January 24, 2008

The Problem Has Been Prices Are Too High

The Contra Costa Times reports from California. “As home prices slipped and selling a home to get out of financial trouble became harder to do, more homeowners in the Bay Area and statewide found themselves facing foreclosure in the final months of 2007, pushing the already record-breaking number of distressed homeowners even higher.”

“‘We’re probably in for more of the same, more increases,’ in foreclosure activity in 2008, said DataQuick’s John Karevoll. ‘We’re still seeing the main driver of foreclosure activity, which is price declines, and we do not know when those price declines will level off.’”

“In Santa Clara County, 2,162 homeowners received default notices in the fourth quarter, up 147 percent from a year earlier, and up 31 percent from the third quarter of 2007. The county certainly has pockets that have been deeply affected, such as San Jose’s Eastside, where many buyers bought at the top of the market in 2005 with no money down using risky adjustable-rate loans.”

The Santa Cruz Sentinel. “The number of struggling borrowers has tripled in Santa Cruz County compared to two years ago, according to the Santa Cruz Record. Last year, 993 homeowners received default notices, the first sign of trouble, compared to 452 in 2006 and 333 in 2005.”

“Another trend: a higher percentage of borrowers who defaulted on payments had their property go into foreclosure. Last year, the number of properties in foreclosure reached 506, compared to 146 in 2006 and 109 in 2005.”

“A total of 44 default notices were posted for one week in January, which is about double the activity from last year.”

“The following week, a total of 23 properties were sold at foreclosure auctions. If that pace were to continue, more than 1,000 homes would be lost to foreclosure this year.”

“In Monterey County, a total of 1,020 homes were sold in foreclosure auctions last year. That represents about a third of the 3,070 borrowers who received default notices that year.”

“Foreclosure activity is picking up speed there this year, with 116 default notices and 53 homes sold last week.”

The Appeal Democrat. “Yuba, Sutter and Colusa counties default notices more than doubled from the previous quarter. Yuba County led the three counties in total with 302 default notices, followed by Sutter County with 210 and Colusa County with 65.”

“Dave Richardson, a Dobbins resident who owned a Sacramento lending business for a number of years, pointed to depreciation. He added that interest rates rose though 2006, and that some loans should not have been made whatever the rate.”

“‘If you owe $300,000 and it’s worth $250,000, you might want to walk away,’ said Richardson.”

From Fox 6 San Diego. “The numbers are in for foreclosures in 2007 and they are grim. Foreclosures jumped 353% in 2007. Add to that, defaults which are often the first stage for foreclosures. They’ve jumped 100% over the prior year.”

“For homeowners who bought in 2005 or later, 48% now have negative equity so the incentive for many will be to allow their homes to default.”

“A jump in the number of delinquent property tax payments prompted San Diego County Treasurer-Tax Collector Dan McAllister Wednesday to send out more than 71,000 reminder notices to property owners. Those who missed the deadline will incur a 10 percent late fee.”

“‘We are not quite certain why the dramatic jump in delinquencies has occurred. But to be on the safe side, we will vigorously pursue these tax collections,’ McAllister said.”

The Press Enterprise. “Foreclosures soared to new records in Riverside and San Bernardino counties in the last month of 2007, with an increasing number of homeowners hard-pressed by mortgages resetting at higher rates and declining home values.”

“In the fourth quarter, lenders sent 9,913 notices of default to homeowners in Riverside County, which was up almost 119 percent from a year earlier and reached a record high for the fourth consecutive quarter, DataQuick reported.”

“DataQuick analyst John Karevoll said the two-county Inland region has the highest mortgage-default rate in Southern California, whether looking at the portion of all mortgages that default or the number of failing mortgages compared with total households.”

“Lisa Jarman, a counselor at the Fair Housing Council of Riverside County, said homeowners on the verge of foreclosure are having difficulty negotiating with their lenders for loan modifications that they can handle.”

