The Housing Bubble

The Union Tribune reports from California. “San Diego County housing prices last month tumbled 13.1 percent from those in December 2006, the biggest drop in 20 years of record keeping, DataQuick reported Monday. The overall median price for all homes stood at $430,000 in December, $10,000 less than the price in November and $65,000 less than it was in December 2006. The latest price represented a 16.9 percent drop from the county’s all-time peak of $517,500 in November 2005 and the lowest since March 2004.”

“‘We can’t say home values have declined 13.1 percent,’ said DataQuick analyst John Karevoll. ‘The numbers are probably more reflective of the types of homes that are selling and the types of loans available for those buying. There’s an awful lot of people buying homes who need jumbo financing and are waiting it out.’”

The Daily Breeze. “As California and much of the nation see home prices drop, the South Bay Association of Realtors today will release local statistics that appear to buck that trend.”

“The South Bay’s median price for a single-family home in December was $741,500, or 14.3 percent more than a year earlier, according to the group. The statistics include new and resold homes.”

“The median price increase came despite a 48 percent annual drop in home sales in December. ‘There are areas in the South Bay that aren’t so strong where we’re seeing definite price decreases,’ said Carol Olney, president of the South Bay Realtors group.”

“The South Bay’s lower-income areas were more vulnerable to the economy’s decline and problems with subprime loans. As a result, fewer homes were sold in those areas, Olney said. That allowed home sales in pricier parts to push up the median price. ‘That skews the picture a little,’ she conceded.”

“The South Bay Realtors group did not release sales or price figures for individual cities.”

“‘If somebody is in a good, stable income situation with great credit, there are some great deals you can find because you’re not competing with 19 other people,’ Olney said. ‘In some ways, for buyers, it’s very positive.’”

“Realtor Adolph James said that the South Bay’s positive housing numbers likely are caused by a relatively large number of newly built homes on the market. Those homes tend to sell for more than resold properties. ‘I think the properties that are selling are a lot of new stuff you typically don’t see in the market,’ said James in Manhattan Beach.”

“‘One of the things that happened in the market is everyone became a builder, speculator and flipper. And in our cities, there’s a lot of new property just sitting down. The last few years, building has been crazy,’ he said.”

“James said he has seen South Bay home prices drop across the board. ‘In my market, I see houses are softer,’ James said. ‘I see less buyers and prices are softening.’”

The Daily Bulletin. “Construction of four major condominium developments in the city has been delayed because of concerns over the uncertain housing market.”

“Construction of 126 condos at the Old School House on Foothill Boulevard was set to begin in six to eight months, but that work schedule is now in question, said Harry Wu, owner of Claremont L.P., the developer.”

“‘We haven’t decided exactly what we should do,’ Wu said. ‘The market is certainly slow, financing is extremely difficult. It’s typically not a good starting time.’”

“Brian Desatnik, city housing and redevelopment manager, said that in Claremont, prices for condos on the market have not fallen as much as in the region as a whole. The problem developers are having, he said, is that units are selling slowly.”

“‘I’ve heard they’re only moving an average of two or three units a month,’ Desatnik said. ‘You’re building units and not being able to sell them quick enough.’”

“Desatnik said he ‘can’t venture to guess’ when the projects would move forward. In total, the four developments include about 300 units. ‘It depends what happens in the market,’ Desatnik said. ‘They’re all evaluating the market. I just know that they’re all on hold right now.’”

The Reporter. “City officials in Vacaville’s Housing Counseling Program, which is a part of the Department of Housing and Redevelopment, have been providing one-on-one counseling to homeowners. In 2007, the city assisted 110 homeowners on exploring pre-foreclosure options. Unfortunately, they weren’t able to help everyone keep their home, said Ann Putney, program administrator.”

“‘A lot of times a mortgage company won’t work with you until you miss a payment,’ Putney said. ‘Unfortunately, a lot of people area coming to us after the foreclosure has been filed, and it’s already too late.’”

“After the workshop, participants will be invited to schedule one-on-one advice sessions with counselors at both agencies. That is the most important part, said Lark Ferrell, Housing Project Manager, Community Development, Fairfield.”

“‘They also recommend looking at your budget to say, is it really the right decision to keep the house, or is it better to just step away?’ Ferrell said.”

“Their last workshop drew 150 participants. ‘In a way, it was good news, because we know that we got the word out,’ Ferrell said. ‘But really, it’s bad news, because it means that more people are dealing with those issues.’”

The Recordnet. “This winter Laura Acosta’s finances have gone cold. Acosta’s work hours have been reduced at the tortilla factory, while her employer adjusts to reduced product demand. Also, her husband - a truck unloader - is working fewer days. In addition, their adjustable rate mortgage is scheduled to rise this year.”

“‘Years before, we were able to pay our mortgage. Today, you can’t make it,’ 37-year-old Acosta, who speaks limited English, said in Spanish. ‘We’re constantly worried about how we’re going to pay our pending bills. There’s no way to save money.’”

“Countywide, nearly 3,000 default notices were issued during the third quarter of 2007, a 230 percent increase from 898 notices in the third quarter of 2006, according to DataQuick.”

