The Housing Bubble

The Voice of San Diego reports from California. “When I was talking with Andrew LePage yesterday about these housing numbers, he sent me a breakdown of the median prices for homes sold in December as a function of the size of the homes. The size-adjusted, or price-per-square-foot median gives us a bit more clarity on one of the murkiest home price measures.”

“‘Even the relatively large declines in the median don’t tell the whole story,’ LePage said. ‘Everybody knows there’s a significant correction underway. Everything’s pointing in the same direction, a lot of what’s selling right now is where you have a really motivated seller, or a foreclosure.’”

“LePage looked at all of the sales in December to see what the last action on the property had been. For 31 percent of the sales in December, that last action was a foreclosure. (That’s compared to 4 percent in December 2006.)”

“For resale detached homes, the median price per square foot fell the sharpest in East and South County neighborhoods. In the last three months of the year, the price per square foot for East County homes was $268, a 15 percent drop from December 2006, and a 21 percent drop from that area’s peak.”

“In the South County, the median price per square foot for resale detached homes was $256, a year-over-year change of 21.5 percent and a drop from the peak of 23.5 percent.”

“Compared to that, the other three subsections of the county showed these drops: Central San Diego: 7.3 percent year-over-year, 12.4 percent off peak. North County coast: 6.8 percent year-over-year, 13.5 percent off peak. North County inland: 11.9 percent year-over-year, 17.2 percent off peak.”

The Union Tribune. “Los Angeles economist Christopher Thornberg, who in 2004 predicted the bursting of the real estate bubble, cautioned prospective buyers to hold off. Prices have a way to fall before hitting bottom, he said.”

“‘Sure, it’s a good time to buy if you don’t mind losing 10 to 15 percent of the sales price,’ said Thornberg. ‘There’s no recovery in 2008, no bottom in 2008. Prices are falling at a pretty rapid pace and will continue to fall through 2008 and into 2009, and that’s the most critical thing to keep in mind.’”

“Resale houses, representing 43.5 percent of all transactions in December, had a median price of $470,000, down $30,000 from November and $70,000 below December 2006. That was a record year-over-year drop on a dollar basis.”

The Orange County Register. “At the peak of the housing boom in 2004-04, the monthly sales pace was equal to 660,000 homes a year, Realtor figures show.”

“By the start of 2007, it had dropped to 450,000 homes a year, then fell again to 360,000-a-year pace after the subprime meltdown. At year’s end, California home sales had slipped below 300,000 a year for the first time since the 1980s.”

“Steve Thomas, president RE/MAX Real Estate Servicesin Aliso Viejo, estimated that prices in Orange County fell about 10 percent from the June 2006 peak, dropping to 2005 price levels. ‘And this year, the tree will shake a little bit more, and we’ll come down to 2004 levels,’ he said.”

“Pat Veling, president of a Brea consulting firm, believes that in many communities in Orange County – places like Yorba Linda, Tustin, Irvine and Huntington Beach – prices already dropped to late 2004 levels, wiping out three years of price appreciation.”

“Condos with less desirable floor plans, houses backing up to busy roads or power lines and homes in more depressed areas like Santa Ana, Anaheim and other north-central cities have seen price drops ranging from 15 to 30 percent, said Thomas.”

“Median home prices fell in 61 of Orange County’s 83 ZIP codes last year and increased in just 17. The biggest drop occurred in east Garden Grove’s 92840, where the median price fell 15.3 percent to $500,000.”

“But even some of the county’s most desirable neighborhoods saw prices falling, with ZIP codes showing double-digit declines in parts of Irvine, Huntington Beach, Yorba Linda and Newport Beach.”

“Veling’s data shows that just 55 percent of the county’s active real estate agents participated in at least one sale last year – half of them with just one or two sales apiece. The remaining 45 percent ‘had no income in 2007,’ he said.”

“Agent Sheri Maxwell said knows at least a dozen agents who have left the business. In one case, Maxwell said, a lender approved a loan with a 10 percent down payment for one of her clients. On the day escrow was supposed to close, however, the lender balked, demanding a 20 percent down payment.”

“‘Who has $130,000 just sitting around?’ Maxwell said. ‘We all felt it. It was probably one of my hardest years.’”

The Recordnet. “Existing-home sales are picking up momentum in San Joaquin County. Pending sales jumped from 392 in November to 459 last month countywide, a 17 percent increase, according to figures from the latest Coldwell Banker Grupe-TrendGraphix sales report.”

“Meanwhile, the median selling price continued to slip, falling to $293,000, the first time the countywide median has been less than $300,000 since April 2004, when the median selling price stood at $290,000.”

“‘Price is king,’ said Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton.”

“Foreclosures are accounting for about 70 percent of the monthly sales, he said, and investors are accounting for about half the buyers.”

“But unlike in the real estate boom years, these investors aren’t ‘flippers’ - buyers looking to resell in a year or two to cash in on fast-rising equity. Now they are looking for long-term investments, he said, and prices are low enough that monthly rental fees basically can cover the mortgage payments.”

The Santa Cruz Sentinel. “76 homes sold in December, the fewest sales for any month in 11 years, according to Gary Gangnes of Real Options Realty, who compiles the statistics. ‘It’s a lot slower for all of us,’ said Pam Spehar, a Boulder Creek agent.”

