The Housing Bubble

The Daily Sentinel reports from Colorado. “A remarkable run-up in property values in the last few years appears to have reduced the appetite of some would-be buyers and left others on the outside looking in at what could have been. Real estate sales in Mesa County sank more than 11 percent to 6,424 last year from 7,241 in 2006, according to a year-end report produced by Stewart Title Company in Grand Junction.”

“Exasperating the decline was that real estate sales plunged 20 percent in the fourth quarter ending Dec. 31. That marked the sixth quarter in a row that real estate sales were lower than the comparable period in the previous year.”

“”It seems so healthy. Retail sales are strong … and we have job growth. They wonder how this can happen,’ said Bob Reece, who researched and authored the report. ‘I think the basic person with a pocketbook is looking at what they can afford or reasonably purchase … but they are struggling at this point.’”

“The report showed that a total of 19 homes, priced between $750,000 and $1 million, were sold between Nov. 30, 2006 and Dec. 1, 2007. At the same time total listings in that price range increased to 40. Data for homes priced above the $1 million threshold were nearly the same.”

“That, Reece said, showed homes in those categories took more than a year to sell. The slowdown comes on the heels of 65 percent run-up in local housing prices in the past five years, Money magazine noted in its December issue.”

“No question,’ said Denny Granum, president of Monument Homes in Grand Junction, on the length of time it takes to sell houses at the far end of the pricing spectrum.”

“Granum, whose company specializes in the $500,000 and up market, said he ‘peeled back the prices on a couple of houses in areas where they were a little higher priced’ than they should be for the market. ‘It’s business,’ he said.”

The Arizona Republic. “Single-family home resales and the median price are falling across the Southwest Valley, with Avondale being hit the hardest. Avondale saw a 31 percent drop in the number of homes resold in 2007 compared with ‘06, and an 11.5 percent drop in the median price of those homes.”

“Buckeye experienced an 8 percent drop in the median price of those homes. Goodyear, Tolleson and Litchfield Park also saw decreasing resales and the median price. Those are among the findings of Realty Studies of the Morrison School of Management at Arizona State University.”

“The declining resales and median prices stand in stark contrast to the booming real estate market experienced in the Southwest Valley in 2005, when people looking for homes were competing with investors, driving up sales and prices to levels never before seen in the area. That rapid growth of sales activity and prices was largely due to the ever-increasing involvement of investors in the market, according to Jay Butler, director of Realty Studies.”

“‘Many investors have found it increasingly difficult to rent and are trying to sell their homes before they lose them to foreclosure or to sell them to lock in any appreciation,’ Butler said.”

“‘Many investors have found it increasingly difficult to rent and are trying to sell their homes before they lose them to foreclosure or to sell them to lock in any appreciation,’ Butler said.”

“‘Another source of trouble properties are those households, in anticipation of continued appreciation, bought more home than they could afford and probably used non-traditional financing to acquire it. Thus, confronting financial issues, these households are trying to sell in order to obtain some appreciation and/or to avoid foreclosure,’ he added.”

“James White, with West USA Premier Properties in Avondale, said many buyers are just waiting for the market to bottom out.”

“‘You buy a home, and the next week it drops $30,000, nobody wants that,’ White said. ‘That’s the biggest problem. The buyers are there. I get a lot of calls and inquiries from buyers, and they’re hesitating and they’re waiting.’”

“‘Speculators were the guys who thought they were going to come up here and grab that bubble and ride it out, and they had that situation where they had to hold the house 18 months,’ said Realtor Carl Chapman.”

“In many cases, builders put 12- to 18-month deed restrictions on homes they sold, and wouldn’t allow the homes to be rented, Chapman said.”

“‘During that 18 months, the houses all came due about that same time, and that’s a whole ton of these brand-new houses,’ he said. ‘If you look at the Internet and look for homes that were completed in 2006 and never lived in, there are just tons of them out there, beautiful homes, great bargains.’”

“Chapman said Avondale has a lot of those homes that were never lived in and are considered resales. Resales are also facing a lot of competition from those selling new homes, Chapman said.”