” A lot of homeowners got their homes based on stated income and their income was overstated on the loan applications, Jarman said.”

“She said sometimes even with a lower interest rate, they could not afford to make the monthly payments on a fixed-rate mortgage, especially if they are required to repay previous missed payments.”

The Desert Sun. “Foreclosures reached a 20-year high in California at the end of 2007 as more homeowners fell behind on their mortgage payments.”

“Coachella Valley information was not available Tuesday, but Diane Busch, president of the local Women’s Council of Realtors, said the desert is ’seeing a lot more of this.’”

“Broker Lorenzo Lombardelli expects to see the trend continue for the ‘next reasonable amount of time.’ Many are buyers who qualified for 100 percent or exotic financing for homes that might have been out of their price range with a conventional mortgage.”

“‘But the problem was they really didn’t qualify to make the payment or buy in that price range,’ Lombardelli said.”

“Buyers thought the houses would appraise at a higher rate, allowing them to sell for a profit or refinance at a better rate. ‘When adjustable rates kicked in and escalated, they found themselves in a situation where they couldn’t come up with the new adjusted mortgage prices,’ Busch said.”

From Reuters. “Borrowers with mortgages for more than their homes are now worth will not be helped by lower interest rates — and refinancing will not be an option amid sliding home prices, which are fueling California’s foreclosure surge, according to DataQuick.”

“The median price paid for a California home fell to $402,000 by the end of 2007 from its March peak of $484,000, according to DataQuick.”

“‘With today’s depreciation, an increasing number of homeowners find themselves owing more on a property than its market value, setting the stage for default if there is mortgage payment shock, a job loss or the owner needs to move,’ said Marshall Prentice, DataQuick’s president.”

“The Fed’s rate cut will have little effect on home prices but may help forestall or minimize a recession by helping to prevent job losses that would send foreclosures soaring even higher, said Stephen Cauley, director of research at the Ziman Center for Real Estate at the UCLA Anderson School.”

“‘The one thing that could make this housing thing really explode is for unemployment to go up a lot,’ Cauley said.”

From The Sun. “Robert Villalvazo gets an earful of gossip every day, but Tuesday’s news kept his ears tingling. ‘They’re worried about if they’re going to lose their jobs,’ the manager of Big W Barber Shop in Upland said of his customers.”

“An economic downturn has already hit San Bernardino and Riverside counties, with skyrocketing foreclosures and job layoffs at the forefront. Recent employment reports have shown a declining level of job creation for some time. In fact, some economists speculate that when 2007 numbers are firmed up, the two-county area might register a significant loss in jobs.”

“Villalvazo is seeing this firsthand. His barbershop gets more customers when people are looking for jobs.”

“‘They’re going to apply for jobs,’ he said of the rise in customers wanting haircuts. ‘We had a lot of people this last December versus the December before. We have a lot of people looking for jobs.’”

The Daily Bulletin. “Permit numbers released this week by the Construction Industry Research Board showed what pretty much everyone had known all along: The year 2007 wasn’t a particularly good one for San Bernardino and Riverside counties, with the total value of permits pulled down by about 40 percent in Riverside County and nearly 30 percent in San Bernardino County.”

“‘People spent most of last year pulling back from new projects,’ said Jack Kyser, chief economist at the L.A. County Economic Development Corp. ‘There were a lot of projects already in the pipeline and more and more unsold inventory as the year went on.’”

“L.A. County slipped only from $10.64 billion in 2006 to $10.6 billion last year. ‘There were a lot of multifamily, condo and loft projects in the downtown area last year,’ Kyser said. ‘We’ll have to wait and see what happens in 2008.’”

The Modesto Bee. “Sen. Barbara Boxer has released a 15-point plan she thinks will help stop foreclosures in California. ‘Time is not our friend,’ Boxer said during a telephone press conference Wednesday afternoon. ‘We are in a crisis, and we need to stop the bleeding.’”