“First-time home buyers, seeing the median price drop a mere 1 percent, may have given up, not realizing changes in the market. ‘Buyers tend to wait until it’s a sellers’ market,’ said Spehar, noting 50 homes currently on the market in Santa Cruz County priced under $450,000.”

“One reason for lower prices: ‘Short sales.’ Case in point: 244 Redwood Road in Boulder Creek. The owners paid $296,000 for the two-bedroom home in 2004, listed it for $250,000 and sold it for $247,000.”

“Real estate agent Bob Bickers brokered December’s most expensive sale, a three-bedroom house at 63 Geoffroy Drive in Live Oak with ocean views near Privates Beach, to an out-of-county buyer for $3.6 million.”

“While high-end homes seem unaffected by changes in mortgage guidelines, even those prices are ‘not as good as they were,’ Bickers said.”

“The Geoffroy Drive home was initially listed for $4.95 million. When it didn’t get any offers, the price was cut by $1 million, and three potential buyers expressed interest.”

“‘It generated a sense of urgency,’ Bickers said.”

The Daily Press. “Local Realtors still see a slow market going into 2008 for the High Desert and say it is mostly due to a ‘wait and see’ attitude that permeates the current buyers market.”

“Agent Jill Lakin says most people are waiting to see how low prices will go. ‘They don’t want to buy now and see the price drop even more,’ she added.”

“Jack Fales of Ambassador Realty, estimates that about 30 percent of the people drive down the hill everyday for work. He says many of them sold their houses down the hill and came up here because they could afford a larger home and better lifestyle, but still have to make the commute.”

“Fales says even that dynamic has changed. ‘Now that the market has gone to zero, even the affordable homes aren’t going,’ Fales said.”

“Another problem occurring in today’s real estate market is that many new homeowners are ending up ‘house poor.’”

“‘When they get qualified for the maximum payment they don’t have any money left after driving up and down the hill. When gas goes to $3.15, now they can’t landscape, they can’t fence, a lot of them now are vacant,’ Fales added.”

“Lakin says it is definitely a buyers market, even for new homes. ‘For the first time in a long time, people are actually being able to make offers on new homes,’ Lakin said.”

“One Realtor says there is something else that homeowners and home buyers in the High Desert are waiting to see, especially the commuters: When are all the new jobs being touted by city officials actually going to get here?”

The Daily Bulletin. “When Federal Reserve Board Chairman Ben Bernanke said last week that the economy was in bad enough shape that further rate cuts would likely be needed, it was good news for some people. Unfortunately, though, those folks that rate cuts would help aren’t the ones who need it the most.”

“A consensus of local realtors commenting Monday agreed that while rate cuts will help those with home equity lines of credit, they’ll have little or no effect on people hoping to buy or sell homes.”

“‘This isn’t going to be any help to the average guy trying to qualify for a loan,’ said Kirk Stoffel of Century 21 Showcase in Highland. ‘The major issue right now is getting people qualified. All the 100 percent loans are gone. Rate cuts won’t help us at all.’”

“Upland Realtor Michael McCasland was even more blunt. ‘The last two rate cuts didn’t even cause a blip in the market,’ he said. ‘A half-point cut now will have no effect at all. The biggest problem is that because loan guidelines have been stiffened so much, the buyer pool has dried up completely.”

“‘Lenders are looking for different reasons not to make loans right now. They’re very afraid of making mistakes,’ he said.”

“Lender reluctance isn’t the only problem, said Bill Velto of Tarbell Realtors in Upland. ‘The only way a rate cut would have any effect is if it helps to build confidence,” he said. ‘People are very apprehensive right now. It’s almost as though they have lost faith in the system. I don’t think a half-point cut is enough.’”

The Tribune. “Style Gifts and Accents, a home furnishings and kitchenware store in San Luis Obispo’s Higuera Plaza, has closed after five years of doing business.”

“Tim Davis said the store’s five-year lease was ending, and he needed to decide whether he wanted to keep the retail operation going for another five years. After contemplating the future, he decided to let the store go.”

“‘Being an independent retailer, you’re sort of fighting the whole trend of retail going to the big-box stores, and with the general economy trending toward a recession, I decided the whole risk-reward of keeping the business open was just not worth it,’ Davis said.”

“Davis said he has seen a downturn in his business the past two years and, he said, ‘2008 doesn’t look like it’s going to be any prettier.’”

“Tony Flatos, a director with the building’s property manager, said he does not have a prospect for the spot. ‘Right now, it’s anybody’s guess,’ Flatos said. ‘The picture for small retailers is not really good right now, and it’s not just at that shopping center, it’s all over the county.’”

“Davis did not know what type of business would fill the now-empty, 1,650-square-foot space, which is between Trader Joe’s and Food 4 Less. ‘We just hope it’ll be something that’s recession-resistant,’ he said.”

A report from the Idaho Statesman. “With 2007 mercifully in the books, Treasure Valley housing industry insiders are hoping for a rebound in 2008. Their optimism is based on Intermountain MLS statistics indicating that show the housing inventory in Ada County is down by 1,000 homes since July and by 425 in Canyon County since August. That still leaves 6,470 Treasure Valley homes on the market.”