In Business Las Vegas from Nevada. “What’s in store for the Las Vegas housing market in 2008? Dennis Smith, president of HomeBuilders Research, says 2008 can’t be any worse than 2007.”

“Smith says he expects new home prices to show year-over-year decreases of 10 percent to 15 percent during the first quarter. By midyear, it will be 8 percent to 11 percent and by the end of the year, price reductions should be about 5 percent over the last months of 2007.”

“That means, he says, there isn’t much more of a bottom when it comes to the new home market. ‘Homebuilders are very near the end of their price cuts in Las Vegas,’ Smith says.”

“An appraiser, he says, recalled going to subdivisions and seeing concessions as high as 33 percent with the typical concession offered by builders at 20 percent. Many subdivisions have lowered prices by as much as $80,000.”

“Those who continue to wait for more price declines are gambling, he says.”

“The number of homes bought with jumbo mortgages tumbled 80 percent in November compared with November 2006, DataQuick reported. It said 5.2 percent of total home sales were financed with jumbo loans in November, down from an average of 12.3 percent during the first seven months of 2007.”

The Reno Gazette Journal from Nevada. “After building permits for housing in Reno, Sparks and Washoe County dropped last year to the lowest levels since the early 1990s, home builders said they are waiting on the sidelines or cutting prices to survive through 2008.”

“Single- and multi-family residential building permits dropped 67 percent since peaking at 6,404 permits in 2005. The 2,089 permits for 2007 are 39 percent lower than the previous year and the lowest number of new home permits in 15 years.”

“The number of construction jobs in the Reno-Sparks metropolitan area has declined as well; the building trades employed 20,900 in November, down by 2,600 from a year earlier, according to state statistics.”

“‘The best thing, in the short term, is building permits fall even more,’ said Perry DiLoreto, a Damonte Ranch developer in south Reno. ‘As they fall, supply will have a chance to match itself with demand. But I don’t think it’s going to turn around soon. We have some problems to sort through.’”

“Paul Curtis,CEO for the Kiley Ranch development in Sparks, said his company has taken a similar tack. ‘We basically pulled all residential land for sale off the market,’ he said. ‘Why chase the market down?’”

“Curtis said large public home builders are dragging down the housing market. They’ve written down the value of their land and are pricing homes with the lower land values.”

“DiLoreto said the big drop in permits in 2007 is not surprising, given the spike in 2005 and soaring prices because of speculation. Now, prices are falling as builders try to get rid of some excess inventory and find a price level to win back buyers. Construction materials also are on the decline.”

“‘The first thing is all the air has to get out of that bubble,’ said DiLoreto, who is also a land developer.”

“Tom Sabini, general superintendent for Bailey Dutton Homes, said his company cut home prices by $20,000 across the board this week at its four subdivisions in Reno to reduce its inventory of unsold homes.”

“‘We are at the bottom,’” Sabini said, of the housing market. ‘We have to crawl to get out.’”

“He agreed consumer confidence is the key. ‘It’s mob driven,’ he said.”

“To survive, Sabini said Bailey Dutton has reduced its work force from 145 to 25 employees. Sabini said a lot of his subcontractors also are hurting. ‘It’s a shame,’ he said. ‘Some of them have subcontracted with us for 25 years.’”

“One of them, Reno Truss Inc., dropped its work force from 200 to 60 over the past year, said Michael Ellis, sales and marketing manager. ‘We have cut back people. We have cut back pay. We have cut back prices,’ Ellis said. ‘We are trying to survive.’”

“‘(The year) 2005 was too much,’ he said. ‘The major builders came in and overbuilt like crazy. It has flooded the market.’”

“DiLoreto said some builders are offering a few homes for sale at huge discounts to find out what buyers are willing to pay.”

“‘Part of the problem is the false economy we were operating on,’ DiLoreto said. ‘There were a lot more buyers in the market than there should have been, both speculators and those who shouldn’t have been in conventional (lending) terms…Builders raised their prices and rushed to supply more product. But a lot of them weren’t buying homes to live in and they weren’t qualified buyers.’”

