The Housing Bubble

The Sacramento Bee reports from California. “DataQuick Information Systems Inc. said foreclosures in California jumped to 31,676 in the quarter, the most since DataQuick began tracking those numbers in 1988. For the whole year, foreclosures rose sevenfold, to a total of 84,375. ‘We’re still climbing to a peak in foreclosure activity in California,’ said DataQuick analyst Andrew LePage. ‘We don’t even have a sign of the peak.’”

“Linda Caoili, (an) agent who works with homeowners struggling to prevent foreclosure, said the decline in prices makes some clients feel their home can’t be saved. One Natomas-area client, who bought her home for $420,000, just watched an identical home across the street sell for $315,000 after foreclosure, Caoili said. This client, like others, is nearly ready to give up her home.”

“‘They’re living on credit cards now. There’s no equity left,’ she said. ‘I’m seeing people who have been able to hang on (but) are turning around and saying, ‘Hey, why am I hanging on? I’m $150,000 upside down.’”

“Steve Galster, co-owner of Galster Group real estate in Fair Oaks, said lenders ‘are pricing them to sell.’ His firm just listed an Elk Grove home that sold in 2004 for $420,000 and fell into foreclosure. The bank is now asking $299,000. ‘I guarantee that’ll sell this week,’ he said.”

The San Francisco Chronicle. “The housing market’s vicious downward cycle wreaked more havoc in 2007, as record numbers of people in the Bay Area lost their homes to foreclosure, according to a report. The numbers of foreclosures are huge compared with current real estate sales. For example, in Contra Costa County, the 1,558 foreclosures in the fourth quarter are almost equal to the 1,589 homes that were sold in the same time period.”

“For the fourth quarter, Bay Area foreclosures rose 482.5 percent to 4,573, compared with 785 in the year-ago quarter. Again, Contra Costa County, with 1,558 foreclosures, up 533.3 percent from a year ago, had the most homes repossessed, followed by Alameda County with 1,026 (a 514.4 percent increase) and Solano County with 704 (up 528.6 percent).”

“Edward Payne, 70, and his wife Waveline, 71, have owned their four-bedroom San Pablo house since 1965. The Paynes are raising their grandchildren, because their daughter, the children’s mother, ‘took off,’ Edward Payne said.”

“After multiple refinances, their monthly payments are now $3,800 - even though their household income is just $4,000 a month from Social Security and a pension.”

“In April 2006, they refinanced again, bringing their total debt on the house to $505,000. Since home values have slumped, the house is now worth about $465,000, they say. They have not made a mortgage payment in three months. The mortgage is scheduled to reset $738 higher in April.”

“Payne said he thought he would be able to refinance his way out of trouble, as he has done before. ‘I didn’t realize the housing market would fall. It’s hard to sleep at night,’ he said. ‘I just lay there, just thinking about it. If it wasn’t for the grandkids, it wouldn’t be so bad. We could find a place for just Waveline and me.’”

The Marin Independent Journal. “Home foreclosures quadrupled in Marin in 2007, reaching record levels, and will continue to rise this year, it was reported Tuesday. ‘It shows that Marin is not immune from these larger forces out there,’ said DataQuick analyst Andrew LePage. ‘Marin has grown less than most counties, so it actually means a little more to be back at record levels.’”

“In Marin, the median price peaked in June at $1.12 million but has dropped to $836,000.”

“‘I think even this county is being affected by the slowdown in the housing industry,’ said Jim Chapman of First Security Loan in San Rafael. ‘I’m not sure this isn’t just a horrible, normal cycle.’”

The Press Democrat. “A record number of Sonoma County residents lost their homes in 2007 when they no longer could afford to pay their mortgages. Lenders sent 968 default notices in the fourth quarter to Sonoma County borrowers who fell behind on their mortgage payments, up from 749 in the third quarter and triple the number from a year ago.”

“Overall, lenders sent 2,586 default notices last year, shattering the previous record of 1,625 in 1996.”