“‘I think the next 90 days are going to be critical. If we can shave another 16 percent off the inventory, that’s going to be huge. It might bring the market back in balance, if not swinging it back to a seller’s market,’ said associate broker Shaun Tracy.”

“Idaho chief economist Mike Ferguson said the MLS numbers don’t indicate whether the reduction in the housing inventory resulted from sales or frustrated owners who have taken their homes off the market.’

‘ “According to the MLS, 10,027 homes changed hands in 2007, or 35 percent fewer than the 15,470 transactions the previous year. The total was well below the 13,515 sales in 2004, the year industry members say is a typical sales year in the Treasure Valley.”

“For all the bad news last year, 2007 was still the fifth-best sales year on record, said Jere Webb of Jere Webb Publishing, which charts industry activity in the Treasure Valley. ‘So if it was the fifth-best year on record, why did it feel so lousy?’ Webb asked.”

“His theory is that many real-estate agents who made $300,000 in 2005 saw their income cut to $200,000 in ‘07. ‘I don’t know of anybody that can take a $100,000 pay cut and be happy about it,’ Webb said.”

“MLS Director Greg Manship said the Realtors association here has lost 600 agents since July 2006, when the market went into a swoon.”

“Broker Don McFarland said the agents who have left the business were mostly newcomers to housing sales and had never gone through a downturn. ‘It’s a matter of experience,’ McFarland said. ‘You have to be able to tell the seller what the (pricing) reality is and that they have to make price adjustments. But some of these (younger) agents were just as much in denial as the sellers.’”

“Meanwhile, the foreclosure problem in Idaho continues to get worse, with more and more filings piling up each month.”

“According to IdahoDataProviders.com, which tracks foreclosures daily, there were 85 filings in Ada County during January 2007. In December there were 190 filings, an increase of 137 percent. In Canyon County, the 59 filings in January grew to 121 in December, an increase of 51 percent.”

‘”I probably agree that things are not as bad out there as it seems. But it’s sure not good,’ said founder Charlie Nate.”

“The ill-fated Boise Tower/Boise Place project, whose developer filed for bankruptcy last summer, now faces possible foreclosure.”

“The trustee’s filing is the latest development in a long-running story that has left Boise with an open hole at the northwest corner of 8th and Main streets Downtown.”

“In 2006, Boise’s urban renewal agency named developer, Gary D. Rogers, of McCall, as the new developer of the site, ending developer Rick Peterson’s decade-long struggle to build his 25-story Boise Tower.”

“As originally envisioned by Peterson, the Boise Tower would have been a $62 million, 25-story mixed-use condominium project and Idaho’s tallest building. When Rogers took control, he renamed the project Boise Place and announced plans for an even bigger tower that would be Idaho’s tallest.”

“But Rogers’ company, Charterhouse Boise Downtown Properties LLC, quickly faced a struggle of its own. Last April, Charterhouse defaulted on a $2.57 million loan from an investor groupe. Charterhouse had taken out the loan to make a down payment on the site.”

“Ironically, the list of Charterhouse’s creditors includes Peterson. Charterhouse owes Peterson $7.6 million.”

The Olympian from Washington. “South Sound home builders rushed to meet the demand of a strong housing market in 2006, but in 2007 they generally took a more cautious approach, year-end building permit data show.”

“Year-end data show that the number of single-family building permits issued in 2007 dropped significantly compared to 2006. In Olympia, permits fell 62.9 percent to 85 from 229. In Lacey, permits fell 24.7 percent to 807 from 1,072. In the county, permits fell 19.3 percent to 815 from 1,010.”

“Also adding to the higher inventory levels were new homes put up for sale by investors who suddenly couldn’t ‘flip’ their homes as quickly as they once could, custom home builder Daimon Doyle of Olympia said.”

“The Northwest has fared much better than other housing markets nationally and the National Association of Home Builders expects a turnaround in housing in the second or third quarter of this year, he said. ‘Things will be picking up before we see any major slowdown here,’ Doyle said.”

“TransNorthwest Construction of Olympia also is carefully studying the housing market before it takes its next step, community relations contact Julie Brannberg said. Once TransNorthwest wraps up five more more single-level townhomes at Horizon Pointe in Lacey, the home builder won’t rush into its next job, she said.”

“‘We are cautious in moving forward in buying new lots,’ Brannberg said. ‘We will build out what we have but be smart about our next move.’”

“South Sound building professionals acknowledged that a cooler housing market has had an effect on the pace of residential construction. After two strong years of home building in 2005 and 2006, inventory levels surpassed 2,000 units in 2007, according to Northwest MLS.”

“With more homes to choose from, home buyers increasingly took time to shop for a house. As a result, year-over-year home sales dropped 14 percent in 2007.”

The Gazette Times from Oregon. “Builders of new homes are finding Corvallis buyers reluctant to jump into an uncertain market, causing construction on new houses to all but grind to a halt. Housing starts in Corvallis for 2007 were down nearly 60 percent. Sales of new homes around the mid-valley also declined by 15 percent when compared to 2006.”