“But he also said a number of people are renting, waiting for their move. ‘I don’t blame them,’ he said. ‘They want to know a house is worth what they pay for it.’”

“About 400 new condominiums in Kiley Ranch are being rented. What would help, Curtis said, is for home prices ‘to come in line with wages.’”

Some housing bubble news from Wall Street, Washington and beyond. Bloomberg, “ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month’s grace to unwind $60 billion of credit-default swap contracts that it can’t pay. ACA was founded in 1997 by former Fitch executive H. Russell Fraser, who left the ratings company in 2001 as it shifted focus to structured finance from municipal bonds.”

“Fraser said his idea was to start an A-rated municipal bond insurance company to guarantee a new crop of borrowers he sometimes called ‘the cream of the crap.’ ACA’s larger competitors such as Ambac and MBIA had enough cash to get the top AAA ratings on their insured bonds.”

“The bond insurers, also known as monolines, guaranteed $127 billion of CDOs backed by subprime-mortgage securities as of June 30, according to S&P. Bond insurers’ shares plunged last week and credit-default swaps rose to a record on concern the companies may be unable to meet their obligations as the subprime-mortgage securities and collateralized debt obligations they guarantee slump in value.”

“Ambac Financial Group Inc., the second-largest bond insurer, had its AAA credit ranking cut to AA by Fitch Ratings. Both Ambac and its larger rival, MBIA Inc., are under threat of losing the top grades from Moody’s Investors Service and S&P, a move that would throw doubt on the ratings of $2.4 trillion of securities.”

The Globe & Mail. “‘It’s a turn of events that has grabbed the attention of credit markets,’ said strategist Stewart Hall at HSBC Securities Canada Inc. ‘If you lose the insurers you have to consider what kind of cascading events occur.’”

“‘We have underestimated the extent of the poor underwriting across the entire mortgage-backed securities and collateral debt obligation market. This kind of systemic failure to assess risk has been difficult for us to believe,’ said Citigroup analyst Heather Hunt.”

“The risk of European companies defaulting soared to a record on concern credit ratings cuts at bond insurers Ambac Financial Group Inc. and MBIA Inc. may trigger forced asset sales and worsen credit market turmoil.”

“‘The major risk for credit markets remains forced selling on the back of downgrades of the insurers,’ said Jochen Felsenheimer, the Munich-based head of credit derivatives research at UniCredit SpA, Italy’s biggest bank. ‘The problem right now is there seems no way out.’”

“Credit-default swaps on Ambac, the second-biggest insurer, soared last week to $2.6 million upfront and $500,000 a year to protect $10 million in bonds, implying a more than 70 percent chance of default in the next five years, according to a JPMorgan valuation model.”

“It cost $2.6 million upfront and $500,000 a year for a similar contract protecting MBIA debt, signaling traders also see a more than 70 percent default risk in the next five years.”

“WestLB AG, Germany’s third-biggest state-owned lender, said today it will report a full-year loss of about 1 billion euros ($1.45 billion) and shore up capital after writedowns and trading losses triggered by worst U.S. housing slump in 26 years.”

From Reuters. “WestLB said its owners, local community savings banks and the state government of North Rhine-Westphalia, would foot the bill for the losses. It puts Germany back in the spotlight as one of the countries worst affected by the credit markets crisis, which almost sank two German banks and has sucked in many more.”

“In a letter to staff, WestLB CEO Alexander Stuhlmann also warned that further writedowns on withering subprime investments could not be ruled out.”

From Spiegel Online. “WestLB said that in addition to the loss it also expected to shoulder €1 billion in writedowns. Meanwhile, fears of a US recession led to sharp stock market losses on Monday with the German blue-chip DAX index falling as much as 7 percent in hectic trading before stabilizing in late afternoon. It was the biggest daily decline since the September 11, 2001 attacks.”

“‘There’s naked panic here — we’re seeing a classic crash,’ said one share trader. Analysts at JP Morgan Asset Management said investor sentiment had reached ‘panic level.’”