“‘We’re working our way through risky loans. Those are all adjusting and payments are going up thousands of dollars a month. People are seeing their values decline more and more, and so people are just going, ‘There’s no hope.’ They owe more than the home is worth, so why fight the mortgage payment,’ said Alison Fetherolf, VP for Sterns Lending.”

“Agent Belinda Andrews is busy trying to help homeowners avoid foreclosure by selling properties for less than what they owe lenders, known as a short sale. She has about 40 clients attempting short sales.”

“‘I started with a handful a year ago, and now I’m probably getting two a week,’ Andrews said. ‘The loans I’m seeing now compared to a year ago are very bad. These are people that really stretched.’”

The Modesto Bee. “Final 2007 foreclosure statistics are in and they’re brutal. More than 8,000 homes in the Northern San Joaquin Valley were repossessed by lenders last year. That’s nearly 10 times more than were lost in 2006.”

“Foreclosures in Stanislaus, San Joaquin and Merced counties are among the highest in the nation. ‘You guys have been slammed,’ LePage said. ‘In some pockets of your region, it’s about as bad as it gets.’”

The LA Times. “Leandro Hernandez of Chino Hills…tried to sell his house in 2006 to get out of a mortgage he couldn’t afford but found no takers.”

“Faced with a house worth less than his loan balance, he’s trying to cut a deal with his bank. But if the lender won’t budge, Hernandez says he knows what he will tell them. ‘Foreclose me,’ he said defiantly.”

“Hernandez knows that an eviction is a lengthy process. ‘I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.’”

“Woodland Hills broker Eli Tene specializes in short sales. He said affluent homeowners were increasingly distressed. ‘Those people overextended to get in to those neighborhoods. I have people in Calabasas, Encino, Woodland Hills, Agoura,’ he said.”

“When prices drop, some homeowners who owe more on their property than it is worth will often walk away, noted Leo Nordine, a Hermosa Beach broker who sells repossessed homes for banks. Nordine said his workload had doubled in the last year.”

“‘When people see appreciation, they fight to hang on to their house,’ he said. ‘When they see it going backward, they’re more likely to give up.’”

“The foreclosure peak of 1996 occurred at the end of an economic recession, economist Christopher Thornberg noted. That makes the sharp rise in foreclosures more alarming, he says, because the recession is just beginning. ‘If you think the market’s bad now, wait a year,’ he said.”

“In a recession, the risk of foreclosure rises because people face sudden hardships such as an unexpected job loss. That’s what happened to Jacqueline and Oscar Arellano of Riverside.”

“The couple bought their six-bedroom house six years ago, before the real estate run-up, for about $300,000. Last March, Oscar lost his job. Within weeks, the couple began falling behind on their monthly payments.”

“Then in October, the payments on their adjustable-rate loan rose to $3,200, from $2,200. Oscar is working again, but Jacqueline was laid off as a loan officer from Countrywide Financial Corp. last fall. They recently received a notice of default, and are trying to sell their house.”

“‘My home’s been on the market for four months and I haven’t had anybody interested in buying it. The market has just died,’ said Jacqueline, who now works as a bill collector.”

The Union Tribune. “Setting dismal records, home foreclosures more than tripled and notices of mortgage default more than doubled in San Diego County in 2007.”

“DataQuick reported yesterday that foreclosures rose 353 percent to 7,349, while default notices increased 128 percent to 20,138. The numbers were the highest since DataQuick began keeping track of county foreclosures in 1988 and defaults in 1992.”

“‘We estimate that about 41 percent of the people receiving an NOD (notice of default) statewide are avoiding an actual foreclosure, while 59 percent lose their homes to foreclosure,’ LePage said.”

“A year ago, about 71 percent were able to emerge from the foreclosure process, he said. ‘With depreciation, we have prices rolling back further and further,’ LePage said. ‘In the worst-hit markets, prices are back to 2004 levels. For people who never had much equity to begin with, or have tapped into equity, there often is no way to refinance. They owe more than the house is worth.’”