“All told, the total number of houses reported sold in the mid-valley in 2007 was 14 percent behind 2006 totals. According to Willamette Valley MLS, 3,697 houses were sold in 2007, compared to 4,305 houses the previous year.”

“At the end of December, there were a total of 1,855 homes listed for sale in the mid-valley. At the same time a year ago, there were 1,690 homes for sale, a difference of 9 percent.”

“North Albany saw the highest median-prices for houses in Benton County in 2007, at $314,975 for the 12-month period ending in December. That market also saw the widest fluctuations as well, with a low of $251,000 in March and a high of $396,000 in September.”

“‘We’re seeing more buyers on the sidelines,’ said Mike Goodrich, VP of operations for Legend Homes in Corvallis. ‘We’ve not been building spec or inventory homes in the past couple of months.’”

The Oregonian. “Oregon carpenters, painters and plumbers, in high demand last summer, are having trouble finding and keeping work. Unions and staffing agencies report that this winter’s construction slowdown is worse than normal, especially for residential work as the housing market slows.”

“On Monday, officials confirmed their accounts, saying the state’s construction sector cut 5,100 jobs in December, twice the normal loss for the month.”

“‘We have a lot of folks out of work,’ said Randy Shelton, Portland recruiting manager at a staffing company. ‘I’m not optimistic that it’s going to improve much,’ when construction normally picks up with better weather in March.”

“Construction job cuts could have been deeper if not for the severe storms that hit northwest Oregon in December, spurring demand for repair work, said said David Cooke, an Employment Department economist.”

“Randy Pozdena, a member of the Governor’s Council of Economic Advisors, noted that he and other economists predicted in October that the state would see four quarters of construction job losses.”

“Nationally, said Pozdena, ‘You’ve got not just the bankers drawing in their horns, but you have consumers wary of taking a position in a new home. People keep talking about further declines in the prices of homes, and that’s not a recipe for encouraging demand.’”

The Sandy Post from Oregon. “Buena Vista Custom Homes sold 141 homes during the builder’s Dec. 15-16 auction at the Oregon Convention Center, including 28 homes from Sandy’s Cascadia Village and Hamilton Ridge subdivisions.”

“The homebuilder’s entire unsold inventory from across Oregon and southwest Washington, 240 homes, was up for grabs at the auction.”

“The lowest-priced house sold at the auction was a three-bedroom, 2.5-bath house in Sandy’s Cascadia Village neighborhood, which went for $195,000. The most expensive house was a 5,073-square-foot home in the Shadow Ridge subdivision in Happy Valley, which sold for $510,000.”

“Buena Vista spokesman Mike Higgins said the Sandy homes sold ‘pretty consistently’ 10 to 15 percent below the unpublished reserve prices. ‘Those homes in Sandy were bid on real aggressively and were very popular in the sale,’ Higgins said. ‘We were real pleased.’”

“Virtually all areas were strong sellers with two exceptions – the 29 homes that were offered in Bend and Buena Vista’s portfolio of rental homes. None of the homes in Bend sold, and few of the rentals found buyers. Four of the unsold homes were in the Hamilton Ridge subdivision.”

“Buena Vista set ‘reserve’ prices prior to the auction to reflect the homebuilder’s costs. The company announced after the auction that 96 percent of the 141 sold homes were sold below the reserve price.”

“‘We came to the auction to sell, and we did just that,’ Buena Vista owner Roger Pollock said in a written statement.”

“Sandy resident and home seeker Luke Lyons attended the auction in hopes that he might walk away with a deal in the Hamilton Ridge subdivision. Lyons, who stayed only for the auctioning of the first six Sandy houses, said he quickly realized that he wasn’t going to buy a home Dec. 15.”

“‘It was just amazing how rapidly the bids went up,’ Lyons said, noting that homes quickly blew past his predetermined price range and didn’t stay on the block longer than two minutes. ‘I don’t think anybody saved any money,’ Lyons said.”

“Worse than that, he said some people probably overpaid.”

“Lyons said he has been interested in the Hamilton Ridge subdivision for a couple years, ‘before they built any houses there,’ he said – and always had picked up fliers from the homes for sale.”

“He said he watched prices start at around $259,000 and top out at around $300,000. The cooling real estate market saw prices drop most recently to $279,000, just before the auction, he said.”

“But once the auction was announced, all the fliers were taken away, and Buena Vista announced that the homes were valued at about $350,000.”

“Indeed, a four-bedroom, 2.1-bath, 2,261-square-foot home in Hamilton Ridge was advertised with a ‘list price’ of $348,950, while a nearly identical home down the street sold in October for $267,950. Another comparable Hamilton Ridge house that had slightly less square footage sold for $262,651, according to real estate records.”

“Yet another house down the street sold for almost $221,000. Lyons thinks Buena Vista raised the list price before the auction to drive bids higher.”

“‘It seems to me like that was put there so that if people started doing research on Hamilton Ridge for the auction, they’d think they were worth a lot more,’ Lyons said. ‘I think they did it to make people think they were getting a bargain when they were paying $275,000 or $250,000.’”

“‘I had done my research and seen that they had accepted offers at $220,000,’ Lyons said. ‘The price shot past that (at the auction) in under 10 seconds. These people thought they probably saved some money, but they didn’t.’”

