more homes built in Lake Shastina in the last three years than in the whole county combined. The areas in the country where prices are now dropping are where a lot of homes were built.’”

“‘One hundred percent financing became so easy for folks who would otherwise not qualify,’ Barr said. ‘The standards were drastically lowered. The easy money drove up home prices. Barr said prices in Lake Shastina have dropped after they ‘went too far too fast.’”

The Press Democrat. “A small-town Mendocino County lumber mill and 200 of its employees have become the latest victims of the nationwide housing slump.”

“Harwood Products last week began shutting down its Branscomb mill and will be laying off all but 40 of its employees, a situation Art Harwood hopes will last no more than a month. ‘It could be extended beyond that,’ said Harwood, the third generation of his family to run the 57-year-old mill.”

“Harwood said he’s being forced to temporarily shut down the mill because the sharp drop in the demand and price of lumber has made it unprofitable to produce wood products. ‘Lumber prices are low, maybe the lowest they’ve ever been,’ when inflation is taken into consideration, Harwood said.”

“Prices have dropped from a 2004 peak near $500 per 1,000 board feet to about $200, he said. ‘That’s a 60 percent deterioration in the price. That is huge,’ Harwood said.”

The Sacramento Bee. “Mortgage giant Countrywide is reeling, its stock price falling amid concerns it could be filing soon for bankruptcy protection.”

“One thing is certain for the thousands of Sacramento-area homeowners who do business with the Calabasas-based lender: No matter what happens, you still have to make your mortgage payments.”

“‘They aren’t going to pack up and go away and say, ‘Don’t bother to send us the money,’ said Sacramento bankruptcy attorney Gary Fraley.”

“But there are other concerns. Countrywide is a big player in the capital region’s real estate market, owning and marketing a large supply of foreclosed homes. And at least one attorney said he was concerned about any disruption in helping borrowers who face foreclosure.”

“‘The problem is there would be nobody to give any permission to do modifications,’ said Sacramento bankruptcy specialist Peter Macaluso. ‘There would be a period of time until the bankruptcy court put somebody in control.’”

“Countrywide was the leading mortgage lender in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties from June 2005 to June 2007, according to DataQuick. The firm did 34,300 loans in the two-year span, a 7.75 percent market share.”

Fox 6 San Diego. “Some of the nation’s leading economists say the US is already in a recession. So is San Diego also heading in the same direction? Economists are worried about our slow housing market and a rise in foreclosures. Fewer homes are being built and the county counted on the construction industry to help fuel growth in the first half of this decade.”

“‘The construction industry is a very important one in determining the direction of the economy,’ said Marney Cox, the chief economist for the San Diego Association of Governments.”

“Another problem? San Diegans who cashed in on their home equity in the first half of the decade are now overextended.”

“‘We’re expecting just about a billion dollar loss in retail sales from the reduction in home equity available for expenditure so that’s a huge turnaround,’ said Cox.”

The Union Tribune. “Lincoln Timson never thought he would be living in a downtown condominium with a view of the San Diego-Coronado Bridge. The unit is small, 500 square feet, and the downtown is National City, but that’s precisely why Timson and others like him can afford a fully furnished condo conversion with bay views.”

“The former Red Lion Hotel, built in 1990 at Eighth Street and National City Boulevard, was recently converted into 170 one-and two-bedroom condominiums.”

“The project was aimed at buyers looking for affordable housing. A banner hung outside the top level of the building for months, advertising condos as low as $185,000 to motorists driving on Interstate 5.”

“He said he paid $189,000 for his third-floor unit. The kitchen is tiny and the ceilings are low, but Timson doesn’t mind. ‘Who wants to spend time in the kitchen? I have a big-screen TV,’ he said.”

“A few doors down from Timson, Erma Militar and her husband, Edwin, had spent two years living in a National City apartment saving for a house. ‘We really wanted to have our house, but we decided to have the condominium instead,’ Militar said.”

“Their 700-square-foot condo has two bedrooms. The couple moved in Oct. 30 with their daughter, Maeden, 20. ‘It seems like I am living a luxurious life here,’ Erma Militar said.”

“Pacifica had other plans in National City, but those are on hold. The firm owns the Holiday Inn across the street from Bayview and proposed building a 19-story condo tower next to the hotel. The firm postponed the project because of the slumping real estate market.”

The Daily Bulletin. “When Gov. Arnold Schwarzenegger said Tuesday that the housing slump was one of the chief reasons for California’s $14billion budget deficit, few could disagree. Builders, in fact, commended the governor and suggested there were actions the state could take to start the money flowing into state coffers again.”

“‘We’re encouraged that (Schwarzenegger) mentioned the importance the homebuilding industry plays in California’s economy and in the state’s budget and his commitment to infrastructure improvement,’ Robert Rivinius, president of the California Building Industry Association, said in a news release. ‘Ignoring the impact of the homebuilding industry will only make things worse.’”