“Financial planner Marcus Frampton, 28, recently bought a house near the ocean on La Jolla Boulevard. The previous owner had bought the two-bedroom, 1,500-square-foot house in May 2006 for $1.35 million, Frampton said.”

“‘This one had an open house in June. They were asking $1.1 million. In October, I saw it was still on the market. My buddy is an agent. I asked him to offer $900,000. We ended up settling at $930,000,’ he said.”

“Frampton worries about taking on too much debt, but he’s convinced that he got a deal that will pay off over time. The sale closed at the end of November. Frampton, who had been renting a nearby apartment, said he knew prices would come down, but he didn’t expect it to be this quickly.”

“‘I thought it would take another year’ to reach current levels, Frampton said. ‘I was surprised they took my offer. Because I had this opportunity, I jumped at it.’”

“Homeowners with good credit…stand to benefit the most from the Federal Reserve’s decision yesterday to cut its benchmark interest rate by three-quarters of a percentage point.”

“But the surprise move yesterday by the central bank will offer little, if any, benefit to some of the people in most need of financial salvation – homeowners with high mortgage rates who are unable to refinance because of bad credit histories.”

“With rising delinquencies on many kinds of consumer loans and the prospect of growing unemployment as the economy slows, banks and other lenders ‘do not want to build up a portfolio of loans to people they consider poor credit risks,’ said Dean Baker, an economist and co-director of the Center for Economic and Policy Research.”

“The lower rates won’t help people like the woman who visited the Credit Counseling Bureau of San Diego yesterday morning. She was worried that she won’t be able to afford her home when her $1,400 monthly adjustable rate mortgage payment jumps to $2,400 in June, bureau manager Sunny Enyoghwerho said.”

“‘She’s not qualified to refinance,’ Enyoghwerho said. ‘She has bad credit.’”

Som housing bubble news from Wall Street and Washington. Associated Press, “Shares of MGIC Investment Corp. plummeted more than 30 percent Wednesday, striking a 15-year low, after the nation’s largest mortgage insurance company said paid losses could reach $2 billion this year. By the end of 2007, MGIC said it had 107,120 delinquent loans, an increase of about 16,000 delinquencies from the end of the third quarter.”

“At the end of 2007, MGIC had $211.7 billion in insurance in force. Last month, MGIC said it would limit coverage for borrowers with poor credit and higher risk loans. The company said it it would charge more for some loans in soft markets like Florida and California.”

From Bloomberg. “American International Group Inc., the world’s biggest insurer, will bail out its Nightingale Finance structured investment vehicle, according to Moody’s Investors Service.”

“AIG Financial Products Corp., a unit of the insurer, will either buy the SIV’s $2.2 billion of senior debt or replace it with loans, Moody’s said. ‘Any realisation of current or future mark-to-market losses will be avoided given the support of AIG Financial Products, provided that AIG FP remains a going concern,’ the ratings company said.”

“Nightingale was set up in May by Banque AIG, a banking unit owned by the insurer. The SIV has $49 million at risk from subprime loans through $306 million of collateralized debt obligations.”

“SunTrust Banks Inc., the Atlanta- based bank forced to prop up two of its money-market funds, said profit was almost wiped out by costs from the bailout and home loan defaults. The company spent $1.4 billion to buy distressed assets from the money funds.”

“SunTrust expects higher loan losses and late payments this year, mainly from loans to residential builders and individuals with home equity and ‘Alt-A’ home loans who didn’t qualify for prime loans, CEO James Wells said. Most of the overdue loans are centered in Florida and Atlanta, he said.”

“‘It clearly wasn’t the news I was hoping to deliver this morning,’ Wells said on a conference call today. ‘2008 will be a tough one for loan and revenue growth.’”