“Boxer expressed concern about the 8,000 homes lost to foreclosure last year in Stanislaus, San Joaquin and Merced counties. ‘What you have is a vicious cycle because as values go down, it doesn’t pay for people to stay in their homes (or try to avoid foreclosure),’ Boxer said.”

The Union. “Real estate prices in Nevada County fell for the ninth straight month in December, plunging nearly 16 percent to a median price of $420,000, according to Dataquick. In an emergency move on, Federal Reserve Chairman Ben Bernanke cut the central bank’s discounted lending rate to banks by three-quarters of a point, to 3.5 percent, in an effort to stave off recession.”

“Despite the lower rates, it could be ‘a little too early’ to know what effects the declining interest rates could have on the local housing market, said Judy Barley, VP of California Land Title of Nevada County.”

“‘Interest rates have never been the problem, because interest rates have been reasonable the last couple of years,’ Barley said. ‘The problem has been prices are too high, and now prices are falling, and sellers still want the gold, and … buyers keep thinking it’s going to go lower, so they wait it out.’”

Buyers Have A Clear Edge Over Sellers

Some housing bubble news from Wall Street and Washington. Associated Press, “Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades. For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982.”

“Lawrence Yun, the Realtors’ chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.”

“The national median existing-home price for all housing types was $208,400 in December, down 6.0 percent from a year earlier when the median was $221,600.”

“Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in November.”

“‘The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,’ Yun said.”

“Regionally, existing-home sales in the South are 20.9 percent below December 2006. The median price in the South was $173,400, down 4.1 percent from a year ago. Existing-home sales in the Midwest are 20.5 percent below a year ago. The median price in the Midwest was $159,800, which is 3.9 percent lower than December 2006.”

“In the West, existing-home sales are 24.8 percent below December 2006. The median price in the West was $309,800, down 11.1 percent from a year ago. Existing-home sales in the Northeast are 22.4 percent below a year ago. The median price in the Northeast was $258,600, down 8.9 percent from in December 2006.’

From Bloomberg. “Lennar Corp., the biggest U.S. homebuilder, reported the largest quarterly loss in its history as the deteriorating housing market led to a $1.86 billion writedown for land and falling property values. Revenue fell 49 percent to $2.18 billion, Miami- based Lennar said.”

“CEO Stuart Miller said market conditions are unlikely to improve this year and ‘might continue to decline in the near term.’”

“New orders for the period ended Nov. 30 fell 50 percent to 4,761 and the cancellation rate was 33 percent, unchanged from a year earlier, Lennar said. Orders fell the most in Arizona, Texas and Colorado, plunging 57 percent. In Florida, Maryland, New Jersey and Virginia they dropped 55 percent and in California and Nevada they declined 40 percent.”

“‘It was a tough, tough quarter by any stretch,’ said Eric Landry, an analyst at Morningstar. ‘2007 losses have just about wiped out everything from 2005 and 2006.’”

“The average sales price of homes delivered decreased to $291,000 in the fourth quarter from $302,000 a year earlier, primarily due to big incentives. Incentives were valued at $58,800 per home delivered in the fourth quarter of 2007, compared with $47,300 in the same period last year.”

“The company cut its work force by 35 percent in 2007 and in November, Standard & Poor’s cut Lennar’s credit ratings to junk status.”

From Reuters. “Ryland Group Inc, the No. 8 U.S. home builder, reported a quarterly loss on Wednesday compared with a year-earlier profit, partly because of large write-offs for land and inventory values, and an income tax charge.”

“Ryland’s quarterly results include charges for write-offs for inventory and property values of $242.7 million. New orders during the quarter fell 7.1 percent to 1,596, and the average value fell 14.4 percent, reflecting the generous incentives builders are offering to buyers.”

“New orders dropped 7.1% while closings slid 30%. Like others in the industry, Ryland has tried cutting prices - up to 25% during one November weekend - to move inventory. Many of its homes are in southern California, Arizona and Nevada, where real-estate prices have tumbled.”