“‘If I had known people were going to be this crazy, I would have made an offer beforehand,’ Lyons continued, ‘and saved myself a lot of trouble. I just didn’t expect people to be that careless or carefree with such a serious matter.’”

“Higgins said that because of the 1-percent deposits that will be due soon for auction winners, it’s likely that a few of the deals will fall through. And when they do, he said the houses will be back on the market.”

“‘And then I’ll walk down and offer $220,000,’ Lyons said.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Citigroup Inc. posted the biggest loss in the U.S. bank’s 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion. The markdown on subprime securities is the biggest so far, exceeding the $14 billion reported by Zurich-based UBS AG, Europe’s biggest bank.”

“‘They’ve got themselves in a deep, desperate hole and it’s going to take them all of 2008 to work their way out of it,’ Jon Fisher, who helps manage $22 billion at Fifth Third Asset Management, said in an interview on Bloomberg TV. Fifth Third owns shares of Citigroup. ‘There are probably issues on their balance sheet that the management team, who’s only really been running the company for about a month, doesn’t even know about.’”

From Dealbreaker. “As they just discussed on the conference call, Citi still had $37.3 billion in direct and indirect subprime exposure at the end of the quarter. That’s still a lot of risk on in asset classes that no-one can confidently value. Even Citigroup admits that it is just looking at the ABX and making intelligent guesses.”

“Our high level quant skills tell us this leaves Citi with $29.3 billion in CDO exposure. What’s worse, Citi’s chief financial officer is stressing that there is no market against which to mark these asset backed CDOs. So these write downs are just mark-to-model. Educated guesses by the folks whose educated guesses got us into this mess in the first place.”

From The Star. “Canadian Imperial Bank of Commerce, already reeling from its exposure to America’s subprime meltdown, confirmed yesterday it will record another $2.46 billion (U.S.) in pre-tax writedowns.”

“The lion’s share of the bank’s new subprime-related writedowns – some $2 billion (U.S.) worth – relate to counterparty hedge protection it bought from American bond insurer ACA Financial Guaranty Corp. Questions continue to swirl about the financial health of ACA after its credit rating was slashed by Standard & Poor’s late last year.”

“The remaining $462 million charge relates to CIBC’s unhedged exposure to the subprime market.”

The National Post. “Four months into the Canadian $35-billion ABCP fiasco and still investors have no idea about the status of their holdings. They may be sitting on the equivalent of AAA-rate securities, as suggested the other day by Purdy Crawford, chairman of the grandly named Pan Canadian Committee of Third Party ABCP Investors.”

“Or, as some critics suggest, their investment values may have more in common with subprime mortages. Since no real information is coming out of the committee, who can tell?”

“What we also learned yesterday, however, is that a private underground market in ABCP paper is alive and kicking. Westaim Corp. of Calgary has agreed to sell 50% of its holdings in ABCP units. Originally valued at $17-million, the assets were written down to $14-million earlier, and now Westaim is selling half its ABCP portfolio for $6-million, off a book value of $7-million.”

“The Westaim sale implies a writedown of up to 30%, which doesn’t sound like AAA-rated material.”

“If Westaim were not a public company, the deal would have remained a secret trading transaction in a $35-billion asset class that a vast cabal of major corporations, from the Caisse de depot et placement to major banks, have systematically conspired to keep out of any public market.”

“Many ABCP owners need the cash to carry on business. Many transactions are believed to have closed, with some sellers accepting 80¢ on the dollar. Another story is that major investment houses are buying back the ABCP assets they sold at 100¢ on the dollar to keep their clients happy, and then unloading the assets into the underground market and quietly taking a loss.”

The Pioneer Press. “Exposure to the subprime mortgage mess will cost St. Louis Park-based MoneyGram International Inc. more than $1 billion, the money transfer company said late Monday night.”

“In October, MoneyGram said it would lose $230 million on mortgage-related investments, but warned that total losses could be higher. Those losses, yet to be incurred, now stand at $960 million, the company said in a press release issued Monday evening.”

“The company spent another $200 million this month liquidating some of its problem securities.”

The Orange County Business Journal. “Newport Beach-based Downey Financial Corp. says it has more bad loans than it stated earlier after reclassifying its balance sheet. Shares of Downey fell 13% on Monday, bringing its market value to about $680 million.”

“Nearly $100 million of the company’s loans that were part of a refinancing program for troubled borrowers were reclassified as nonperforming assets, according to Downey.”

“The loans were part of a ‘borrower retention program,’ which in December the company’s accountant KPMG LLP said should be considered nonperforming after initially saying in September that they were being accounted for correctly, according to a press release.”

“In November Downey said nonperforming loans were 5.77% of its total assets. In October it said it had $323 million in nonperforming loans.”

The Insurance Journal. “More than $170 billion has evaporated from the balance sheets of companies around the world as the result of the meltdown of the U.S. subprime mortgage market, reports Advisen Ltd., a provider of technology and data to the global commercial insurance industry.”

“However, the $170 billion of writedowns may be only the tip of the iceberg, the research firm suggests in a special report…that tracks writedowns reported to date and the related lawsuits filed against those companies.”