“SunTrust set aside $356.8 million for credit losses, citing an increase in overdue mortgage loans and falling home values. That was more than double the $147 million in the third quarter.”

“Non-performing loans, those no longer paying interest, climbed to $1.46 billion from $1 billion. ‘Home-equity lending is one of the Achilles’ heels for SunTrust’ said Chris Marinac, an analyst at FIG Partners in Atlanta.”

From Reuters. “Downey Financial Corp reported a fourth-quarter loss, hurt by higher provision for credit losses as it continues to deal with a weak housing market.”

“Downey reported a $218.2 million increase in provision for credit losses for the quarter.”

The Street.com. “The private mortgage insurance industry is under severe pressure from rising delinquencies and mounting losses. Now questions are swirling about how a potential blow-up in that sector will affect Fannie Mae.”

“Fannie Mae…operates with the understanding that the insurers will pay it back.If one of these insurers takes a massive hit, then Fannie Mae’s underwriting standards may come under scrutiny, and the firm may be forced into buying fewer high-LTV mortgages in the future.”

“In a recent research note, CIBC analysts said the ‘highest losses will be driven by LTVs, not FICO scores.’”

“‘Today, as a higher percentage of people own homes and many of them have taken on ‘too much house’ or high LTV loans, things are different,’ CIBC analyst Meredith Whitney wrote. ‘Many previously considered ‘prime’ customers who took on 80+% LTVs are performing closer to sub-prime loans.’”

“Fannie Mae has $227 billion of exposure to mortgage loans in which the LTV ratios are greater than 90%. Overall, about 19% of the company’s $2.4 trillion single-family mortgage book of business has private mortgage insurance or some other form of credit enhancement.”

“Ohio’s attorney general has sued mortgage lender Freddie Mac, accusing the lending giant of defrauding the state’s pension fund by systematically investing in sub-prime home loans.”

“Attorney General Marc Dann alleges that Freddie Mac, formally the Federal Home Loan Mortgage Corp., ’secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times.’”

“Dann said the lawsuit sends ‘a loud and clear message to Wall Street that this type of fraud and manipulation will not be tolerated by the people who live on the Main Streets that are being devastated by what Freddie Mac has done.’”

The North County Times. “Real estate executives said during a Tuesday conference that investors need to position themselves to survive a tumultuous economy.”

“One example of bubble-era creative restructuring that speakers blamed a credit meltdown on was collateralized debt obligations, securities that are sometimes backed by subprime loans with the highest credit ratings because of a complicated mathematical model, which was used, turned out to be inaccurate.”

“‘Some guy put some numbers into a computer model and reverse-engineered it so it fit what the boss wanted to hear,’ said Burland East, managing principal for Silver Portal Capital. ‘It was a collaboration of stupidity.’”

“East said the fallout from the subprime mortgages gone bad and the housing crisis will take a stark toll on real estate; he expects 75 percent of homebuilders to enter Chapter 11 bankruptcy and land will sell for 10 to 20 cents on the dollar.”

“As a cause for the housing depression, East pointed to younger financial workers who failed to identify and avoid the bubble.”

“‘Every single cycle is the same. It’s like a dog that gets into the trash can. You scold it and it doesn’t go into the trash can for 15 minutes,’ East said. ‘But then it forgets and goes right back into the trash can. That’s the market.’”

“Speakers at the conference said mortgages currently are more difficult to get, take longer to process and the collateralized debt obligation market has evaporated.”

“‘One anecdote I’ve heard is, ‘We’re doing the deals that are low-hanging fruit and anything that’s not, is put at the back of the line. And if we don’t get to them, we don’t care,’ said Janice Sears, managing director for Bank of America.”

“The conference’s keynote speaker, John Robbins of Wachovia Securities, said proposed legislation that allows bankruptcy judges to alter mortgage terms would add $3,000 to $4,000 in costs to the borrower for every mortgage.”

“‘It says when the United States feels like it, it can negate any contract,’ said Robbins, managing director for Wachovia. ‘You’ll kill the U.S. mortgage-backed securities market if you do that.’”