“Todd Tatum, a Victorville builder who is president of the association’s Rancho Cucamonga-based Baldy View chapter, said developers had done what they could.”

“‘We’ve lowered prices and we’ve asked our suppliers to lower their costs,’ he said. ‘But impact fees need to be lowered too. That’s the third leg of the stool. If we can do all three things together, we can get moving again.’”

“Inland Empire housing starts are down 50 percent since 2004; new permits are down by 50 percent as well. Just three years ago, new home construction was responsible for 74,000 jobs in San Bernardino County alone.”

The Press Enterprise. “Tricia Powe lost her job and her house in Corona and then found new employment, all because of the bashed housing market.”

“Having been laid off as a mortgage consultant in March, Powe and her husband no longer could afford to pay their own mortgage. Their house was foreclosed on and they started the new year packing up the family’s belongings so they and their two children could move to a rental in Riverside.”

“The irony for Powe is her new job is as a foreclosure-prevention counselor for a consumer assistance group in Riverside.”

“Also hitting the streets are high-paid home building executives and hundreds of engineers, architects, appraisers, underwriters, escrow workers, loan processors and real estate brokers and agents.”

“‘I cannot think of any company that has not let go a portion of their workforce over the past 18 months and are not thinking of laying off more,’ said Borre Winkle, executive director of the Riverside chapter of the Building Industry Association.”

“‘I would say the industry is 60 percent smaller than it was two years ago,’ said Steve Johnson, director with a Riverside real estate consulting firm. The cuts started in 2006 and have accelerated as the predicted ’soft landing’ for home builders failed to materialize. ‘It is getting worse every day,’ Johnson said.”

“Greg Berkemer, executive VP of the California Desert Association of Realtors, said he expects that organization will lose 30 percent of its membership from non-renewals in the next two years. He predicted many of the agents ‘will go back to something they did before they sold real estate.’”

“Brian Weide, branch manager of SunStar Mortgage Services in Ontario, said many loan officers paid on commission have not formally quit but no longer show up for work. ‘Most of them are leaving because they can no longer make a living in the business,’ he said.”

“John Munoz, a loan officer at SunStar, has seen his business dwindle by more than half.”

“‘I got my insurance license so I could start doing financial planning seminars,’ Munoz said. The Upland resident, with more than 20 years in the mortgage industry, is also selling jewelry over the Internet and has learned to repair eyeglass frames for optometrists.”

“Despite all these endeavors, which he said keep him busy at least 12 hours a day, Munoz said he and his wife have seen their monthly income drop from about $12,000 to $5,000. They cancelled a European vacation and a full-time maid, and cut back on dining out.”

“Scott Chappell, a longtime Riverside real estate broker, said that since 2004 his business has shrunk by two-thirds. Chappell said he is trying to bolster his earnings through property management and hoped to land much-coveted contracts with lenders to sell foreclosure properties. But to get by, he said, he is selling real estate he bought during the flush times.”

“‘I work every day and make absolutely no money. It is just a living hell this year,’ Chappell said last month. ‘I have been through three real estate down cycles and this one is absolutely the worst.’”

Bloomberg reports on Canada. “Canadian building permits fell almost five times as fast as economists forecast in November, as the value of licenses for new offices and multifamily dwellings tumbled. ‘Economists have been calling for a slowdown for years, but this may be the start of the real thing,’ said Doug Porter, an economist with BMO Capital Markets in Toronto.”

From Reuters. “Canadian building permits fell dramatically and housing prices held steady in November, signaling a slowdown in the housing market but economists warned against dire predictions of a U.S.-style meltdown.”

“‘The mistake would be to bind today’s report on permits to yesterday’s soft housing starts number and try to spin it into the makings of a US styled real estate story,’ said Stewart Hall, markets strategist at HSBC Canada. ‘This is moderation from very high levels to still high levels.’”

“‘This dramatic fall in permits offers some credence to the view that the Canadian housing market may have hit a soft spot in the fourth-quarter of 2007, and validates the significant fall reported in housing starts yesterday,’ said Millan Mulraine, economics strategist at TD Securities.”

“‘We would, however, simultaneously emphasize that the Canadian housing market remains in reasonable shape, with an expectation for some moderate adjustments during 2008,’ Mulraine said.”

The Financial Post. “Canada Mortgage and Housing Corp. says there is little fear the Canadian housing market could soon resemble the one in the United States. On a seasonally adjusted annualized basis there were 187,500 housing starts in December, a 19.6% drop from a month earlier.”

“Despite the decline, there were an estimated 229,600 new homes constructed last year, the second highest level of construction in the past two decades.”

“‘No, the sky is not falling, it really was a weather-related decline,’ said Bob Dugan, chief economist with CMHC, noting December was an extremely cold month in Toronto, in particular, and that slowed condominium construction.”