“Acosta is hoping to not join the default group. She was advised by a Golden 1 Credit Union representative to refinance with a fixed-rate loan. ‘The only thing I could do is refinance. The advice was very helpful,’ Acosta said.”

“Can’t make your auto payment? Light your car on fire, and tell the insurance company you were a victim of theft.”

“That’s what a local prosecutor says he’s seeing more of these days. A symptom of the overall economy - a troubled housing market and high gas prices - auto arsons in San Joaquin County have doubled in the past three years, according to the state Department of Insurance.”

“State figures show the numbers rose by a third in California, while in San Joaquin County, they more than doubled from 10 in 2005 to 23 in 2007.”

“These days, people in financial straits who torch their cars are often caught in the subprime home loan debacle, and on top of that, they have to pay $3 for a gallon of gas, said Daniel Bale, national director for special investigations at Mercury Insurance Group.”

“‘It’s not unusual for investigators to find the owner of the vehicle with burn marks on his arms,’ Bale said. ‘The dumbest criminal is the easiest to catch.’”

The Voice of San Diego. “The red neon letters spell EL CORTEZ when they’re all working, launching a beacon from the stately white building atop its namesake hill on the edge of downtown San Diego. But when the letters are on the fritz, as they are now, they flash and blink, muddling the sign’s message and portending another: all is not right with the landmark.”

“The building, now spliced into 85 residential condos, some commercial and office space, and the restored Don Room for entertaining, is now facing a mutiny from within and the external pressures of the slumping housing market.”

“The building is mired in litigation. And of the five units in the building currently for sale, four are being sold for about half of their original selling price by lenders who repossessed them. The other is listed for less than is owed on the mortgage.”

“Take unit 405, a two-bedroom, two-bath condo that sold in November 2005 for $625,000. It’s been repossessed by the lender and is now listed for sale with an asking price of $290,000 — a 54 percent price reduction.”

“Another bank-owned unit that once sold for $405,000 is now listed at $199,000. Another one, No. 304, sold in February 2006 for $699,250. Now it’s listed as a bank-owned sale for $294,500 — a 58 percent difference.”

“With a loan from the city of San Diego’s redevelopment arm in 1999, developers Peter Janopaul and Anthony Block fixed up the old building for rent as luxury apartments. After a few years, they paid back the loan and converted the apartments for sale as condominiums.”

“The units came on the market right at the peak of an unprecedented, lengthy boom in San Diego County’s housing market. The deals closed in late 2004 and early 2005, as investors bought pieces of the distinctive downtown building.”

“But the market in San Diego turned, and condo owners trying to sell units in the El Cortez have not found immunity from slumping sales and prices. And falling prices have left some who used unconventional financing in foreclosure.”

“The homeowners say the litigation is necessary to make the building what they believed it would be when they bought it. They believe the values will come back.”

“Homeowners’ association VP Joe Roth, whose bathroom sink fell off his wall once due to the construction problems, said he, too, has a happy ending in sight. ‘I’m optimistic,’ he said. ‘When you’re on the side of right, all you need is a big flashlight.’”

The Sierra Vista Herald reports from Arizona. “Despite the perception of the current real estate market, a decade into the future, people will look back and kick themselves for not buying a home this year. So says Lawrence Yun, chief economist of the National Association of Realtors, speaking at the Tucson Association of Realtors’ 2008 Forecast seminar. ‘This is a great market to buy in and a great time to buy,’ Yun said. ‘There seems to be an irrational pessimistic outlook on the market fed by negative stories from the media.’”

“The audience of about 325 real estate agents, brokers, developers and builders gave a loud cheer and applause.”

“‘It is a fact that (2007) is the first time home appreciation was negative since the Great Depression,’ he said. ‘But considering in Tucson over this boom we saw 50 percent appreciation, then no growth in 2006 and what we figure to be about 2 percent depreciation of values in 2007, it is like taking 50 steps forward and two steps back for most homeowners. Those who bought in the last year or two didn’t fare as well.”

“Yun said there was no way that growth of that size was going to be sustainable for longer than it did.”

“‘We need to get rid of the excess,’ he said. ‘But when reports come out that the Fed might cut rates in January, and then more in March and maybe in May too, people are going to wait and wait to buy. We are fulfilling our own prophesy.’”

“Realtors just have to get back to work, said Tucson Association of Realtors President Tom Sloyan. ‘We are not in a down year,’ he said. ‘We are in a normal year and just have to get back to work. The free ride is over.’”

The Arizona Daily Star. “December proved to be 2007’s slowest month for real estate sales, according to figures released today by the Tucson Association of Realtors MLS. For the year, sales totaled 12,109, down about 18 percent from 2006.”

“The number of active listings in December, 8,708, was up slightly from the same month a year ago.”

From KVOA News 4. “You’ve probably seen the ‘For Sale’ signs in front yard for months on end as homeowners lower their prices. That has been the real estate story here in Tucson for the past year.”

“Jeff Reed has watched the Tucson housing market go through different phases. ‘Basically for the past 15 years, I’ve been buying, fixing, and reselling homes in Tucson.’ Reed says these days, ‘It’s just been really slow trying to get a house closed. They’re just no showings. I’ve got a house for sale in Green Valley and I’m lucky if I get one person to go through it a month.’”