The Atlanta Journal Constitution. “Officials for Atlanta-based Beazer Homes acknowledged Wednesday the many challenges facing the troubled homebuilder and the uncertainty of the slumping economy. Closings were down by 24 percent and new home orders dropped by 29 percent, the company said in a Securities and Exchange Commission filing.”

“Beazer also reported improved, thought still serious, cancellation figures. The cancellation rate on sale contracts was 46 percent in the fourth quarter, down from 68 percent in the previous quarter.”

“Neither the SEC filing nor the presentation included quarterly earnings. The company is currently recalculating its earnings for much of the past decade after revelations that certain aspects of its operation had been inaccurately recorded.”

“Chief Financial Officer Allan P. Merrill cautioned the investors not to expect sales or housing starts to show significant recovery anytime soon. ‘Our expectation is that this year is going to be very tough,’ Merrill said.”

“In addition to the staff reductions, which have cut the company’s workforce in half, Merrill said, Beazer has also reduced its land holdings, pared down the range of options it offers buyers in everything from floor plans to plumbing fixtures and even reduced prices on its homes in some locations as much as 30 percent to stimulate cash flow, according to Merrill.”

“‘We are aggressively defensive. That’s our posture,’ Merrill said.”

From BBC News. “French bank Societe Generale announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US.”

“Sovereign Bancorp Inc. on Wednesday reported a 12-fold widening in its losses in the fourth quarter, as it recorded a massive write-down because customers defaulted on loans and the value of its investment in a New York thrift fell.”

“Results were hurt by a $1.58 billion write-down of goodwill — what a company is worth beyond its assets. About half the write-down came from a decline in business at Independence Community Bancorp in Brooklyn, which Sovereign purchased over some shareholder objections in June 2006. The goodwill write-down was higher than what Sovereign disclosed last week.”

“Sovereign also booked $180 million in pretax, noncash charges related to the decline in value of its Fannie Mae and Freddie Mac preferred shares. Another $27 million in charges came from loan defaults by two unspecified mortgage companies.”

“Sovereign increased its reserves for loan and lease losses — a buffer against bad debt — by $88 million to $738 million.”

“Bond insurer and reinsurer Assured Guaranty Ltd. said Thursday it will take a $302.9 million loss on the value of a derivatives portfolio and $18.1 million in losses tied to its home equity line of credit business during the fourth quarter.”

“Assured Guaranty had $7.01 billion in exposure to the U.S. subprime market at the end of December, representing about 27 percent of its total mortgage-backed securities exposure.”

“The U.S. Federal Reserve and other central banks are partly to blame for the financial-market slump that’s now threatening to derail the global economy, said investors and former policy makers at the World Economic Forum.”

“‘It’s hard to give central banks a very high grade over the last couple of years on recognition of bubbles and actions taken to address them in the policy or regulatory spheres,’ said former U.S. Treasury Secretary Lawrence Summers in a panel in Davos, Switzerland.”

“Fed Chairman Ben S. Bernanke is facing the same objections leveled at his predecessor, Alan Greenspan, who was slammed for not doing enough to prevent the Internet stock boom and then cutting rates too low to limit the fallout.”

“In 2003, the Fed reduced its benchmark to a 45-year low of 1 percent, leading to a house-price boom that turned to bust in 2006. That prompted a collapse in the market for mortgages to risky borrowers. It’s now derailing financial markets because so many banks bought derivatives linked to those mortgages.”

“‘Central banks lost control of the situation when they allowed financial institutions to develop new financial instruments which they themselves didn’t understand,’ said Soros.”

“Some Davos attendees came to the Fed’s defense. ‘We could pierce bubbles but we’d pierce a lot of non- bubbles and take a lot out of gross domestic product,’ said John Snow, also a former Treasury Secretary. ‘We need to reform regulation.’”