“WestLB will lower costs and ‘can’t rule out’ job cuts, said spokesman Marc-Sven Kopka. The state lender, which had 6,205 employees at the end of September, may cut as many as 2,000 jobs, German newspaper Rheinische Post reported yesterday.”

“WestLB has provided financing to about $14 billion of investment funds to prevent a fire sale of their assets after they couldn’t raise funding on the debt market. It extended a credit line for its $11 billion Harrier Finance structured investment vehicle as well as Kestrel Funding, which has $2.9 billion of senior debt, to help repay commercial paper.”

“The bank said in November that it would post a full-year loss because of the ’substantial price losses of structured securities.’ WestLB at that time forecast a ‘low three-digit million-euro loss’ before taxes.”

From Deutsche Welle. “Just a few months ago WestLB issued a statement assuring investors that its exposure to subprime securities in the United States was ‘relatively limited.’”

“In August 2007, WestLB said there was little reason for concern that it would get caught up in the US subprime crisis as 98 percent of the bank’s securities were rated ‘A’ or better. ‘The commitment is relatively limited, and its rating is very high, which signals that we do not have to be too concerned,’ a spokesman said.”

“German stocks fell for a fifth day Monday. Commerzbank led declines…on news that it was also being downgraded due to losses related to the subprime market tension. The bank’s losses are expected to be about 210 million euros for the fourth quarter of 2007, according to US investment bank Bear Stearns.”

“‘The situation remains tense,’ Michael Scholz, an equity strategist with WestLB AG told Bloomberg Television. ‘January has been a disaster for share prices so far. If this continues, we’ll have a problem this quarter.’”

The Associated Press. “Shares in China’s banks fell sharply Monday after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.”

“The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities. Also Monday, China’s banking regulator warned that lenders might face risks from fluctuations in fast-rising real estate prices.”

“Bank of China is expected to announce a ’significant writedown’ on its $7.95 billion in U.S. subprime mortgage securities, Hong Kong’s South China Morning Post newspaper reported, citing unidentified sources.”

“‘The subprime woes in the U.S. have raised concerns at home about risks in the domestic mortgage market and prompted selling in banking and real estate companies,’ said Wang Junqing, an analyst at Guosen Securities in Shanghai.”

“China’s banks have seen revenues and profits soar in recent years, driven by a fast-growing economy and rising real estate prices. But the country’s industry regulator warned in a report released Monday that they might face higher risks from fluctuating real estate prices and financial conditions.”

“‘Property market price fluctuation possibly could increase credit risks facing the banking industry,’ said Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, said in a report.”

“Chinese regulators have raised interest rates repeatedly over the past year and tightened lending standards in an effort to cool a boom in investment in real estate and other assets. They have warned repeatedly that runaway spending could lead to a debt crisis if investors in ill-conceived plans default on loans.”

The Sydney Morning Herald. “Almost $43 billion was wiped from the Australian sharemarket yesterday after panic selling caused the 11th consecutive day of losses.”

“The longest sell-off in 26 years, and the strong prospect of more days of red ink to come, takes the market’s losses since the start of this year to almost $200 billion, as fears of a recession in the US continue to cause havoc on global sharemarkets.”

“Investors dumped financial service companies because of fears they could be hit by the fallout from the US subprime mortgage meltdown.”

“‘What perhaps we are seeing a foretaste of is that most financial companies can go bust because they have so much leverage,’ said Hugh Giddy, a portfolio manager at Cannae Capital Partners. ‘Allco, MFS and some of the property trusts are all in danger if they have too much leverage - people are becoming risk averse about lending money.’”

“‘They are battening down the hatches for recession. This isn’t over; simply because of the pattern of refinancing of subprime,’ said Colonial First State’s head of investment markets research, Hans Kunnen.”

“Jean-Claude Trichet and Lawrence Summers accurately warned investors a year ago about being too complacent.”