“The Federal Reserve swooped onto the scene Tuesday, flexed its muscles with a surprise rate cut to calm panicky financial markets and flew away promising to return again soon.”

“But it left behind bystanders more confused than ever about the Bernanke Fed and worried that, as superheroes go, this Fed looks confused and weak. William Sullivan, chief economist at JVB Financial, said the Fed looks simply ‘bewildered’ by credit market developments.”

“Another reason for concern is that the Fed’s power to cut interest rates helps the economy but…have been offset by tightening lending standards as banks are reluctant to lend. Home prices are declining, home inventories are rising and securities tied to the mortgage market have caused credit markets to just shut down.”

“‘A rate cut is not anti-matter. It doesn’t take 19,000 existing home sales off the market in Fort Myers, Fla., and it doesn’t eliminate CDOs with huge holes in their valuations,’ said Robert Brusca, chief economist for FAO Economics.”

The New York Times. “Until a few months ago, it was accepted wisdom that the American economy functioned far more smoothly than in the past. Economic expansions lasted longer, and recessions were both shorter and milder. Inflation had been tamed. The spreading of financial risk, across institutions and around the world, had reduced the odds of a crisis.”

“Back in 2004, Ben Bernanke, then a Federal Reserve governor, borrowed a phrase from an academic research paper to give these happy developments a name: ‘the great moderation.’”

“These days, though, the great moderation isn’t looking quite so great — or so moderate.”

“The recent financial turmoil has many causes, but they are tied to a basic fear that some of the economic successes of the last generation may yet turn out to be a mirage. That helps explain why problems in the American subprime mortgage market could have spread so quickly through the world’s financial system.”

“The great moderation now seems to have depended, in part, on a huge speculative bubble, first in stocks and then real estate, that hid the economy’s rough edges.”

“Everyone from first-time home buyers to Wall Street CEO’s made bets they did not fully understand, and then spent money as if those bets couldn’t go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.”

“The…problem is that real estate and stocks remain fairly expensive. This shows just how big the bubbles were: despite the recent declines, stock prices and home values have still not returned to historical norms.”

“Until 2000, the relationship between house prices and rents remained fairly steady. The same could be said about house prices relative to household incomes and mortgage rates. But the boom of the last decade changed this entirely.”

“Consumer spending kept on rising for the last 16 years largely because families tapped into their newfound wealth, often taking out loans to supplement their income. This increase in debt — as a recent study co-written by the vice chairman of the Fed dryly put it — ‘is not likely to be repeated.’”

“‘What people have done is make an assumption that these prices could continue rising at the rate they had been,’ said Ed McKelvey, an economist at Goldman Sachs. ‘And that does seem to have been an unreasonable assumption.’”

The Baltimore Sun reports from Maryland. “Richard Lunsford feels as if he’s watching the economy fall apart, and along with it, his plans for retirement. Housing sales are weak - a pointedly painful fact for Lunsford, who runs a construction business from his Pasadena home. ‘Right now, there’s hardly any work at all. No one’s buying houses, no one’s repairing houses, no one’s building,’ he said. ‘I probably won’t get to retire. I’m living on my savings right now.’”

“Those who planned to make money trading in their big homes for smaller ones can no longer count on quick sales or top dollar pricing. Two weeks ago, Wendy Sigler rearranged her 401k to help mitigate potential losses’. In her early 50s now, she had hoped to retire from her job within a decade, but she’s no longer sure that will be possible.”

“The equity that she and her husband have in their Ellicott City home has steadily declined, while expenses have risen.”

“‘The tentative [retirement] plans that I had put in place change with the fluidity of the market on a month-to-month basis,’ she said. ‘A lot is going to depend on what happens over the next few years in the economy. I have to have enough money before I can even think about retiring.’”

“Half of working families do not put anything away for retirement, and those who do have average savings of just $35,000.”