The Arizona Republic. “The Valley’s overall housing market ended 2007 listlessly, and the Southeast Valley wasn’t any spunkier.”

“Chandler and Tempe held up best, both seeing their median home price decline 3 percent. Gilbert and Ahwatukee fared worst among major Southeast Valley communities, both seeing a decline of about 10 percent. Mesa took the biggest dip in the number of homes sold, 26 percent fewer in 2007 than 2006.”

“‘There’s a feeling that the market hasn’t bottomed,” said Jay Butler, director of Realty Studies at Arizona State University. ‘It’s sort of the prom date (dilemma): ‘I’ll wait to say yes and maybe I’ll get a better looking girl down the line.’ But you usually don’t.’”

“Last month was the weakest for sales in nearly a decade. Valley-wide, 3,290 homes were sold compared with 4,620 in December 2006 and 3,240 in December 1999.”

“Butler predicted sales volumes and prices will continue to fall in 2008 but stabilize in 2009. ‘People are always asking me when the market is going to recover,’ he said. ‘The question I ask them is, ‘What do you mean by recover?’”

“Investors drove the Valley real estate market to record levels in 2005. Many believe the housing bubble was bound to burst and return to a more normal and sustainable level.”

“‘Really, the market, if it were following its historical norm, would be in the low 70,000 (resale homes sold a year) instead of being driven by investors looking for their fortune and people getting caught up in the hypermarket,’ Butler said.”

“The median price of an existing metro-Phoenix home tumbled to $232,000 in December, an 11 percent drop from where prices were at the beginning of 2007.”

“December’s median home price was the lowest since the spring of 2005. At the time, the speculator-driven housing boom was in full swing and so were bidding wars on Valley homes.”

“Experts from the many other parts of the market besides housing convened last week at the Institute of Real Estate Management/Certified Commercial Investment Member economic forecast for Phoenix.”

“‘The mood about all of the market is cautious and guarded,’ said Stanley Paul Cook, the keynote speaker. ‘Vacancies across the board from office to apartments are going to rise this year, and sales prices on all those properties are bound to head down.’”

The Arizona Daily Sun. “Despite a claim against it for $1.8 million in unpaid bills, one of Flagstaff’s biggest developments expects to begin building its first homes in March. That’s according to Clem Stubstad, a spokesman for Presidio in the Pines, which has city approval for 900 housing units…in west Flagstaff.”

“He said a slump in the housing market led to ‘a cash flow hiccup’ that brought construction to a standstill. The planned groundbreaking had been scheduled for 18 months ago.”

“But a former contractor, A. Miner Contracting, has brought a $1.8 million lawsuit against the primary developers of the project, Premiere Acquisitions LLC and Luxury Lofts LLC, saying it has not been paid in full.”

“He said he was paid about $600,000 for some of the initial work, but he canceled the contract last August after working for months without payment.”

“‘As the months went on, I realized I wasn’t getting paid,’ he said. ‘We have been going through so many months of ‘We’re going to have the money on Friday.’”

“Another Presidio-related lawsuit filed in 2005 is still active. A total of 22 people who bought into Presidio in the Pines filed a lawsuit against the builder, claiming the builder was reneging on their contracts and purchase prices.”

The News Herald from Arizona. “The ailing housing market ended a painful year with a modest increase in building activity. (Lake Havasu City) issued six single-family building permits in December, the latest in a string of single-digit monthly totals that became commonplace in the just-ended year. The total was up compared to the month before, when the city issued only three single-family building permits.”

“Even with the small increase, 2007 was still the second-lowest year on record going back to 1980.”

“‘This is about as low as you can get,’ said Bud Schulz, executive director of the Colorado River Building Industry Association. ‘On the positive side, there’s no place to go but up.’”

“Mark Durham, president of the CRBIA, said there was a combination of factors. ‘The lenders are tightened up. They’re reviewing their applications a lot more closely,’ Durham said. ‘Before, you could buy a house for virtually nothing down. Now they’re making sure that you qualify and can make your payments.’”

The Review Journal from Nevada. “The Southern Nevada housing market is continuously evolving. Valley home prices soared in 2005 and sales were recorded in record numbers. Since then, the Southern Nevada housing market has swung in the opposite direction and become a buyer’s market.”

“With more than 22,000 houses listed for sale on the MLS in December, an influx of foreclosures, a slowing sales pace and tightening of the subprime mortgage lending market, prices of both new and existing homes have decreased.”

“The Greater Las Vegas Association of Realtors’ most recent sales statistics for December 2007 report the median sales price of a single-family, detached, resale house was $260,000, a 15 percent decrease compared to December 2006.”

“The median sales price of an attached, resale condominium/townhome was $185,000, a 5 percent price reduction from the previous December. Of the 879 houses sold in December, 228 were repossessed.”

“Devin Reiss, 2007 GLVAR president, described the lowering of home prices as part of a housing cycle. ‘Definitely housing has become more affordable. We’ve gotten back to an affordable price range now. Certainly, we (the GLVAR) have been stressing that this is an opportune time to buy,’ Reiss said.”