“Former U.S. Treasury Secretary Summers returns to the World Economic Forum in Davos, Switzerland, this week urging quick action in the form of economic stimulus to head off ‘a cascading loss of confidence’ in the U.S. economy after the collapse of its housing market.”

“‘When you have recessions from bubbles bursting, they tend to be protracted,’ says Summers, a Harvard economist. ‘There is the possibility, not yet at all the probability, that a recession could prove long and severe.’”

“As the hubris that Trichet and Summers decried last year is replaced by fear, an aversion to risk-taking may worsen the outlook for the world economy.”

“‘Davos was marked last year by an irrational exuberance,’ Josef Ackermann, CEO of Deutsche Bank AG, Germany’s largest bank, said in an e-mailed response to a question. ‘I hope that we don’t swing to the opposite this year and give in to an irrational depression.’”

“Bankers are dumping derivatives that drove the credit boom. At the same time, they’re constraining lending and eliminating jobs.”

“‘We have to pay for the sins of the past,’ Klaus Schwab, the World Economic Forum’s founder and chairman, said in a Jan. 11 interview. ‘The mood of Davos has changed.’”

“Trichet said at the 2007 forum that a ‘reappreciation of risk’ was ‘likely.’ Summers compared the confident mood then with the market sentiment that prevailed just before World War I.”

“The financial crisis may turn out to be one of the worst ever, concludes a new paper co-written by Davos speaker Kenneth Rogoff of Harvard, the former chief economist at the International Monetary Fund, and Carmen Reinhart of the University of Maryland.”

“‘The big question is how deep the losses in the banking sector will be,’ Rogoff said in a Jan. 15 interview. ‘They will be at least $300 billion to $400 billion, which would be a moderate crisis. But if house prices continue to drop, we could see two or three times those losses, and it will one of the bigger financial crises.’”

The Press Telegram. “The call to freeze interest rates is fast becoming the rallying cry for Democratic presidential candidates. Hillary Rodham Clinton is the latest to jump aboard. During a debate in Nevada last week, she called for an immediate five-year freeze on mortgage interest rates.”

“Interest rates move in response to many stimuli - too many for the government to lasso. And they are pretty much a private-sector affair. Those interest rates the candidates want to freeze are a revenue stream investors bet on.”

“‘You would be getting a forced haircut on your investment from the government,’ said Keith T. Gumbinger, VP of mortgage-rate tracker HSH Associates.”

“Fortune magazine senior writer Jon Birger offered this harsh assessment in an article that popped up on CNN.com: ‘Hillary Clinton is no dummy. Even her detractors know that. And yet in last night’s Democratic presidential debate in Nevada, Clinton floated what is perhaps the dumbest solution to the current mortgage mess I’ve heard from a top presidential contender.’”

“This is a bad time for all the players in the mortgage pool, and a rate freeze could make it worse.”

“‘It certainly would not speed the recovery of the housing market,’ Doug Duncan, chief economist of the Mortgage Bankers Association, told Birger in the story. ‘The problem now is that investors are already worried about what the risks are, and (a rate freeze) would only widen risk premiums more.’”

“Gumbinger also points out that whoever wins the presidency - Democrat or Republican - won’t take office until a year from now.”

“‘I think a year from now the problem in the American mortgage market is going to look drastically different than what we’ve seen so far,’ he said.”

The Statesman Journal. “I need a man. A man who can say ‘No.’ A man who rejects Big Nanny government. A man who thinks being president doesn’t mean playing Santa Claus. A man who won’t panic in the face of economic pain. A man who won’t succumb to media-driven sob stories.”

“A man who can look voters, the media and the Chicken Littles in Congress in the eye and say the three words no one wants to hear in Washington: Suck. It. Up.”

“Which leading GOP candidate represents fiscal accountability and limited government? Who will take the side of responsible homeowners and responsible borrowers livid at bipartisan bailout plans for a minority of Americans who bought more house than they should have and took out unwise mortgages they knew they couldn’t repay?”

“I don’t want to hear Republicans recycling the Blame Predatory Lenders rhetoric. Enough with the victim card.”