“The ECB nevertheless argues that it may be possible for central banks to ‘lean against the wind’ by raising rates in the early stage of a bubble to head off future gains.”

“The worsening real-estate recession is at the core of the economic slowdown and will probably prompt the Federal Reserve to lower interest rates next week and in future meetings, economists said.”

“‘We are not at the bottom in the housing market,’ said Nigel Gault, director of U.S. research at Global Insight Inc. ‘The Fed is trying to battle against the fundamentals which say housing is not going to recover until we have a substantial decline in prices.’”

The New York Times. “One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago.”

“Critics say the Fed’s attempted rescue looks uncomfortably similar to the aggressive rate reductions that aggravated the speculative bubble in housing.”

“‘We’ve literally forgotten that this is the very policy environment that led to the housing and mortgage problems in the first place,’ said Michael T. Darda, an economist at an investment firm. ‘We’re not going to see another housing bubble, but we could see more inflation.’”

“But other central banks are not following the Fed’s lead. Jean-Claude Trichet, president of the European Central Bank, strongly hinted on Wednesday that European policy makers would keep their benchmark rate unchanged.’

“‘Particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility,’ Mr. Trichet told the European Parliament. The Bank of England is not expected to reduce rates quickly either.”

The LA Times. “In the 1990s, when Latin America and Asia were rocked by financial crises similar to the one now dogging the United States, Washington officials were quick with stern advice: Don’t bail out distressed banks. Don’t intervene when stock market and real estate bubbles pop. Let your overblown economies shrink to their natural levels.”

“‘It was all, ‘You’ve got to be tough and take your castor oil,’ said Joseph E. Stiglitz, the Nobel Prize-winning economist and former vice president of the World Bank.”

“To date, U.S. officials haven’t followed any of the advice they so readily dispensed to others. They have tried to aid troubled banks. They have slashed interest rates to help the struggling housing and stock markets. They have made it clear that they will go to extreme lengths to keep the American economy out of recession.”

“But if the current prescription fails to provide long-term relief, what comes next? The answer, many economists say, could be that old castor oil.”

“‘People are going to have to buckle up their seat belts and expect some dicey economic times for much of the year,’ said William Grenier, chief investment officer at UMBS Management, a $12-billion asset management firm. ‘We’re going to have to let the excesses wash out of the system.’”

“When Latin American and Asian countries found their finances in an analogous mess in the 1990s, Stiglitz said, ‘we told them, ‘You have to face the pain…You can’t bail out people.’”

“Most of those governments eventually let the turmoil take its course. The countries recovered, but not before going through the economic wringer — for periods that in some cases lasted years.”

“America’s big bankers were supposed to be ’so good at financial risk management, they could regulate themselves,’ economist Stiglitz said. ‘It turns out these guys did very bad risk analysis and have created a mess.”

From CNN Money. “Without any intervention, an estimated 3.5 million homeowners could default on their mortgages in the next 2 1/2 years, says Mark Zandi, chief economist at Moody’s Economy.com.”

“Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.”

“But the couple, who have a 15-month-old daughter, may still lose their three-bedroom Northvale, N.J. home to foreclosure. With gross monthly pay of about $10,000 ($6,000 after taxes)…they can no longer keep up with the $4,100 house payments.”

“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”

The Market Is Tanking

The Plain Dealer reports from Ohio. “The devastation extends far beyond Slavic Village, where 1,500 houses are abandoned. Nearly every one of the 59 communities in Cuyahoga County, along with many cities in neighboring counties, have taken a hit. More than 120 houses in Cleveland are being offered to the city for a buck apiece because the U.S. Department of Housing and Urban Development can’t find other buyers.”

“The homes have been on the market for more than six months with no takers. All told, the federal agency owns more than 1,000 houses in Cuyahoga County, two-thirds of them in Cleveland. Lenders are stuck with thousands more unwanted properties and are willing to unload many of them for pennies on the dollar.”