“‘This is part of the housing cycle. It is an opportunity cycle right now that buyers should really be capitalizing on before it’s too late and they are priced out of their price range again,’ he said.”

“Sapphire Springs by Richmond American (offered) a 1,136-square-foot, two-bedroom, 21/2-bath home in the northern valley for $153,990. In February 2007, SalesTraq reported the same size of floor plan available at that neighborhood for $198,990. The price reduction in just under one year amounts to 22.6 percent.”

“Encantos by Storybook Homes…in the eastern valley…listed a 1,271-square-foot, two-bedroom, 11/2-bath house for $169,965; in February 2007, its lowest-priced floor plan was a 1,199-square-foot home for $199,240.”

“Rumors have circulated that sales prices are not necessarily set in stone at some new-home neighborhoods.”

“‘I’ve heard quite a few stories with home prices (at new-home neighborhoods) being negotiable…It would be difficult to call it across the board, but I’ve heard that some builders have been negotiable with their prices. It varies. It certainly doesn’t hurt to ask,’ Reiss said.”

“D.R. Horton Homes, one of the largest new-home builders in the country, recently announced to the Las Vegas brokerage community the release of 500 completed homes. Located in 40 neighborhoods throughout the Las Vegas Valley, these homes are available for immediate purchase and move-in.”

“‘Our strategy is to be extremely aggressive in 2008,’ explains Jeff Ward, director of sales for D.R. Horton.”

“The builder has recently lowered the sales price of the 2350 floor plan to below $140 per square foot in some valley locations.”

“Themed around the big game, Super Buy Saturday will illuminate the entire array of the completed homes recently released for sale, and the unprecedented pricing now published on the builder’s Web site, Ward said. Football legend William ‘The Refrigerator’ Perry will attend the event and be on hand to autograph memorabilia and take photographs with sports fans.”

“With Meritage Homes offering savings of up to $120,000 and interest rates holding low, the time to purchase a home is now, according to Robb Beville, the company’s Las Vegas division president.”

“‘The home-building industry is at a rare point in its history,’ Beville said. ‘As a rule, mortgage rates are usually down when home prices are high, or mortgage rates are low and housing prices are higher. They rarely happen at the same time.’”

“‘Our goal is firm in 2008, to provide the right home, at the right price, in the right location,’ he said.”

In Business Las Vegas from Nevada. “Las Vegas home prices continued to plummet in December, falling to their lowest level since April 2004, according to statistics released this week by the Greater Las Vegas Association of Realtors.”

“The median price of homes on the Multiple Listing Service sold in December was $260,000, down $13,500 or 5 percent from November. Prices are down 15 percent from December 2006, the Realtors group reported. Most listings are existing homes.”

“Prices were as high as $315,000 in June 2006, meaning prices have fallen more than 17 percent from that peak.”

“Greater Las Vegas Association of Realtors President Patty Kelley said that December may not be a true reflection of the marketplace because of a large number of homes that are vacant and owned by investors, banks and other lenders.”

“They sold at deeply discounted prices to get their properties off the books, creating an artificially low median price, she said. Nearly one-third of the 879 homes sold in the region in December were either repossessed or short sales, Kelley said.”

“‘I believe that percentage may actually be closer to 40 percent of all home sales since banks are under enormous pressure to get these properties off their books,’ Kelley said.”

“Despite the drop in prices, buyers aren’t scooping up the houses. The 879 homes sold in December were 9.2 percent below November and 47 percent below December 2006. ‘People buy on the way up, but they don’t buy on the way down,’ said Larry Murphy, president of SalesTraq. ‘They are waiting for it to hit the bottom.’”

“SalesTraq reports 51 percent of the listings on Jan. 1 were vacant homes. Given the limited sales in December, the inventory remains at 21 months despite a reduction in new listings, Murphy said.”

The Spectrum from Utah. “Jaime Bundy has waited on the sidelines of St. George’s real estate market since May. She and her husband…decided to wait and see if they could get a better deal for a four- to five-bedroom home.”

“Her Realtor, Natalie Larsen, showed Bundy one home priced at $279,000. Just months ago the same homeowners were asking for $348,000, Larsen said.”

“The average home in Washington County in the third quarter of 2007 sold for $322,687, down from $351,295 in the third quarter of 2006, according to the Utah Board of Realtors Web site.”

“In Iron County, the average home price was $210,939 in the third quarter of 2007. In the third quarter of 2006, the average home sold for $247,096, according to the site.”

“The house Bundy inspected was built in 2005. Back then, St. George’s real estate market was a whole different game. ‘It was crazy,’ Larsen said. ‘You would be standing in a house, and by the time you got back to the office, it would already have an accepted offer.’”

“Vardell Curtis, CEO for the Washington County Board of Realtors, said there was a home-buying frenzy between the first quarter of 2005 and the first quarter of 2006.”

“A larger amount of investors came to the area and bought up houses on the market, said Lori Chapman, president of Washington County Board of Realtors. The increase in demand led to a smaller supply, which created a 38.4 percent increase in home appreciation, Curtis said.”