“He said there are plenty of pre-sales for condominiums, which would indicate a lot of activity to come. CMHC is sticking with a forecast of 214,000 for new-home construction in 2008, the seventh straight year starts would top 200,000. One would have to go back 30 years to find a comparable run for the construction industry.”

“But all is not perfect. Interest rates haven’t been this high since August, 2001. ‘They are high for recent months but not if you look at them long term,’ said Mr. Dugan, who said one of his concerns for the housing market was the possibility of credit drying up.”

From The Star. “A stormy December put the big chill on home building as Canadian housing starts sank to the lowest level in almost six years.”

“‘The sharp drop in housing starts shouldn’t be seen as a prelude to a U.S.-style meltdown,’ said BMO Nesbitt Burns economist Robert Hogue. ‘Nonetheless, the sector’s strong momentum of the last several years is expected to slow moderately, as rising economic uncertainty throws some sand in the housing engine.’”

“‘The strong price gains recorded in 2007 began to stress affordability, suggesting that Canada’s housing market will cool,’ said senior bank economist Dawn Desjardins. ‘Still, against a backdrop of a strong labour market, rising wages and low interest rates, the slowing is likely to be modest.’”

“Of all cities, Toronto registered the biggest hit, with starts down 51 per cent from November.”

The Halifax News. “House prices in Atlantic Canada keep edging up, putting ownership out of reach for more residents. According to Valerie Folk, area manager for Royal LePage Atlantic in Halifax, a lack of desirable properties in Bedford, Sackville and Dartmouth left little room for price negotiation.”

“Buyers who tried to go in below asking price were largely denied entry into the market, she said. Two-storey homes in the west end soared by 32.5 per cent to $265,000.”

From The Record. “Homes were bought and sold at a record pace in Waterloo Region last year, defying all predictions of a slowdown in the housing market. Across the region, 9,799 homes were sold in 2007, topping the red-hot 2005 market, when 9,146 homes were sold in the Kitchener, Waterloo and Cambridge areas.”

“Ever since the last record was hit in 2005, there have been predictions that the pace of home buying is bound to slow down, especially since the U.S. housing market has been in a slump. But that hasn’t happened in this area.”

“‘It was our best year yet,’ said Tania Benninger, president of the Kitchener-Waterloo Real Estate Board. ‘Last year, when we were coming off of a really good year, people said it was bound to slow down. This year, again, I’m hearing that it’s bound to slow down. But, I think, even if it slows down a wee bit, it will still be a hot market.’”

“While the price of housing has been steadily rising across the region, Benninger says homes are still affordable compared to other major markets in Ontario.”

“Last year, in Kitchener-Waterloo and Cambridge, 36 homes sold for more than $750,000, with eight of those selling for more than $1 million. In 2006, there were 23 homes sold for more than $750,000, with eight of those selling for more than $1 million.”

“‘We are bringing new blood and creating wealth in our own community,’ Benninger said.”

The Chronicle Herald. “Canada’s residential real-estate market posted solid gains in the final three months of 2007, avoiding much of its usual midwinter slowdown, but price increases are likely to slacken this year, Royal LePage Real Estate Services reports.”

“The October-December period ‘had really unusual, high levels of activity, and that in turn drove higher price appreciation than we expected,’ Royal LePage president Phil Soper said.”

“The country’s biggest real estate agency franchiser said bungalow prices rose 43 per cent in Saint John, N.B., and 21 per cent in Winnipeg, and double-digit percentage gains were also recorded in Edmonton, Vancouver and Victoria.”

“The Prairies continued to dominate in price appreciation late in 2007, and home prices in Saskatchewan rose much faster than anywhere else in the country. Bungalow prices were up 55 per cent to $292,500 in Saskatoon and 52 per cent to $229,200 in Regina.”

“In Alberta, where Edmonton’s prices were rising at a 50 per cent annualized clip early in 2007, the breakneck rise in recent years ‘has moderated demand,’ the Royal LePage report said.”

“Edmonton and Calgary now have ‘a surplus of inventory,’ it added, and ‘while demand is strong, the increased supply has impacted the resale market and homes that are not priced appropriately will take longer to sell.’”

“Soper said the Alberta economy needs time to adjust to the ‘frankly unhealthy increase’ in home prices between late 2005 and early 2007.”

“A typical Vancouver bungalow was priced at $795,250, up 12 per cent from a year earlier, a standard condominium appreciated 11 per cent to $428,250, and a two-storey house in Vancouver also rose 11 per cent to an average of $895,000.”

“Vancouver’s rise is slowing in percentage terms, but ‘at this rate it will be in the next 24 months the first region in Canada to have a housing class with an average price over $1 million,’ Soper commented. ‘Wages and salaries there aren’t that much superior to other parts of the country, so affordability is an issue.’”

The Leader Post. “The ground is frozen but that hasn’t halted the record-breaking pace of new home construction in the City of Regina. Despite a bit of a lull in December, new housing starts in 2007 were at a 21-year high, according to the monthly survey released Wednesday by the Canada Mortgage and Housing Corporation.”