“A California investor, shopping via the Internet, bought a four-family house in Slavic Village for $1. Texas investors scooped up 90 houses — primarily in Cleveland — for prices as low as $750.”

“During the first nine months of last year, nearly 1,000 parcels in Cleveland traded hands for less than $10,000 each.”

“‘The market is tanking,’ says Dave Sarver, a real estate agent who specializes in lender-owned property. ‘We’re giving houses away.’”

The Kentucky Post. “If you want to know how soft the home construction industry is in Southwestern Ohio, just ask contractors like Dave Conradi of KEP Electric in Batavia. ‘I’m kind of busy still, but the company had to let people to go,’ he said.”

“Conradi’s comments are the face between the latest roller coaster round of home building statistics from the Home Builders Association of Greater Cincinnati.”

“Association Executive Director Dan Hendricks says the boom years occurred from 2003 to 2006 with unprecedented growth each year. ‘Those were such huge numbers,’ Hendricks said. ‘Nobody thought they were going to be sustainable forever.’”

The Flint Journal from Michigan. “Hammers were rarely heard across the county last year as the number of new houses dropped at staggering rates. ‘It’s scary,’ said Ted Henry, building inspector for Clayton Township.”

“According to Barry Simon, consultant with the Builder’s Association of Metro Flint, new houses countywide is down 80 percent over 2004, a peak building year.”

“‘It’s not just Genesee County,’ he said. ‘It’s from Clio to the Ohio border.’”

“Adam Zettel, assistant city manager of Swartz Creek, said subprime lending and the economy likely are affecting the construction of new houses locally. ‘In our area I suspect the economy is bigger than foreclosures, however, there are a lot of foreclosures,’ he said.”

“And although Genesee County may seem worse off than its counterparts across the state, it’s not. ‘We’re on life support,’ Simon said. ‘Oakland County is in rigor mortis and Livingston County already is decomposed.’”

“But Simon said there is an upside to the current market conditions. ‘You can get your dream house for pennies on the dollar.’”

The Kalamazoo Gazette from Michigan. “Steve Starbuck’s four-bedroom home in Portage has been on the market since February 2007. He’s dropped the price twice in the past 11 months and, at $189,900, it’s listed at the same price he paid in 2001. ‘I guess it’s been a nice house to rent,’ he said.”

“According to the latest figures from the Greater Kalamazoo Association of Realtors, Starbuck isn’t the only Kalamazoo-area seller who’s felt the housing slump of the past year. Sales of residential properties by Kalamazoo real-estate agents in 2007 were down 13.5 percent compared to 2006.”

“While part of the drop last year was exaggerated because of a runup in prices over several years, Matthew Maire, the association’s CEO, said the fall wasn’t far because the Kalamazoo market has held fairly steady. ‘In Kalamazoo, we don’t see the tremendous fluctuations you see in other markets,’ Maire said.”

“Starbuck said a combination of the overall market slowdown and an unrealistic original asking price probably kept his house on the market longer than it should have been.”

Chicago Business from Illinois. “Sales of new homes in the Chicago area fell even faster in the fourth quarter, and with the economy on the brink of recession, homebuilders face another tough spring selling season.”

“Builders sold 2,196 units in the quarter, a 51% decline from the year-earlier period and the biggest quarterly drop since the residential slump began more than two years ago, according to Tracy Cross & Associates Inc. Homes sold in the quarter at the slowest pace in 15 years, the firm says.”

“‘It’s frightening, it’s nerve-wracking — it’s a lot of things,’ says Jerry Thiel, president of a Rolling Meadows-based carpentry contractor that employs about 30 carpenters now, down from 275 in 2005.”

“‘We’re quote-unquote not in a recession,’ Mr. Thiel says. ‘What’s going to happen if we’re actually in a recession? Our prospects aren’t going to be any brighter.’”