“To help feed the frenzy, many builders began developing more housing neighborhoods, Chapman said. Building new housing projects takes time. Chapman said by the time some of the new developments were finished, the housing frenzy had slowed.”

“Mortgage rates began to readjust, as well, and new foreclosures and quick sales also added to the market’s supply. SGI mortgage broker Scott Gibson said an average of 100 homes in Washington County are given notices of default each month.”

“In November, there were 27 months’ worth of inventory for sale in Washington County, Curtis said. Curtis said some sellers are frustrated right now because no one appears to be interested in their home. But the reality for many sellers is that the home just isn’t priced to sell in the current market.”

“‘The ship of 2005 has sailed,’ Curtis said during a presentation at the Washington County Economic Summit. ‘If your home is priced competitively, it’s going to sell.’”

“Jaime Bundy is what Chapman would consider an educated buyer who does her homework. On foreclosed homes, Bundy said she researches the remainder of the home loan so she can better estimate a fair price. And after eight months of searching, Bundy said she’s ready to make the plunge.”

“‘I’m so ready to buy,’ she said.”

“Curtis said he expects more people like the Bundys to begin purchasing homes in the near future, he said. Larsen said she agreed. She said the market is ‘just evening itself out.’”

“‘Right now, we’re having a moment, but it will be OK,’ she said.”

Some housing bubble news from Wall Street and Washington. Associated Press, “Sovereign Bancorp Inc. said Monday it expects to take about $1.76 billion in charges in the fourth quarter related to a range of issues, from goodwill impairments to rising loan-loss provisions. The Philadelphia-based bank will record a non-cash impairment charge of $180 million on the ownership of Fannie Mae and Freddie Mac preferred stock.”

“The impairment, loss provisions and losses are all tied to the continued deterioration of the housing market and rising defaults among home loans.”

“M&T Bank Corp. said Monday fourth-quarter earnings plummeted…due to collateralized debt obligation losses, Visa litigation and provisions for credit losses.”

“M&T Bank took a $127 million charge in the fourth quarter as it cut the value of its collateralized debt obligation holdings to $4.4 million.”

“M&T Bank also ramped up its loss reserves to cover rising mortgage defaults. M&T Bank set aside $101 million in the fourth quarter for losses. Net charge-offs, loans written off as not being repaid, were $53 million in the quarter.”

“‘While it is likely that weakness in this sector will continue for some time, we believe that our exposure to residential real estate has been appropriately provided for,’ Rene F. Jones, M&T Bank’s chief financial officer, said in a statement.”

“Friedman Billings Ramsey Group Inc.’s mortgage lending arm, First NLC Financial Services LLC, will file for bankruptcy protection and plans to liquidate because demand among investors for home loans has vanished, the investment bank said Monday.”

“First NLC Financial Services LLC, which FBR bought in February 2005 for $100.8 million, plans to file for Chapter 11 bankruptcy protection.”

“FNLC’s business model was to issue ’subprime’ mortgages, or home loans to people with spotty credit histories, and sell the loans to banks and institutional investors.”

From Bloomberg. “UBS AG, Europe’s biggest bank by assets, is offering to sell notes at yield premiums seven times higher than on securities issued in May, at the beginning of the subprime mortgage market collapse.”

“Investors are charging the most in at least nine years to lend to banks and financial companies because of concern that writedowns related to subprime mortgage losses will crimp profits through 2008, Merrill Lynch & Co. indexes show.”

The LA Times. “The no-worries lending that inflated the housing bubble is resulting in a flood of soured option-ARM loans. Numbers from industry trackers suggest that these borrowers…are starting to create a second tide of defaults for lenders swamped by the meltdown in sub-prime loans made to people with bad credit or overstretched finances.”

“‘This is not a sub-prime crisis. This is a stated income crisis,’ said Robert Simpson, CEO of Investors Mortgage Asset Recovery Co. in Irvine, which works with lenders, insurers and investors to recover losses related to mortgage fraud.”

“The more recent loans appear to be faring the worst, reaffirming the conclusion that lending standards had become overly lax throughout the mortgage industry in the middle of this decade, as competition for fewer good loans intensified amid skyrocketing home prices.”

“‘It is astonishing how fast the credit deterioration has occurred,’ said Paul Miller, an analyst with Friedman, Billings, Ramsey & Co. who follows the savings and loans that specialize in these mortgages. ‘It took me and everybody else by surprise.’”

“In California, the 60-day delinquency figure for securitized 2005 option ARMs was 9.5%, compared with only 2.1% of the option ARMs from 2003.”

“The Mortgage Asset Research Institute, which investigates lending fraud, said one of its customers checked 100 stated-income loans against tax documents and found that nine in 10 of them overstated income by at least 5%.”

“‘More disturbingly, almost 60% of the stated amounts were exaggerated by more than 50%,’ the institute reported, saying the mortgages clearly deserve their ‘liar’s loan’ handle.”

“‘They were extremely popular in 2004, 2005 and 2006, and some people were telling borrowers and investors they were safe,’ said Steven Krystofiak, president of the Mortgage Brokers Assn. for Responsible Lending, who has testified to the Federal Reserve about high-risk loans.”