“‘That is amazing,’ said Alice Russell, executive director of the Regina and Region Home Builders Association. ‘I don’t remember having a December like we did in 2006. It was out of the norm.’”

“‘If we did not see another house this year, we would all still be busy,’ said Heather McGinnis, project consultant at Munro Homes in Regina. The phones are still ringing off the hook and builders are moving as quickly as possible to get the homes built, McGinnis said.”

“The housing market in Regina set all kinds of records in 2007, and the fourth quarter of the year was no exception.”

“The average price of residential properties in Saskatchewan rose more than anywhere else in the country for the fourth quarter. From December 2006 to December 2007, some properties increased in price more than 50 per cent, according to the Royal LePage house price survey.”

“The biggest jump in Regina was in detached bungalows, which increased by 52.4 per cent from 2006 to an average of $229,200. Standard condominiums also had strong increases at 49.2 per cent, making the average price $144,000.”

“The good news for buyers is that not all homes are jumping at such a drastic rate. The bad news, however, is that the most-sought-after homes are making the biggest jumps. This also means that the market will be able to withstand increases of this kind for some time, according to broker Mike Duggleby.”

“The increases meant change for the buyers, sellers and realtors. Some of the changes included the Association of Regina Realtors creating forms to deal with bidding wars and realtors agreeing to not take offers until a certain day, allowing buyers time to see the homes, explained Duggleby.”

“He also said vendors had to be ready to sell their homes very quickly after putting them on the market and buyers had to be active in their search and prepared to make offers immediately.”

“Although the increase of 50 per cent in a year is shocking, Regina is still relatively affordable compared to the national averages, says Royal LePage.”

“Regina also fell slightly below Saskatoon’s numbers. There, condos increased the most at 65.3 per cent from December 2006 to $205,000 in December 2007. Detached two-storey homes increased by 56.7 per cent to $321,250 and detached bungalows hit $292,500, up 55.2 per cent.”

“Duggleby expects the Regina market to follow in Saskatoon’s footsteps just as Edmonton followed in the footsteps of Calgary’s housing boom.”

“The main story in 2007 was demand and Duggleby says that we can expect much of the same for 2008. His only advice for people wanting to buy is, ‘Do it as soon as you can.’”

Some housing bubble news from Wall Street and Washington. LA Times, “Countrywide Financial Corp.’s future was called into question again Wednesday after it reported another rise in loan delinquencies and foreclosures, fueling fresh speculation that the company was headed toward bankruptcy. The nation’s biggest mortgage lender was ‘withering’ and ‘might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks,’ said Egan-Jones Ratings Co., an advisor to pension funds and other big investors.”

“Weiss Research, which rates the condition of lenders, said the Calabasas company ‘is on a collision course with bankruptcy,’ adding that it ‘exhausted many of its extraordinary financing options last year and is ill-prepared for the rising mortgage defaults and home foreclosures that are widely expected this year.’”

“On Wednesday, some customers at Countrywide Bank’s Glendale branch said they were…trying to determine whether the favorable terms offered were worth the risk. Fred Campi of Silver Lake decided it wasn’t. He was at the bank to withdraw four certificates of deposit, cashing out a total of $60,000.”

“Campi, an administrative aide at Los Angeles City College, said he didn’t want to risk losing access to his funds, even temporarily. ‘I don’t know if it’s worth the crapshoot,’ Campi said.”

The Washington Post. “Countrywide Financial reported yesterday that foreclosures and late payments on mortgages in December soared to their highest levels in five years.”

“Lehman Brothers analyst Bruce W. Harting wrote in a report yesterday that ‘the extent of the deterioration is a surprise.’ Steven Persky, chief executive of a Los Angeles investment adviser, said:’People are recognizing that foreclosures are skyrocketing beyond expectations.’”

“Countrywide, with a $1.5 trillion portfolio of loans, is so large that its failure may cause a crisis on Wall Street, which over the past few years has tied its fate to the mortgage industry by buying so many of the mortgage-backed securities these lenders produce, said Stuart Plesser, an equity analyst at Standard & Poor’s.”

“The housing market would suffer as well, he added. ‘A customer’s ability get a mortgage would be significantly impaired,’ Plesser said.”

“The worst may be ahead for home prices. Treasury Secretary Henry M. Paulson Jr. said yesterday that the housing market has not bottomed out. ‘There’s no evidence that is improving or bottoming, and as a matter of fact, I think the evidence would indicate that it is going to have further to run,’ Paulson said on CNBC.”

From Bloomberg. “Freddie Mac, the U.S. mortgage-finance company that lost a record $2 billion in the third quarter, may be downgraded by Moody’s Investors Service because damage from loan defaults could be worse than the ratings company expected.”