“Advisen estimates the 112 companies reporting writedowns may have as much as $1.2 trillion in collateralized debt obligations and other securities backed by subprime mortgages on their balance sheets. The crisis in the subprime mortgage market also has triggered an avalanche of lawsuits.”

From MarketWatch. “Fewer people will be obtaining mortgages this year than in 2007, with total mortgage production expected to drop 16% to $1.96 trillion in 2008, the Mortgage Bankers Association said Monday.”

“If the projections hold, it would be the first time since 2000 that total mortgage originations fall below $2 trillion, the group said.”

“‘The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital,’ said Doug Duncan, MBA’s chief economist. ‘Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed.’”

“After total mortgage production decreases 16% in 2008, it will drop another 4% in 2009 to $1.88 trillion, the MBA predicts.”

The Guardian. “Two of Britain’s biggest mortgage lenders, Alliance & Leicester and Britannia building society, have doubled the minimum deposit demanded from first-time buyers in the latest sign that banks are anticipating a downturn in house prices.”

“Borrowers will have to pay a minimum deposit of 10% on the price of a property compared with 5% before. According to Moneyfacts, 11 mortgage lenders have reduced the maximum loan-to-value ratios on some or all of their mortgage range since the beginning of December.”

“This marked an about-turn from the position before the onset of the credit crunch, when lenders pushed loan-to-value ratios to highs of 130%, with 95% the norm.”

“A spokeswoman for Britannia said: ‘At the end of December, Britannia took the decision to impose a maximum loan-to-value limit on all products of 90%. This is due to the current external environment, with house prices falling over the last few months and the Council of Mortgage Lenders forecast that house prices will continue to fall in 2008.’”

“Taylor Wimpey Plc, the U.K.’s largest homebuilder, said orders fell 19 percent as of the end of last year as falling prices and tighter credit markets deterred buyers.”

“Cancellation rates rose to more than 30 percent in the final quarter of 2007 from an average of about 20 percent, while reservations fell about 25 percent, Redfern said.”

“Taylor Wimpey builds houses and apartments in the U.S. states of Arizona, Georgia, Texas, California and Florida, where it’s the leading golf-course developer.”

The Telegraph. “Fewer Brits are splashing out on holiday homes in the sun as higher mortgage repayments and concerns about the economy bite.”

“The trend, which is further evidence that Brits are reining in their spending habits, emerged when Taylor Wimpey gave a trading update to the market this morning. The housebuilder warned that profits from its mainland Spain business would be ‘well below’ those achieved in 2006.”

“In 2007, Taylor Wimpey sold 47 pc or 167 fewer homes in Spain and Gibraltar compared with 2006.”

“CEO Peter Redfern said that the US market remained ‘exceptionally challenging’ and he expected that to continue throughout 2008. Completions in its North American business, which includes Canada, fell 24pc from 8,839 to 6,740, and prices fell 19pc from an average of £212,000 to £172,000.”

“It emerged last week that Taylor Wimpey has told suppliers it intends to pay them 5pc less as the credit crunch bites into housebuilder profits. A letter was sent to its subcontractors, suppliers and consultants, which warned of imminent cuts and blamed them on a difficult 2007 which looked likely to continue in 2008.”

“Mr Redfern played down the letter today: ‘In any industry at any time it is normal to have an ongoing conversation about pricing. We don’t see it as anything out of the ordinary.’”

The Orange County Register. “In a Securities and Exchange Commission filing, Newport Beach-based William Lyon Homes says…’On December 26, 2007 and January 7, 2008, William Lyon Homes, Inc., a California corporation, entered into ten separate purchase and sale agreements with various affiliates of Resmark Equity Partners, LLC.’”

“‘Pursuant to the Resmark Agreements, Lyon California agreed to sell…604 residential lots and 5 model homes in 10 communities in Orange County, San Diego County, and Ventura County, California for an aggregate purchase price of $90.6 million in cash.’”

“‘Prior to the sale, the collective net book value of these lots (as reflected in WLH’s financial statements) was approximately $210.7 million.’”

“By our math, that’s 43 cents on the dollar.”

The Baltimore Sun reports from Maryland. “The National Association of Realtors’ chief economist told local real estate agents yesterday that he believes the Baltimore housing market has hit bottom and 2008 should be a better year, assuming buyers don’t sit on the sidelines, anticipating major price drops. ‘This area will be very interesting to watch because there’s very solid economic growth, but people aren’t buying homes,’ said Lawrence Yun.”

“He added: ‘Ten years from now, people will look back at 2008 and say, ‘Wow, that was a great time to become a homeowner.’”

“Yun said ‘excessive negative coverage’ about the nation as a whole, which saw prices fall, has given buyers a distorted picture.”

“But other economists aren’t so optimistic. Anirban Basu, CEO of a Baltimore economic and policy consulting firm, said that he’s sticking to the forecast he gave the Home Builders Association of Maryland: No bottom until next year.”

“‘This year I expect to be the year of the falling prices,’ Basu said.”

“The Greater Baltimore Board of Realtors, which brought Yun in to speak to a packed hotel conference room, said yesterday that it will team up with other local Realtor groups in the metro area on a $50,000 media campaign with that ‘great-time-to-buy’ message.”