“Authorities in New York and Connecticut are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities that were sold to investors, Connecticut’s Attorney General said Saturday.”

“The investigations, first reported Saturday by The New York Times, center around ‘no-doc’ or ‘exception’ loans, that did not even meet subprime standards, Attorney General Richard Blumenthal said.”

“‘The loans were made to people who did not have any documents to verify their income or other verification for key requirements normally applied to mortgage borrowers,’ he said. ‘Many of the lenders made large amounts of loans, so that the exception swallowed the rule, or became the rule.’”

“The loans were sold by subprime lenders to Wall Street firms that bundled them with other, less risky, loans into securities.”

“Investigators want to find out whether the banks properly disclosed the high risk of default on those loans when selling those securities to investors in Connecticut and elsewhere, Mr. Blumenthal said.”

“‘The investment banks may have used very broad, boilerplate disclaimer language that effectively failed to disclose fully and fairly all the information,’ he said.”

“Blumenthal declined to say which firms were under investigation, but said his office had issued over 30 subpoenas.”

“‘These practices involving trillions of dollars in securities sold to ordinary investors go to the core of our financial system’s integrity and efficiency,’ Blumenthal said. ‘We regard this investigation as a priority.’”

“As presidential candidates and government policymakers rush to offer prescriptions for the deteriorating U.S. economy, some are beginning to worry about a disturbing possibility: This may not be your traditional downturn.”

“And the tools that helped restore prosperity in the past may prove less effective this time around.”

“In the current downturn, something more unsettling than a traditional swing in the business cycle appears to be at work: The United States has become increasingly prone to financial bubbles — huge, seemingly irreversible rises in the value of one sort of asset or another, followed by sudden and largely unforeseen plunges.”

“After tentatively suggesting in 1996 that stock prices were exhibiting ‘irrational exuberance,’ former Federal Reserve Chairman Alan Greenspan opposed any effort to tamp down the market, saying that productivity was growing so rapidly that many of the old reasons for concern no longer applied.”

“But Greenspan’s theory has become increasingly hard to maintain in the wake of what has happened in housing.”

“‘We are more prone to bubbles than we used to be,’ said John H. Makin, a former senior Treasury official with several Republican administrations.”

“‘If I were the Fed, I’d think twice about continuing to say we can’t identify bubbles,’ said Makin. Given the threat now posed by sagging house prices, the sub-prime mess and a more general financial constriction, ‘we’d better work harder learning how to identify bubbles and preempt them.’”

The New York Times. “What do banks call it when a troubled borrower abandons her home, sending them the keys? ‘Jingle mail.’”

“And what do they call it when an irate borrower abandons his home, yanking electrical outlets from walls, leaving faucets running and otherwise trashing it on the way out? ‘Taking the inside of the house with you.’”

“There’s nothing like black humor to define — however sadly and starkly — the blows that keep on coming in this mortgage debacle. But make no mistake, lenders are only beginning to learn how to manage the onslaught of jingle mail and houses turned inside out.”

“For example, while it is widely known that a wave of subprime adjustable-rate mortgages, or A.R.M.’s, will reset this summer…an even more troublesome mess involving pay-option adjustable-rate loans lies well beyond that.”

“Only when the loan balloons to 15 percent larger than its original size, a nifty development that results from a multisyllabic quagmire known as ‘negative amortization,’ do lenders demand that borrowers pay down principal. In many cases, this will cause borrowers’ monthly payments to double, according to analysts.”

“When do analysts say borrowers will have to start coughing up this extra cash? In 2009, or later.”

“‘As difficult as the rescue prospects are for subprime borrowers, they are even worse for most pay-option A.R.M. borrowers,’ said Michael D. Calhoun, president of a consumer advocacy group. ‘Three-quarters of pay-option borrowers are making the minimum payment based on 2 to 3 percent interest typically. The payment shock is so huge that a refinance is virtually impossible.’”

“It is possible to get a feel for what is happening on the ground from a new survey of 2,400 real estate agentss. The survey taps into the outlook of people who see troubled borrowers firsthand, when they try to sell their homes before foreclosure occurs.”

“Agents participating in the survey confirmed what many borrowers say: that loan servicers are downright unresponsive. Thomas Popick, principal at the designer of the survey, said its findings show that loan servicers are averse to short sales, even though they may be the best solution for many borrowers, lenders and the overall real estate market.”

“‘In many cases, loan modifications — no matter how generous the terms — only delay foreclosures on properties where the mortgage balance far exceeds the current property value,’ he said. Homeowners who try instead to sell ‘know they cannot afford the property and are trying to do the responsible thing — sell the property to someone else who can afford it.’”

“‘The attitude of the folks handling these situations with homeowners creates an adversarial relationship and makes the homeowners less able to understand and work through the situation,’ one survey respondent said. ‘Most foreclosure properties when listed back on the market with the corporate seller look like they have been through a war — and they often have.’”

The Sun Herald. “Beginning today, the National Association of Realtors(R) is reaching out to consumers with the facts about homeownership and the value of real estate as a long-term investment.”

“Over the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year, and home values nearly double every 10 years, according to historical data from NAR’s existing-home sales series.”