“‘We have a lifelong financial savings plan crisis in this country today,’ said Joseph DeMattos Jr., the Maryland AARP director, adding that there needs to be some sort of bipartisan political intervention to stimulate a savings spree.”

“Lunsford needs the housing market to rebound before he can even think about retiring, and he has all but given up on doing it early.”

“‘My father is in the same business, and he’s having the same problems,’ Lunsford said.”

The Capital from Maryland. “The rise in home foreclosures across Anne Arundel County could slow economic growth this year, stunting consumer spending, pulling down home prices and affecting developers putting together new deals, economists and observers of the local market said.”

“There were 1,800 foreclosure filings in the county by the end of last year, a roughly 40 percent increase from the 1,300 filings in 2006, said Clerk of the Circuit Court Robert Duckworth, who added he hasn’t seen this many filings since the dot-com bust around 2000.”

“‘It’s a problem in Anne Arundel, absolutely,’ said April Richardson, a foreclosure attorney in Annapolis, who said she has seen foreclosure cases increase in areas such as Annapolis and Crownsville over the past year. ‘I have homeowners who live in multimillion-dollar homes that are in the same position. It’s affecting upper-class and well-educated people.’”

“The foreclosure problem stems in part from an inflated home market that saw skyrocketing home prices and sales, but then began to decline.”

“Lakshman Achuthan, managing director of the Economic Cycle Research Institute, said foreclosures also will add to the housing supply and cause a downturn in home prices. ‘You get in a little bit of a vicious circle,’ he said.”

“‘The days of having close to 100 percent financing are certainly behind us for the time being,’ he said.”

The Washington Times. “The overvaluation of homes has created a buyers strike as potential buyers sit on the sidelines waiting for prices to fall. James Haffly, an Alexandria defense worker, would like to buy a house in the Washington area but thinks that prices are way too high and must come down substantially.”

“‘Housing is out of reach for many folks here unless they have a rich relative,’ he said, noting that having a high-income, dual-earner family doesn’t suffice anymore to buy a typical ’starter’ home for about $400,000.”

“He’s hoping that the 1 million to 2 million foreclosures predicted nationwide this year will help to drive down prices to affordable levels.”

“‘I mean, here we are at $125,000 a year, and to buy a home on the low end means spending 40 percent of our take-home pay. Something ain’t right. I wouldn’t buy in this market, not with rent amounts at half or less of what a house payment would be,’ he said.”

The Washington Post. “The slump in home prices in the Washington region is deepening and spreading, according to data compiled for The Washington Post that shows that for the first time, every local county saw a decrease in prices for a significant period of last year.”

“The current slump is worse in counties far from the Beltway, such as Prince William, where prices fell 13 percent year over year. Prices have plunged in…Sterling, Manassas and Bowie. Those drops challenge the notion that a strong local economy would shield the region from the worst of the mortgage crisis.”

“Instead, the depression in housing prices across the region is deepening and accelerating, according to the data.”

“Kristin Cockrell and her husband put their red-brick, three-bedroom Sterling Park house up for sale in April 2006 for $425,000. Then $379,000. They kept cutting to $350,000, then $325,000. Now, the couple hopes the new $300,000 price will attract the buyers they need in order to sell and move closer to family in San Diego.”

“‘Watching the price fall right before your eyes, it’s hard,’ Kristin Cockrell said.”

“Numbers show downward patterns in neighborhoods characterized by long commutes and lots of newly constructed homes. For example, MRIS shows that prices fell 18 percent in December in Sterling Park, about 30 miles from the District in the 20164 Zip code, as a spike in foreclosures depressed prices there.”

“On one street, three houses were recently for sale. A few blocks away, there is a cul-de-sac with two for-sale signs. Two blocks over, homeowners took their place off the market after it languished; it is now for rent.”