“‘What we want to do is negate all the national media in terms of the doom and gloom,’ said Cathy Werner, president of the Greater Baltimore Board of Realtors and an agent for 22 years.”

“Denie Dulin, an agent in Baltimore, hopes buyers will stop waiting for that doom and gloom to show up in prices. Right now, they keep delaying a purchase because they think prices and interest rates will drop, she said.”

“‘They’re looking and looking and looking and want to see 50 or 60 homes before they make their decision,’ Dulin said. ‘That’s a lot of looking.’”

“Gov. Martin O’Malley announced a wide-ranging plan yesterday to confront an unprecedented rise in home foreclosures and combat predatory mortgage schemes.”

“Tens of thousands of subprime mortgages are expected to go into foreclosure in Maryland over the next two years at a cost of $2.7 billion in lost property value and $19 million in property taxes, according to the Joint Economic Committee in Congress.”

“About one-fifth of homeowners with subprime mortgages in the state were late on their payments or in the foreclosure process during the three months through October, according to the Mortgage Bankers Association.”

“‘These are really, really tough times,’ O’Malley said. ‘We are seeing a national economic downturn, and we are also seeing a real unprecedented crisis when it comes to foreclosures.’”

“The administration also announced yesterday the ‘Bridge to HOPE’ program to provide interest-free loans of up to $15,000 so that homeowners can catch up on their mortgage payments and avoid foreclosure. The HOPE loan program, announced last summer by O’Malley, didn’t meet expectations. It would have directed $100 million to assist hundreds of homeowners refinance, but only 14 homeowners have qualified.”

“Thomas E. Perez, Maryland’s secretary of labor, licensing and regulation, has frequently said that it’s harder to get licensed as a barber than as a mortgage broker in Maryland, and one regulatory change would increase the amount of experience needed to obtain a license.”

“‘You can be assured that person is qualified to give you a loan,’ Perez said. ‘That person would be required to look after the public interest rather than just lining his own pockets.’”

The Maryland Daily Record. “Sarah Bloom Raskin, Maryland commissioner of financial regulation, said she thinks the reforms will be appropriate, but not too restrictive. ‘We are not expecting any credit availability problems to emerge whatsoever,’ she said.”

“David Pulford Jr., president of the Maryland Mortgage Bankers Association, said a proposed regulation to establish a duty of good faith and fair dealing for lenders, brokers, servicers and borrowers sounds good in theory but uniform definitions of those terms could be problematic.”

“‘If the legislature is going to require us to show a net tangible benefit that is according to legislation, then I have a real hard time with that,’ said Pulford.”

“Kathleen Murphy, CEO of the Maryland Bankers Association, said she does not think the state regulations would prove onerous to the point where they would restrict the availability of credit in the state.”

“She said the secondary market for subprime loans, which are often packaged by the companies that originate them and resold as investment products, is drying up.”

“‘In essence,’ she said, ‘those loans aren’t going to be made because those outlets aren’t available.’”

The New York Times on Maryland. “At Vixxen Hair Salon, the main topic of conversation has always been money. But since last August, Anjanette Booker, the owner, has noticed a new focus. ‘Now it’s money and foreclosures,’ Miss Booker said.”

“For each of the last four years, more than half of the foreclosures in the Belair-Edison neighborhood have been homes owned primarily by women, according to a nonprofit community development organization.”

“Single women have been among the fastest-growing groups of homeowners in recent years, and in Baltimore they accounted for 40 percent of home sales in 2006, twice the national average, according to the National Association of Realtors. Nearly half of these mortgages were subprime.”

“‘When I bought my house, it was the American Dream,’ said Kue McIntyr, a single mother of three who is scrambling to avoid losing her row house, on which she defaulted after losing her job. ‘Now I need to save it for my boys.’”

“In Belair-Edison, these trends converge at Vixxen Hair Salon, where on a recent afternoon the chairs were empty, as they have often been since summer, when many adjustable-rate mortgages in the neighborhood reset — and many women began cutting back on beauty care to pay for them.”

“‘Just our conversations, our demeanor, have changed,’ said Miss Booker, who, like most of her customers, is a single woman trying to save her home from foreclosure. ‘Now when we have the TV on, and something comes on about interest rates, we’ll be screaming at the TV.’”

“Four years ago, Miss Booker bought a brick row house for $130,000, taking a subprime mortgage because she had a low credit score. Her initial payments were $841 a month.”

“‘He said the rate was adjustable but in six months you can refinance,’ she said. ‘But I never did. I didn’t ask why I didn’t get a fixed rate from the beginning.’”

“After two years, her mortgage payments shot up to $1,769. She has borrowed money from her former husband and two friends, but says it is hard to ask for money ‘because most people are going through what you’re going through.’”

“From her house she said she could see five homes with ‘For Sale’ signs out front, signs that went up around the time many mortgages reset. ‘It looks like a ghost town,’ she said of the streets around her house.”

“The neighborhood’s 6,400 houses are mostly owner-occupied, and median house prices have nearly doubled since 2004, to $125,000.”

“Ms. McIntyre, bought her house for $125,000 in April 2006, using two subprime loans, adjustable loans that started at 8.35 percent and 13.25 percent, the lender insisted that she use her savings to pay down a car loan, a common demand on subprime loans. After she lost her job, she had no reserve to pay her mortgage.”