“Freddie Mac ‘may experience higher credit losses than Moody’s previous expectations,’ Moody’s analysts led by Brian L. Harris said in the report late yesterday. ‘In its review, Moody’s will focus on Freddie Mac’s asset quality and the potential that the company may experience an elevated level of credit charges over the near to medium term.’”

“U.S. home prices may fall 12 percent from their peak through 2010 in ‘the toughest housing correction in our lifetimes,’ Fannie Mae CEO Daniel Mudd said this week.”

“‘Credit stress is most likely to occur in the company’s guarantee portfolio,’ Moody’s said.”

“(Freddie Mac) ‘continues to have several options to manage its capital adequacy including raising additional capital, further reducing the dividend, or managing the size of its portfolio,’ Moody’s said.”

“Bank Hapoalim Ltd. became the first Israeli lender to report losses from the collapse of the U.S. subprime mortgage market as it reduced the value of structured investment vehicles and mortgage-backed bonds by $380 million.”

“It also wrote down $90 million related to mortgage securities, which won’t result in a charge.”

“Hapoalim said 98.8 percent of the mortgage-backed securities it owned had the highest AAA credit ratings. The investments were made through the bank’s offices in London and New York.”

The Street.com. “Huntington Bancshares was sliding to a 52-week low Thursday, after the bank said it expected a net loss primarily due to a $276 million charge, disclosed Jan. 3, tied to its relationship with subprime lender Franklin Credit Management.”

“The bank is establishing a $406 million provision for credit losses due to exposure to bad mortgages and is reducing net interest income by $18 million. Huntington also increased its provision for non-Franklin-related credit losses by $106 million.”

“Shares of WCI Communities plunged nearly 30% Wednesday as investors feared a bankruptcy at the Florida condo developer. The decline came after Standard & Poor’s issued a note maintaining its junk rating and negative outlook on the company. The agency pointed out that the homebuilder faces ‘acute liquidity challenges.’”

“‘These challenges include the need to negotiate more liberal terms governing a $700 million secured revolver and a $263 million secured bank loan, including a modification of the company’s fixed-charge covenant,’ S&P said in a note.”

The News Press. “‘If WCI is unable to obtain the amendment or comply with its terms, the lenders would have the right to exercise remedies specified in the loan agreements, including foreclosing on certain collateral and accelerating the maturity of the loans,’ the company said in a release.”

The Orange County Register. “Irvine-based homebuilder Standard Pacific Homes has sold its holdings in two Southwestern U.S. housing markets, saying that the company is adjusting its business ‘to changing market conditions.’”

“The company, which has seen a year of red ink, said it has sold its Tucson division and sold most of its excess land in San Antonio.”

“The land includes finished lots as well as lots awaiting subdivision approvals, according to a press release.Meanwhile, Standard Pacific also sold its Southern Arizona division based in Tucson to a local developer from which it acquired the properties in 2004, according to the Arizona Daily Star and other Arizona Web sites.”

“The Star reported that the deal consists of 700 vacant lots ready for home construction, plus 70 homes near or under construction.”

“Lennar Corp.’s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar.”

“That’s how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier.”

“As the U.S. housing slump drags into its third year, sellers will start cutting prices as much as it takes to find buyers, said Marcel Arsenault, a self-described ‘vulture investor.’ Properties will be available to buyers with the financial strength to ride out the slide. Now that a price has been set, all that’s left is the waiting.”

“‘We’re watching Denver, Phoenix, Austin and Tucson, but South Florida is our principal focus,’ said Arsenault. ‘If you’re a vulture, Florida has more carrion. This stuff is lying on the ground. It’s lost life. Some of the stuff in Phoenix is still breathing. Perhaps not for long.’”

“Arsenault said he and his three partners may buy a block of about 50 new, unsold condominiums in Orlando, Florida. They have a price in mind and they’re willing to wait until they get it: 40 cents on the dollar.”

“‘There’s a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall,’ he said.”

“Lawrence Gottesdiener, chairman of Northland Investment Corp pounced last week when Tarragon Corp. offered five apartment complexes in Florida and another in South Carolina for $156 million.”

“‘I could say I bought for 50 cents on the dollar of last year’s price, because I did, but I think that’s a little bit of hyperbole because last year’s price was last year,’ Gottesdiener said.”

“John Levy, a real estate investment banker in Richmond, Virginia, said he’s planning a joint venture with a national builder to buy communities abandoned by bankrupt developers in the middle of construction. ‘That’s where you can buy at the biggest discount,’ Levy said.”

“The next bubble to deflate may be Alan Greenspan’s reputation. Hailed as perhaps the greatest central banker who ever lived when he left the Federal Reserve in 2006, Greenspan is under attack from critics…for his handling of the 2000-2005 housing boom.”

“At stake is not only Greenspan’s legacy but also the future of policies he espoused during 18-1/2 years atop the central bank. Critics blame his aversion to regulation and reluctance to use interest rates to puncture asset bubbles for the boom in mortgage lending and house prices that has since gone bust, threatening to throw the economy into recession.”