“‘Nobody buys a home in the national real estate market,’ said NAR President Dick Gaylord, a broker in Long Beach, Calif. ‘All real estate markets are local, and buyers and sellers who are thinking about making a move should consult with a Realtor(R) in their local market to learn about conditions specific to the area. It’s also advisable to look beyond the immediate horizon.’”

The Boston Globe reports from Massachusetts. “Prices in the Boston area more than doubled between 1995 and 2005, even adjusting for inflation. Lax lending standards played a big part. Sellers raised prices, and buyers easily borrowed the wanted money. Many families chose to stretch, agreeing to monthly mortgage payments that consumed a larger share of income than the recommended 28 percent - often a much larger share. Many of them are now are facing foreclosure.”

“In Boston and other hyper-expensive markets, the surge in foreclosures and the resulting drop in prices isn’t bad for everyone. Government efforts to limit foreclosures have the effect of favoring people who want to stay in their homes over the people who want to move in next.”

“Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, said he’s torn by concern for homeowners, but ‘our hope for home buyers is that the market softens somewhat. When a market has been as hot as it’s been for the last while, your hope is for prices to come down,’ he said.”

“It’s also not clear that the government can prevent prices from falling, even if it wanted to. A number of modest efforts are underway to help people keep their homes. But there is no plan in place to forestall the majority of impending foreclosures.”

“Even if there was, prices would keep declining.”

“George Marshall, a Boston renter who wants to buy a home in the suburbs, has money saved for a down payment, but he’s waiting for prices to drop a little more.”

“Marshall said he wants people to understand ‘how frustrating it is for people who are looking to buy a home to see their governor using their tax dollars against them.’”

“Leave the market alone, Marshall said, so he can buy a home.”

“Foreclosures continue to pile up in Essex County, where the filings for most of 2007 outpaced other areas of Massachusetts, according to data compiled by The Warren Group.”

“Foreclosure petitions increased 75 percent in the county from January through October 2007, compared with the same period in 2006. Data for November and December is not yet available.”

“‘There is still an awful lot of potential for people to lose their homes,’ said Terry Egan, editor-in-chief of Banker & Tradesman. ‘It’s a pretty clear indication the problem is still at, or near, its peak.’”

The Republican from Massachusetts. “Michael J. Farrell, president of Northeast Financial Group in Wilbraham, helps people work out solutions to impending foreclosure. While Springfield is flooded with foreclosures, Farrell said he’s also working with homeowners from Longmeadow, Wilbraham, East Longmeadow and other well-to-do suburbs of the city.”

“Of the four homeowners he worked with in Longmeadow, Farrell said two were subprime loans. One had a no-down-payment $500,000 mortgage, he said. The other homeowner filed for bankruptcy and the lender foreclosed on the home.”

“The two situations he worked on in Wilbraham were also subprime loans, he said, with 100 percent mortgages. Both foreclosures were precipitated by the breakup of the domestic relationships, he said. ‘In a typical scenario, had they not been stretched to the max, one might have been able to survive’ paying the mortgage alone, Farrell said.”

“The actual number of foreclosures in wealthier suburbs to date may mask the potential, Farrell said. ‘The banks are being extremely slow in pulling the trigger,’ he said, pointing to a foreclosure auction in Agawam that has been postponed four times.”

“Farrell said he’s noted another worrisome trend lately: ‘A huge uptick in non-subprime loans coming through now.’”

The Press of Atlantic City from New Jersey. “As the housing market continues to keep its head just above water nationwide, the oceanfront-home market on Long Beach Island is a whole other animal, according to several local real estate agents.”

“‘The oceanfront market is a recession-proof market,’ said Joy Luedtke, owner of Joy Luedtke Real Estate.”

“There now are 37 active oceanfront listings on the island, with three under contract. And 29 closed within the past year, according to the Jersey Shore MLS.”

“‘Oceanfronts always hold their value. It’s about supply and demand, and there are so few available. They’re not making any more oceanfront properties,’ said Sonia Ward, owner of Sonia Ward Realty in Harvey Cedars.”

“According to Ward, owners of multimillion-dollar properties usually are not in hurry to sell, so prices usually do not plummet.”

“‘There are distress sales on the oceanfront. These sellers are not going to compromise. They’ll sit and wait because they know they have something special,’ Ward said.”

“For the owners, the downside of not selling is being able to use the property for another summer.”

The Chambersburg Public Opinion from Pennsylvania. “Home construction in Franklin County during 2007 slowed from the feverish pace of the three previous years. Some out-of-state developers even abandoned a market that they eagerly embraced while it was peaking in 2004 and 2005.”

“The county has a hefty inventory of vacant new homes — more than twice as many as in 2002.”

“‘We went through tough times,’ Guilford Township Supervisor Greg Cook said. ‘Lots and homes didn’t sell as quickly, and some developers got hurt or ran into tough times. I think it is imperative for developers not to bite off more than they can chew.’”

“The inventory of newly constructed homes for sale rose while the market was cooling, according to Metropolitan Regional Information Systems Inc.; 134 at the end of 2002, 154 in 2005, 354 in 2006 and 353 in December.”