“Borrowers are not all saints. There’s nothing compassionate about taking money from prudent, frugal families and using it to aid their reckless neighbors and co-workers who moved into McMansions they couldn’t afford or went crazy tapping their home equity and now find themselves underwater.”

“Economist Tyler Cowen points out…something you never hear politicians spotlight. He notes, ‘As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications,’ according to research on more than three million loans done by BasePoint Analytics.”

“‘Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents by using computers.”

“‘Too often, mortgage originators and middlemen looked the other way rather than slowing down the process or insisting on adequate documentation of income and assets. As long as housing prices kept rising, it didn’t seem to matter.’”

“As we head toward Super Tuesday, the subprime mess and the economy will dominate, and the Do Something Democrat candidates will turn their spigot of overextended homeowner sob stories on full blast. Do Republicans want a clear alternative? Or will you settle for a lip-service conservative who will reward fiscal recklessness with only slightly less government intervention than the Dems?”

“Message to Washington: Stop treating every defaulting borrower like Mother Teresa.”

The Des Moines Register reports from Iowa. “Jamie Sammons was 25, married and wanted to ’stop throwing away money on rent.’ He and his wife bought a townhouse in Ankeny. They paid $139,000 for it in 2002 with the idea that five years later they could sell it, get out the money they paid in and buy a house. ‘It just seemed like a nice strategic move for building equity,’ Jamie Sammons said.”

“Now he’s not so sure. With a 2-year-old and a toddler in the family, he and his wife want to buy a larger home. Sammons said they’ve had their townhouse for sale for about one year, gradually reducing the price to the point that he now guesses he would lose $15,000, if he can find a buyer.”

“Sammons is far from alone in Ankeny, according to Heath Moulton, a local real estate broker. Moulton said he frequently meets with clients who likewise would go upside-down by that much money or more if they tried moving out of their Ankeny townhouse.”

“Moulton said he thinks the Ankeny townhouse market will continue to get worse until the construction of new townhouses is slowed significantly. ‘We’ve created such a supply,’ he said. ‘There’s really no need for new ones’ to be built at the same rate.’”

“Sammons wondered if the only solution to his family’s dilemma is to wait and hope the market improves. Their townhouse is getting cramped with the two kids, he said, but they would rather not lose money to move into a larger place.”

“‘We’re faced with two choices: either stick it out until things get a little better,’ he said, ‘or, obviously, turn it upside down and try to get out.’”

The Post Tribune from Indiana. “In less than 10 years, foreclosures on Porter County homes have almost tripled, shooting to nearly 500 in 2007. Former Courts Clerk Dale Brewer recorded 192 foreclosures through her offices in 1999, and that increased to 406 in 2003, the last year she had time to keep those records.”

“‘It looks like it started in 1999 to pick up,’ she said. ‘What I was seeing was all different kinds of people. It could be people are relying on credit too much.’”

“Allen Watkins, who has bought homes and offered foreclosure alternatives in Porter County for 11 years, blamed lenders being overly flexible in guidelines in subprime markets. ‘When those payments go up, either people can’t pay it or they get frustrated and stop paying,’ Watkins said. ‘It was a simple recipe for failure.’”

ABC 7 Chicago from Illinois. “If you wander by Jackson and Jefferson in the Loop, you’ll see probably the biggest crane you’ve ever seen in your life. Alan Lev is adding eleven stories to the century-old warehouse and turning it into a hip place to live.”

“Lev is also the incoming president of the Homebuilders’ Association of Greater Chicago, and he knows about the perils facing Kimball Hill and other developers such as Neumann Homes, which filed for bankruptcy last fall.”

“‘I think in some areas there were too many units being built, and we are now seeing that there are some developers that are not going to weather the current storm. And there’s more inventory in some places that the market can’t absorb, and it’s going to burn off,’ said Lev.”

“You can see the inventory around Chicago. The entrepreneurs behind developments like them face intensifying challenges: the summer’s credit crunch, which has lenders being very picky about who they give money to, and falling stock prices, which make investors jittery, and a sharp lack of confidence in the economy.”