“Economist Allen Sinai said the Fed’s experience is leading other central banks to rethink their approach to asset bubbles.”

“‘There is a growing body of thinking in central banking that one should not let these bubbles run and allow them to burst,’ he said. ‘They should lean against them.’”

“In an interview, Greenspan said such criticism ignores limits on what regulation and monetary policy can achieve. Greenspan said that, while the Fed’s bank examiners were hard at work during the mortgage-lending boom, ‘we have to be realistic about what regulators can and cannot do.’”

“‘It is extremely rare to uncover fraud other than through whistle-blowers,’ he said. ‘You don’t get at it through internal audits, you don’t get it through outside audits and you certainly don’t get it through bank examinations.’”

The Rocky Mountain News. “Last week, a woman called me and asked me for the number of the Colorado Foreclosure Hotline. She told me she wanted the number for her neighbor, not herself. She then asked me if there were any counselors who spoke Spanish at the hotline, as her neighbors don’t speak much English. I assured her there are bilingual counselors at the hotline.”

“Then she told me what really was the crux of her call. The couple next door had given a false Social Security number to the lender on their mortgage application. She said although they are hard-working, good citizens, she thinks they are in this country illegally.”

“They are understandably worried that their fraud will be discovered and there would be no help for them.” “In addition to the prospect of losing their home, they fear being deported. I said I didn’t think that would happen. But honestly, I told her I thought they could be out of luck as far as getting help from their lender, since they were guilty of mortgage fraud.”

“After I got off the phone with her, I wondered if I had given her the correct advice, so I called Zach Urban. Urban runs the Colorado Foreclosure Hotline.”

“I asked Urban if the homeowners called their lender, and the lender discovered the phony Social Security number, would they turn the borrowers over to the Immigration and Naturalization Service, or some other agency?”

“‘I have not seen any mortgage company that has any interaction with the INS,’ Urban told me. ‘And we certainly have no interaction with the INS. From our perspective, we are not police officers; we’re housing counselors.’”

“But clearly it is a sticky issue for the counselors. ‘They have presented false information,’ Urban said. ‘As with any type of fraud, they have been dishonest from the start. What gets to the heart of the issue is that it may not have seemed like fraud when they lied, or maybe it seemed so easy, or maybe it seemed everyone was doing at the time, when there were such lax underwriting standards.’”

The Herald Tribune reports from Florida. “When the market goes south, the deals come out. Nathan Benderson is hoping to jump-start sales at his Port Charlotte retirement community by offering massive rebates that could top $100,000. ‘What we’re doing, nobody else can beat it,’ Benderson said. ‘Things being the way they are, we wanted to do something that would get people’s attention.’”

“Benderson has about 600 of an eventual 1,000 homes built at Kings Gate. The development was humming along like clockwork during the boom. Retirees and investors could not snap up the properties fast enough, some at prices topping $400,000.”

“But when the bottom fell out, the flood of potential buyers dried to a trickle.”

“‘We have seen all kinds of things in the past year,’ said Jack McCabe, a Florida real estate analyst. ‘I’m surprised they’re not giving away ponies at some places.’”

“‘The reality is that people can afford only so much for housing, and that’s where prices have to be’ or a ‘huge inventory’ can build up, McCabe said. ‘We’re coming back now from the delusional, hallucinogenic stage of the boom.’”

“One reason for the bleak landscape is that the local economy has been structured almost entirely around real estate, said Dennis Black, an appraiser who works in Charlotte County. When the bubble burst, the jobs started drying up.”

“‘We are a one trick pony,’ Black said. ‘We just don’t have anything else to fall back on right now.’”

“In another sign of the turbulence in the banking industry, Stonegate Bank has decided to pull out of Sarasota less than four months after opening. Six of the bank’s eight local employees already have been let go, including market President Steve Putnam.”

“‘I would chalk it up to the poor economic conditions that we’re in here,’ Putnam said Wednesday.”

“Banks doing business in Sarasota, Manatee and Charlotte counties have been battered by the real estate slump. Profits are down, bad loans are rising, and many banks are tightening credit lines. ‘It’s definitely a sign of the economic times that we’re in,’ Bank of Commerce CEO Charlie Murphy said of the closing.”

“Lawmakers face an additional $2 billion budget shortfall and a plummet in housing prices not seen since the Great Depression. Lawmakers already cut about $1 billion in October. House budget chairman Ray Sansom told lawmakers in a memo Wednesday that the budget will have to be cut by an additional $2 billion this year.”

“Amy Baker, the coordinator of the Office of Economic and Demographic Research, said that the state’s excess supply of homes is more than 200,000 and that it may take nearly two years simply to sell the excess homes. She said prices are expected to continue falling into 2009, with a total reduction of home values in Florida likely to be greater than the 15 percent expected nationally.”

The News Press. “Call it the lure of the shoreline: Properties on or near the beach still sell, even in a slower market. The number of sales and sales prices have dropped a bit, but the activity is still steady, Realtors say. And deals abound.”