“‘I feel they had me from the start,’ Ms. McIntyre said. ‘I was eligible for money as a first-time home buyer and a state employee. Nobody told me about any of these.’”

“Her house was offered at foreclosure auction in December, without a buyer. She is still living in it, hoping to work out a payment plan with her lender.”

“‘And if I can’t keep my house, I need to save my money so I’ll be ready to buy another house in two years,’ she said. ‘But it’s really hard to get out of this hole.’”

The Washington Post. “Home buyers and sellers in the Washington area face a new challenge: Most of the region has been tagged a ‘declining market’ by the powerful loan underwriters who review mortgage applications.”

“That means appraisals are receiving an extra dose of scrutiny, and lenders are asking some buyers to come up with more down-payment cash. Such a broad-brush treatment of the diverse Washington market risks weakening prices in neighborhoods that, so far at least, have been holding their own.”

“In November, a ‘declining market’ flag was enough to scuttle a $510,000 home purchase planned by Tony and Sarah Pierson, both Army captains. They were only days away from closing on a brick Cape Cod near the historic district in Leesburg.”

“But the deal fell apart when their lender, USAA First Mortgage Origination, notified them that, because of that flag, USAA would no longer honor its preapproval commitment for a package of first and second mortgages covering 100 percent of the price.”

“Even though the appraisal showed a value higher than the Piersons had agreed to pay for the home, USAA told them it would approve the deal only if the couple came up with a 5 percent down payment.”

“‘Five percent of half a million dollars is $25,000,’ Tony noted. They had that in savings, but had been planning to use it to renovate the house. They didn’t close the mortgage.”

“According to a Fannie Mae policy statement released last month, its declining market flag calls for a lender to more closely examine whether the home’s appraisal accurately reflects current market conditions. If a giant such as Fannie says values are headed down, what other mortgage investor is going to be so bold as to dismiss the warning?”

“‘It’s not just Fannie Mae, it’s every investor,’ said David Stevens, president of affiliated businesses, including mortgage lending, at Long & Foster Real Estate. As a result, according to Stevens, a loan that used to require 5 percent down now requires 10 percent, and one that required 10 percent now calls for 15. ‘It’s stopping sales,’ he said.”

“The Piersons continue to hunt for a home, with their renovation budget now converted into a down payment budget. I asked Tony if that declining-market notice gave him pause about investing in a home.”

“‘No, because you need a place to live,’ he said. ‘We’re going to be here at least five years. We’re not under the mistaken assumption that we’re going to get rich. When you’re renting, you’re losing $20,000 a year in rent plus whatever tax breaks you miss. You don’t know what’s going to happen in the future.’”

“He also summed up how the fear of real estate losses just may bring about such losses. ‘They’re not loaning the money after they’ve made a written agreement to do so because of what they feel might happen in the future. They created the problem [through lax lending] but their solution is making it worse.’”

The Lebanon Daily News from Pennsylvania. “Lebanon County Realtors say the county’s real-estate market has slowed but is still healthy.”

“‘It’s not booming like it was for two years, but we’ve eased back to a normal market,’ said Melissa MacBride, who is secretary of the Lebanon County Association of Realtors. ‘We’re not seeing homes fly off the market in two or three days, but that’s not typical.’”

“‘We hit those glory years, and you can’t stay there forever,’ said Irene Pickett, president of the county association.”

“Average Lebanon County sales prices have increased every year since 2002, when the mean figure was $115,464. In fact, since 1990, prices have risen every year except 1997 and 2001.”

“‘It’s not all gloom and doom, as depicted in the national media,’ MacBride said.” “‘It really isn’t that bad,’ Pickett said. ‘It has tightened up for people with poor credit.’”

“Pickett said she has seen the lending industry evolve. ‘When I first got into real estate, people had to have 10 percent down unless you were working with FHA (Federal Housing Administration loan programs),’ Pickett said.”

The Evening Sun from Pennsylvania. “Higher gas prices could be to blame for a slight drop in home values throughout the southern region of York County last year, officials are saying.”

“‘I think the higher gas prices have slowed the migration from Maryland to York County a bit,’ said Steve Snell, executive officer of the Realtors Association of York and Adams Counties.”

“The fact that homes in the southern region of the county have historically been the most sought-after might have contributed to the price drop. ‘Those school districts were the hottest in the county and may have cooled the quickest,’ Snell said.”

“Most real-estate experts agree that with more active listings on the market, a situation that often allows for added room to negotiate price, and mortgage rates staying at or below 6 percent, this continues to be a good time for people to buy a home.”

“In the first 11 months of 2007, York County boasted 3,142 active real-estate listings, compared with 2,524 in the prior year.”

“Despite added inventory, the number of homes sold within the first 11 months of 2007 dropped 8.9 percent to 4,953, compared with 5,436 in 2006.”

“Dominic Arcuri, associate broker with Morgan-Collins Realtors, said the drop in home sales has its roots in how the real-estate industry has been perceived by potential buyers.”

“‘Our industry is suffering through a perception problem,’ he said. ‘When you pick up the newspaper or turn on the TV, you hear how bad the market is.’”

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