“The challenge is sales, really. ‘When there is so much negative news on a daily basis, it makes it more difficult to get people to buy a unit,’ said Lev.”

The Rockford Register Star from Illinois. “From increasing job training to revising floor plans, area home builders are adjusting in a variety of ways to a marketplace that turned from scalding hot to wintry cold in a few months.”

“For the workers who build the houses the adjustments are even tougher: going from weeks where 50 hours wasn’t enough to get all of the work done, to times where they are happy if they work three days out of five.”

“‘I don’t think anybody knew how much housing was inflated by subprime buyers,’ said Darrin Golden, business manager for Electrical Workers Union Local 364 in Rockford. ‘Three years ago, the work was so brisk we couldn’t find enough people to staff it. Now our residential guys are facing 25 percent to 30 percent unemployment, and our apprentices are at 50 percent unemployment.’”

“Zentz & Associates of Rockford concentrates on the condominium market, which may be the most competitive segment as companies try to capture a share of baby boomers looking at retirement.”

“When the market was at its hottest, builders had to pay premium prices for land because ‘you can’t run the train if you don’t have land for the tracks,’ said Founder Steve Zentz. That means some builders are sitting on land that is doing nothing for them except running up costs.”

The Detroit News from Michigan. “Metro Detroit’s real estate market was socked hard last year, marked by the largest drop in home prices since the Reagan administration, the third-consecutive drop in annual home sales, the lowest number of new home permits since at least 1969, and a massive wave of foreclosures that drove thousands from their homes.”

“Out of desperation, Rob and Kelli Clifton of Ortonville tried swapping their lakefront home this summer without any luck. That was after they twice tried selling the home through a Realtor and reduced their asking price more than $30,000 since they first put it on the market in late 2006.”

“‘It’s tough,’ Kelli Clifton said. ‘We’ve tried selling it as a summer home. We’ve renovated. We’ve advertised everywhere. But right now, we’re stuck.’”

The Detroit Free Press from Michigan. “It sounds too good to be true. But in fact, buyers can find scores of historic, large homes available for astonishing bargains — some under $200,000 — in beautiful Detroit neighborhoods, deals that real estate agents say haven’t been this good in decades.”

“But what frustrates real estate agents and owners is the struggle to sell such historic gems — even at these prices. And some have slashed their asking prices by tens of thousands of dollars.”

“Buyers have long been able to get more house for their money in Detroit than most suburbs, but today’s deals in the city are at ‘a whole new level,’ said said Ron Simpson, the outgoing president of the Detroit Association of Realtors.”

“‘I’ve been doing this 30-some years,’ he said. ‘And the prices now are back to where they were 20-some years ago.’”

“It took weeks, but real estate agent Caroline Lynch got two lenders to agree to take an $89,000 offer on a Howell condominium even though the homeowner still owed $132,000 on the mortgage. All that remained was to negotiate a discount on the $9,500 in delinquent association fees and charges from an attorney representing the association.”

“But neither the association nor its attorney would budge, said Lynch. Lynch added that two prospective purchasers walked away rather than pay the fees. ‘They’re killing sales. It’s just a nightmare.’”

The Daily Press & Argus from Michigan. “Foreclosures in Livingston County have more than tripled in the past three years, hitting an all-time high of 1,029 in 2007.”

“‘I am not hearing that they will be going down anytime soon,’ said Sally Reynolds, Livingston County register of deeds. ‘Of the people I have heard talk about it from the field, they say that this first quarter is going to be higher in numbers.’”

“As of Wednesday, Reynolds recorded 56 foreclosures for the month. ‘We had 38 on Jan. 9,’ she said. ‘For January 2007, we had 38 for the whole month.’”

“‘As far as price, there doesn’t seem to be a range of prices that are being foreclosed,’ she said. ‘I see it in every township and in every area.’”