“Clay Cason of Florida Gulf Coast Realty had two closings in December with another one in the works. One of his clients paid $1.225 million for a three-bedroom, two-bath house on Fort Myers Beach. The 1950s-era house is on the water and has an assessed value of more than $1.6 million.”

“‘Right now you’re looking at 2002, 2003 prices,’ Realtor Isabella Wells said. ‘Homes priced $2 million to $1.5 million still sell, but what really sells the most are the properties from $250,000 to $400,000. Those were in the $500,000 or $600,000 range two year ago.’”

The St Petersburg Times. “Tony Polito, preparing to deliver a not-so-healthy housing report to Tampa Bay area builders, likened his role to that of a doctor about to deliver a painful shot to the patient’s backside.”

“‘I was going to play the funeral march,’ Polito joked as he spoke Tuesday at the yearly economic forecast of the Tampa Bay Builders Association.”

“With a healthy balance between supply and demand about a year away, Polito urged builders to create a sense of urgency with the home-buying public. ‘For the home market, it’s all about undecided buyers,’ said Polito.”

“Polito’s report was a mixed bag. The region suffers from a glut of vacant developed home lots. A healthy supply would last builders 18 to 24 months. We’ve got a 40-month supply.”

“Builders compete with acres of new homes bought by investors during the boom. And home prices have outstripped incomes. In 2002, 77 percent of new homes sold for less than $200,000. In 2007, only 21 percent of new homes fell into that category.”

“‘Sales and marketing are the two key words,’ he said. ‘It’s a matter of exciting the buyer.’”

The Miami Herald. “In 2007…the Club at Brickell Bay ranked first among condominiums in Miami-Dade and Broward counties with the most units in foreclosure. Borrowers owe lenders more than $42 million.”

“As the region’s housing market sputters into the new year, a collection of largely unoccupied new towers are straining under hundreds of millions of dollars in defaulted mortgages. In the 20 buildings in Miami-Dade and Broward counties with the largest numbers of units in foreclosure, loans in default totaled more than $271.8 million, according to a Bal Harbour real estate consulting firm.”

“For the 36-story Vue at Brickell, its 65 units in foreclosure represented 20 percent of the complex. Two blocks away, the deluxe Jade Residences at Brickell Bay topped the list with highest dollar value of mortgage defaults of $60.7 million.”

“Widespread mortgage fraud, involving inflated appraisals and faux buyers, also led to the dizzying rise in defaults. ‘These buildings are notorious because the fraud was so prevalent,’ said real estate broker Lucas Lechuga.”

“The Club at Brickell Bay had 128 units listed for sale in the South Florida MLS on Monday. Thirty of those were listed as short sales. An 818 square-foot unit, which sold in June of 2006 for $430,000, was listed Monday for $220,000, according to Lechuga.”

“Lisa Magill, a lawyer (who) represents community associations, said she knew of associations struggling to cover expenses because more than 10 percent of their residents were behind on fees.”

“‘In September, we started recommending associations include a line item in their budgets to account for anticipated bad debt from noncontributing residents,’ Magill said.”

“Earlier this year, the Club at Brickell Bay lost its cable and Internet service because the condo association fell behind on payments. That doesn’t worry Alex Fornet, who has lived at The Club for two years. He said he’s there for the long haul.”

“‘Hopefully, when we get all these issues with the foreclosures we’ll prosper in the end and profit from our investments,’ Fornet said. ‘This is Manhattan, it’s the future Manhattan, so we’re all sitting real good.’”

The Daily Business Review. “When Shannon Ford moved from New York early last year, she began looking around for a condo to buy in downtown Miami. She…soon learned about the potential cost-saving benefits of auctions.”

“Last month she raised her bidding card and, at $185,000, became the top bidder for a one-bedroom condo in the Isola Island Residences on Brickell Key off Brickell Avenue. The closing is scheduled for later this month.”

“An increasing number of South Floridians are losing their homes as lenders recalculate adjustable rate mortgages. More than 5,300 foreclosure filings were recorded in December, for a fourth-quarter total of 14,527, according to Daily Business Review data. The region recorded less than 12,000 foreclosures in both the first and second quarters of 2007.”

“Veteran auctioneer Martin Higgenbotham of Lakeland, recalls March 1983 when he spent days in a tent trying to auction 225 condos at Biscayne Cove, a high-rise building overlooking Biscayne Bay in North Miami Beach. Units were sold at discounts of 30 to 45 cents on the dollar, he said last week.”

“‘I have been through six economic downturns since 1959 and it is always the same,’ he said. ‘This time, too, you will get 30 percent to 45 percent discount of the retail price.’”

The Palm Beach Post. “As organizers ready for this year’s Stuart Boat Show, area dealers are bringing in boats, putting up tents and holding their breath. ‘All you can do is hope,’ said Kevin Lindsay, owner of Lindsay Marine in Stuart. ‘The boat business right now, for a lot of guys, is really tough.’”