“Briddell Builders of Libertytown, Md., in November sold for $1.7 million its holdings off Falling Spring Road. The township in 2006 had approved 58 lots for Falling Spring Estates, Briddell’s first venture in Pennsylvania. Briddell installed roads and utilities for the first phase and roads for the final two phases. Lots were not sold.”

“‘They had a lot of money going into the ground and weren’t recouping the cost,’ Cook said. ‘Then the plug came out of the market.’”

The Plain Dealer from Ohio. “Home values in Cuyahoga County are likely to take a big hit because banks that foreclose on houses are unloading them for less than half what they are supposed to be worth, a study shows.”

“In Cleveland, lenders are dumping houses for less than a third of their market value as set by the county auditor, according to the study by Case Western Reserve University.”

“The study, which tracked thousands of houses sold at sheriff’s auctions from January 2000 through last September, found that prices declined every year, but tumbled dramatically in 2006 and 2007.”

“County Treasurer Jim Rokakis and others fear speculators are snapping up the cheap, rundown houses and selling them to desperate buyers, possibly triggering another cycle of foreclosures.”

“Several out-of-state companies have purchased dozens of houses in Cleveland, some for less than $1,000.”

The Toledo Blade from Ohio. “Damaged by a housing market that has been unable to regain momentum, the mortgage industry in the Toledo region took another big hit in 2007. In Lucas County alone, the number of mortgages fell by nearly a quarter to the fewest in more than a decade, according to the county recorder’s office.”

“Over the past two years, mortgage activity has plunged 40 percent in the region’s biggest county.”

“The industry had many changes last year. Appraisers are taking a more cautious approach, said Elizabeth Kollar, senior vice president for consumer lending in Fifth Third Bank’s northwest Ohio division.”

“Once, they alerted lenders to only serious problems such as foundation defects and nonoperating furnaces. Today, appraisers note - and often photograph - less serious problems such as drywall damage.”

“Mortgage brokers, who act as middlemen between lenders and borrowers and were involved in many of the subprime loans at the center of current troubles nationally, have suffered the most.”

“‘It stinks,’ mortgage broker Shane Marzullo said of current conditions. Amid a 10 percent decline in sales, he is pinching pennies more at his three-person Springfield Township firm. But several other local firms have folded, noted Mr. Marzullo, who is president of the local chapter of the Ohio Mortgage Brokers Association.”

“The Lucas County agency responsible for logging and filing official documents such as mortgages has had a lighter workload and didn’t fill a clerk’s position recently vacated.”

“‘Those people are gone,’ county Recorder Jeanine Perry said of title insurance workers and others who used to use her office.”

The Newark Advocate from Ohio. “Licking County homeowners not only struggle to keep their homes, many are learning they can’t sell them, either.”

“Sales of homes and all residential property took longer and closed at lower prices in 2007 than in previous years. The housing market includes more foreclosed properties but precious few new homes.”

“The average sale price of residential property in Licking County decreased from $130,316 in 2006 to $118,513 in 2007, a 9 percent drop. In Newark, the average price fell from $107,443 in 2006 to $93,229 in 2007, a 13 percent decrease, according to a database analysis.”

“Some sellers give up for a while and try later. Others are forced to settle for less than they wanted. Still others stubbornly wait for a buyer to pay their asking price. Ann Moore, whose husband died three years ago, has lowered the price of her Granville Road home from $219,000 to $199,000, but it still has not sold. It’s been on the market almost a year.”

“‘I feel I really need to sell it because I’m alone and it’s a lot for me to take care of on my own,’ Moore said. ‘I really don’t feel I can go lower. You can’t give your property away. I know a lot of people have been (waiting) two to three years. I don’t know what the answer is.’”

“Judy Newton, a real estate agent trying to sell Moore’s home, said the market is the worst she’s ever seen. ‘I’ve been a real estate agent for 23 years, and I’ve never ever seen real estate this bad,’ Newton said. ‘I hate to be negative, but those are my true feelings.’”

“‘There’s a lot of homes on the market waiting to get sold. Usually, you reduce it $1,000 to $2,000 at a time and now we’re reducing it $10,000 at a time. It may be appraised $50,000 more than on the market,’ she said.”

“Real estate agent Mitch Fellows said sellers can reduce their frustration and their wait for a buyer by lowering their price.”

“‘Prices have come down a little bit, and sellers need to realize that,’ Fellows said. ‘Sellers still expect what they could have gotten out of a property two years ago, and I think they have a hard time getting that.’”

“Developers and builders temporarily have given up, as well. In 2006, the Licking County Planning Commission shows 196 lots were approved for platting. In 2007, none were approved. ‘I’ve never seen a year no lots were approved for final plat,’ said Jim Leonard, of the planning commission.”

“Margaret Wiedenbein finally sold her home when she switched real estate agents. She had it listed for nine months without success, then changed Realtors. The house sold in 26 days.” “The key was lowering the price from what the first agent had it listed.”

“‘I got what I wanted,’ Wiedenbein said. ‘I thought he had it overpriced. It had been on the market nine months, and anything on the market that long is hard to sell.’”

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