The Journal Sentinel from Wisconsin. “With tumultuous 2007 finally over, the residential real estate industry in Milwaukee is hoping to exhale. December was so slow that ‘you wondered if your phone was working,’ said Beth Jaworski, a broker and chair of the Greater Milwaukee Association of Realtors.”

“Many sellers who tried in 2007 to hold out for their target prices finally gave in, evoking offers from buyers worried about overpaying, said Jaworski.”

“‘Reality has to set in,’ said Kathleen Winkelmann, an agent in Milwaukee. She and other agents said they’re working harder to craft incentives to grab attention for their listings. And asking prices are now on Post-It notes, not labels, subject to fluctuating local market conditions.”

“Still, foreclosure fallout opened 2008 with another act in what is turning out to be a long-running drama, with lender losses mounting beyond even the most pessimistic predictions of 2007.”

“After a record year for foreclosures, a stunning 1,000 Milwaukee County properties already have been scheduled for sheriff’s sales in the first nine weeks of 2008, with a record 200 put up for sale in just one day earlier this month, records show.”

“Local officials now say they are worried that the high tide of foreclosure sales - more than 2,800 properties were scheduled for sheriff’s sales in 2007, a 60% increase over the previous year - could easily become a tsunami in 2008.”

“‘When I started in 1998, there were fewer than 800 for the entire year, maybe 20 or 30 a week,’ said Eileen Carlson, a civilian employee of the Sheriff’s Office who helps supervise the weekly sale of foreclosed property. ‘We’ve already issued 1,000 docket numbers for 2008. We’re already booking sales into March.’”

“‘The money was easy, and people thought the value of the properties they bought would just continue to appreciate,’ said Milwaukee City Assessor Mary Reavey. ‘Some people just overbought and then they couldn’t make the higher payments.’”

“Some people also got taken by scams in which unscrupulous brokers teamed up with appraisers to sell properties at prices far greater than the city’s assessed or fair market value, she said. ‘There was a lot of hanky-panky going on, and there were a lot of unsophisticated buyers who were taken advantage of,’ Reavey said.”

The Star Tribune from Minnesota. “Home sale prices dipped in 2007 for the first time in at least 20 years and are expected to remain flat or fall slightly in the coming year, officials from several Twin Cities-area real estate groups said.”

“‘It’s significant in that prices declined,’ said Mark Allen, CEO of the Minneapolis Area Association of Realtors. ‘But insignificant when you look at long-term price growth.’”

“But the first price decline in two decades of record-keeping debunks the long-held notion that home prices in this market don’t fall. Whether this decline signals a long-term trend or is just a blip is anyone’s guess, but the slowdown has already left plenty of victims. The number of foreclosures in Minnesota doubled in 2007.”

“Some home builders have resorted to mass auctions to unload new but empty homes.”

“Condo sales in downtown Minneapolis and St. Paul haven’t kept pace with development plans, forcing developers to scrap several high-profile projects. The story was similar in the suburbs, where new projects came to a virtual halt while builders and developers focused on reducing inventories of unsold homes.”

“Todd Bjerstedt, VP of a data research company in Hudson, Wis., said there still is a glut of unsold new houses on the market, but that inventory levels have come down slightly.”

“As of December there were 3,548 houses that were finished but not sold, he said, down from a peak of 4,552 in April. And the number of ready-to-be-built lots peaked at 42,524 in August, but dropped slightly to 42,287 in December.”

“‘Until this inventory is drawn down, we can’t really expect normal construction activity,’ he said.”

“Tom Musil, director for the Shenehon Center for Real Estate at the University of St. Thomas, said that given the rapid price increases of recent years, a decline was inevitable.”

“Tony Pistilli, chief retail appraiser at U.S. Bank in Minneapolis, said that even though optimists already are talking about a recovery, 2007 marked just the beginning of the market correction.”

“That, combined with the fact that the market oversold itself in 2005 and 2006, doesn’t bode well for price increases in 2008.”

“‘I don’t think people are comfortable buying into a declining market,’ Pistilli said. ‘Time will tell. There’s still a huge inventory of properties that has to get sold before people get more comfortable.’”

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