“‘Right now, you’re not going to have the kind of sales you had two or three years ago when everyone thought their house was worth a half-million dollars,’ said Lindsay.”

“‘Nobody’s selling anything,’ said George Field, president of the marine industries association. ‘Housing bubble prices, that soaked up a lot of boat money. There isn’t that much discretionary money around. The boat business has gone to sleep.’”

The Orlando Sentinel. “Amid the growing mortgage-debt crisis, personal bankruptcies nearly doubled in Metro Orlando last year, according to court figures released this week.”

“‘I have doctors, Realtors, mortgage brokers and all kinds of people who had rental properties who are in trouble now,’ said Andrew Baron, a consumer-bankruptcy lawyer in Orlando. ‘These are people who never dreamed they’d be facing this kind of situation. And they’ll resist until the bitter end before they file bankruptcy.’”

“Of the district’s largest metro areas, Orlando topped Tampa (77.6 percent) and Jacksonville (43.7 percent) in the pace of increase. Overall, the three divisions recorded 26,424 bankruptcy cases, up 72.7 percent over the previous year.”

“The rich as well as the not-so-rich…bought second homes (and sometimes even more) with the intent to quickly resell, or ‘flip,’ them at a profit. When the housing market collapsed, they could find no buyer, leaving them strapped with debt, falling prices and little hope of refinancing.”

“‘We know of a lot of folks who own more properties now than they ever thought they’d still have,’ said Dan Moisand, a certified financial planner in Maitland. ‘There are many stories out there about flippers who are stuck all over the place.’”

“‘It is not exactly a rarity that well-educated, high-income professionals will find themselves in a financial bind,’ he said. ‘Just because someone has made good money doesn’t mean they know what to do with it. They may be doctors, lawyers or whatever, but that doesn’t make them a good financial manager.’”

“Another prominent feature in the latest wave of bankruptcy is youth, according to Rosanna Jacobsen, a financial-literacy advocate and local executive with Colonial Bank.”

“‘You just see more people in their 20s and 30s going into bankruptcy these days,’ said Jacobsen. ‘Too many young people are uneducated and unprepared to manage money, and that’s why we’re seeing more of them in debt and in bankruptcy.’”

The News Journal. “The worst is over for the Volusia-Flagler real estate slump, but prices will continue to stagnate for three more years, an economist predicts. Hank Fishkind said his analysis found ‘very little price erosion’ occurred in most markets last year.”

“‘Housing prices aren’t like the price of barbecue grills at Wal-Mart where you simply mark them down at the end of the summer,’ he said. ‘People are very reluctant or unable to cut the price of their homes.’”

“He said the Census has estimated the state grew by 195,000, while his own estimate is 260,000, but demographers at the University of Florida have put the growth at 600,000.”

“‘They based their numbers on building permits, which shot up last year,’ Fishkind said. ‘But a lot of those houses built are sitting empty.’”

The Christian Science Monitor. “After three years showing houses in Atlanta’s hilly suburbs, Dee McMahon is finished with real estate. Yanking up her custom-made ‘For Sale’ signs in her North Lake neighborhood rattled her ego, she admits. But when Ms. McMahon closed her final sale in late November, the mother of two felt a swell of relief.”

“‘Now I can finally get my own house back together,’ she says. ‘I’m nervous about the future, but I feel happy.’”

“McMahon is one of thousands of real estate agents across the U. S. wandering with mixed emotions and uncertain prospects through the debris of a real estate gold rush.”

“As many train for new careers, return to old ones, or wait tables until prices rebound, the plight of the real estate agent reveals the human dimension of how loose lending, raw opportunity, and self-determination produced a housing bust that has stunned the U.S. economy.”

“‘They’ve tasted success and big money, and now their standard of living has been rocked and reality has set in,’ says John Baen, a real estate professor at the University of North Texas in Denton. ‘The whole [economy] has been built on real estate. When the music stops, what is left?’”

“Evidence is growing that agents, especially in hard-hit markets like Florida, California, and Georgia, are closing up shop in large numbers, experts say.”

“In Cape Coral, Fla., where only 30 percent of agents sold even a single home last year, real estate agents are ‘dropping out’ daily, says local realtor Ginette Young.”

“In Georgia, realty ranks had swelled to 48,000 at the peak of the market. ‘There’s a lot of money being spent [on real estate classes] teaching agents how to waste a year of their life,’ says Atlanta agent Sandy Koza.”

“‘It’s a gold-rush mentality,’ says Michael Davis, an economist at Southern Methodist University.”

“He has been struck by how many agents, brokers, and investors, acting against conventional wisdom of portfolio management, converted large percentages of cash holdings into only a single and somewhat risky investment: property.”

“‘I don’t know whether they’re ignorant or optimistic, perhaps a little of both,’ says Dr. Davis.”

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