“The market ‘is probably worse than it was in the early ’90s,’ says Frank Libby, second VP of the Chicago Regional Council of Carpenters.”

“‘It’s almost like a limbo pole that’s almost on the ground and can’t go any lower,’ says Tracy Cross, president of the eponymous consulting firm. ‘This is about it.’”

“About 3,500 unsold downtown condos are under construction and will be completed between now and 2010. ‘Some of those buildings are going to have some trouble,’ Mr. Cross says.”

“Apartment rents are surging in the Chicago area, but that check to the landlord is still a lot smaller than a monthly mortgage payment.”

“The average rent in the Chicago area represented just 60.0% of the after-tax monthly mortgage payment for the median home in the third quarter, according to a recent report by Deutsche Bank.”

“The rent/buy relationship has taken on greater significance recently as analysts try to determine how much home prices — or interest rates — need to fall before the residential market returns to equilibrium.”

“In Chicago, ‘the gap has got to narrow,’ says Deutsche Bank analyst Louis Taylor. ‘Chicago is going to have an adjustment, and an adjustment that I don’t think is going to be particularly painful.’”

“Of the 58 U.S. cities Deutsche Bank tracks, Chicago falls in the middle of the pack at 60%. The Oakland/East San Francisco Bay area in California is the most expensive place to own a house, with the monthly rent representing just 26.9% of the monthly payment, which includes mortgage, property taxes, insurance and tax savings.”

“Nationwide, the monthly rent represented 62.7% of the monthly payment in the third quarter, up from a low of 60.9% in second-quarter 2006.”

“‘With short-term rates falling along with home prices, there’s the potential for a significant (66%) portion of the country to return to affordable levels,’ the Deutsche Bank report says.”

“Unable to sell their condos, many owners are renting them instead and competing for tenants with traditional apartment landlords. Though this so-called shadow market has become a factor in Chicago as well, it’s not a huge concern, Taylor says.”

“Including condos for rent, the Chicago-area apartment vacancy rises to 7.3% from 4.5%.”

The Journal Sentinel from Wisconsin. “Bankruptcy filings jumped 39% in Wisconsin last year, an increase driven partly by adjustments in mortgage payments that were too big for some consumers to handle.”

“Samuel J. Gerdano, executive director of the American Bankruptcy Institute, said he expects the number of bankruptcies to climb again this year as adjustable-rate mortgages reset at higher monthly payments.”

“‘Some of those aren’t predatory at all - they’re just adjustable-rate mortgages that people can’t handle, largely because they are in homes that they can’t sell or refinance,’ Gerdano said.”

“Milwaukee bankruptcy attorney James Miller said he is seeing more people here ‘just tossing their arms up’ about their mortgage.”

“Rather than try to keep their homes, more consumers - particularly those with little or no equity in the house because they put no money down or its value has dropped - are just assuming the home is a lost cause and asking the courts to relieve their other debts.”

“‘Before, if someone was behind on the mortgage payments, it was, ‘What can I do to save my home?’ And now, people are just so frustrated with the interest rates and with their climbing mortgage payments, it’s, ‘What can I do to get out from under my mortgage debt?’ said Miller.”

“Madison attorney Tim Peyton said his practice has been handling an increasing number of bankruptcy cases for people who were working in the mortgage industry - real estate agents, brokers, small developers. The retreat of the housing market and prices has put them out of business and into personal financial trouble, he said.”

“For example, he said, construction workers who during the height of the housing boom started their own small home-building businesses now can’t keep up with what they owe on lots they planned to develop or houses they intended to renovate and resell.”

“‘There are a lot of those out there,’ said Peyton.”

“Like the bankruptcy institute’s Gerdano, Peyton said he expects the number of bankruptcies to rise again this year. ‘I think we are just seeing the tip of the iceberg,’ he said.”

Bits Bucket And Craigslist Finds For January 24, 2008

Please post off-topic ideas links and Craigslist finds here.