“Fast-climbing prices transformed Sterling Park over the last seven years. Median home prices in the neighborhood…rose nearly 100 percent from $237,086 in 2001 to $468,496 in 2005 at the height of the market, according to a review of MRIS data conducted by a local real estate agent.”

“As of mid-December, 39 percent of houses for sale in Sterling Park and neighboring Sterling were either foreclosed on or being sold in a short sale, according to Danilo Bogdanovic, a Loudoun County real estate agent.”

“‘The only thing selling right now are foreclosures,’ said Bogdanovic.”

“As banks discount properties for sale or allow owners to sell them for less than their mortgage value..the median sales prices in the Sterling Park Zip code dropped from $365,000 in December 2006 to $298,000 a year later.”

“‘It used to be location, location, location. In this market it is price, price, price,’ said Rick Martindale, an agent in nearby Chantilly. Martindale recently lowered the price of a four-bedroom foreclosed house in Sterling Park from $330,000 to $250,000.”

“After 25 years in Sterling Park, Betty Skelton wants to move into a retirement community. But on her block, at least two other homes are for sale. ‘I saw another sign up. I don’t remember seeing the sign up before,’ she recently lamented.”

“After two months on the market, Skelton isn’t ready to budge from her $399,900 asking price. During the housing boom, similar houses were selling for $500,000, a price she acknowledges was inflated.”

“‘I am not going to be able to go down further than where I am,’ she said. ‘I don’t think I can give the house away.’”

The Times Dispatch from Virginia. “Chesterfield, Hanover and Henrico counties recorded the fewest number of building permits last year since Integra Realty Resources began tracking the numbers in 1992.”

“‘The market correction that began in 2006 is definitely continuing,’ said Tom Tyler, senior analyst with Integra Realty in the local office in Glen Allen. ‘Once we get the fourth-quarter figures in, we may very well see another drop. This correction will probably continue well into 2008.’”

“Christine Chmura of Chmura Economics & Analytics in Richmond said she expects construction starts in the country, state and or region to continue to fall this year.”

“In the Richmond metro area, building permits for single-family houses are down 42 percent since peaking in January 2007, she said. By comparison, in the 1990 recession, permits in the Richmond area fell 40 percent.”

“‘A similar trend is occurring in the state, where permits are down 49 percent from their peak, compared with a 52 percent decline in the 1990 recession,’ Chmura said.”

“Some areas of the state are slower than others, such as Fredericksburg and Culpeper, said Rich Napier, past president of the Home Builders Association of Virginia. ‘Hopefully, we can move forward, wave the flag and people will buy homes. You’ve got be optimistic when you are in this business,’ he said.”

The Daily Progress from Virginia. “With more than 600 residential units slated to be built over the next two years in downtown Charlottesville, some developers and city planners are predicting that the combination of the flagging economy and the amount of competition will precipitate the downfall of a few of these high-rise projects.”

“All of the projects are set to be finished within an 18-month span, leading some to question whether the downtown market can absorb more than 600 condos at once. ‘I think that a number of those projects that have been approved probably will never get built,’ said John Matthews, a local architect.”

“Only one of the towers - the 57-unit Waterhouse on Water Street - has broken ground. And that was no easy task, said Bill Atwood, Waterhouse’s architect and developer. It took time to pre-sell nearly 50 percent of Waterhouse’s units - the magic number bankers and developers look to lock up before they move forward.”

“‘The credit market is so bad and the banking business has gotten so tight that it is extremely difficult to get a project started,’ Atwood said.”

“‘Are we going to go full-bore ahead without any pre-sales or testing the water? No,’ said Bob Englander, the developer of the site on the corner of West Main and McIntire.”

“Englander’s plans are still being molded. This summer when he received a zoning change by the city, he announced that he was going to put 79 units in the nine-story tower. Now, though, he says the building could have as few as 50.”

“He’s confident that construction can begin by the end of this year but acknowledges there are no guarantees. ‘We have one foot on the accelerator, one hand on the gear shift and the other foot on the brake as well,’ Englander said.”

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