The Housing Bubble

The Mercury News reports from California. “The seekers boarded the bus Saturday, questions on their minds and dollar signs in their eyes. Possibilities abounded in South San Jose, where numerous ‘for sale’ signs dot the lawns. Again and again the bus stopped at select houses where the tenants had left and foreclosure auctions failed, leaving lenders to repossess the homes.”

“‘You can make steal deals,’ advised broker Don Crozier, as he stood in front of the bus, microphone in hand, ‘even though it’s already below market.’”

“From San Diego to Stockton to San Jose, members of the real estate industry are offering such bus tours to entice home sales in a bad market. ‘Sometimes to get people to move off the dime, you have to have something more than the norm,’ Crozier told the Mercury News before the tour. ‘What do you need to do to snap people out of the little cocoon? Let’s get people on the bus.’”

“Each flaw, said contractor Rick Steiner, was a chance to haggle with the banks holding the mortgages on these empty shells. Take the trim cream-colored home on Goldfield Drive, the one with a market value of $640,000 that’s listed for $575,000.”

“If the tiled pool in the back yard isn’t cracked, Steiner estimates it’ll take $15,000 to get the house up to shape, but he could probably persuade that bank to cut the price by $40,000.”

“The last home on the tour was a townhouse on Communications Hill, turnkey ready with hardwood floors, rich brown carpeting and $70,000 under market.”

“Susi Steiner nodded approvingly. The ‘budding real estate investor’ was looking for a home for her mother and a possible investment for herself and her husband.”

“Standing in the immaculate master bedroom with its walk-in closet, she noted, ‘This is a great thing for my mom because she wants it live-in ready, and I don’t want her to pay full price.’”

“‘It’s a buyers’ market,’ said Cecilia Manibo, whose financial planner advised her to buy real estate. A tour was the most efficient strategy. ‘If we were left on our own,’ she said, ‘we probably wouldn’t do it.’”

From KSND TV. “In 2005, Marty Ummel and her husband bought a four-bedroom house in Carlsbad for $1.2 million. The Ummels say their agent was dishonest about the price of other homes in the neighborhood, and then rushed them to close the deal before the Ummels found out comparable houses on the same street sold for as much as $175,000 less.”

“She has now filed suit against her real estate agent, claiming fraud. ‘We feel that we were misled. We feel disappointed. We do feel angry,’ she said.”

“But in a deposition, an expert witness hired by the defense said of the Ummels: ‘They simply didn’t do what is expected of a knowledgeable sophisticated buyer, and are now looking for someone other than themselves to take responsibility.’”

“People in the real estate industry are calling this a ‘landmark lawsuit.’”

“The National Association Of Realtors said it has failed to find any legal cases in the past five years that revolve solely around the question of valuation. The Ummels’ case goes to trial in Vista on Monday.”

The Voice of San Diego. “Economic disquiet means fewer sales in the city’s stores and restaurants, funneling less general sales tax money to city coffers. Without the confidence boost instilled by a sizzling housing market, a weekend trip out for a flat-screen television or a new couch is less and less common for shoppers in Lemon Grove.”

“And so, Lemon Grove’s Graham Mitchell and the other city managers and financial officials for San Diego County’s 18 cities grapple with sales tax revenues that hardly resemble the economic boom time in recent years. And even among cities whose managers thought they were being quite conservative with revenue projections, some find themselves lowering their expectations.”

“The trouble has hit El Cajon’s car dealerships and Lemon Grove’s home improvement stores. San Marcos’s building permit fees have dropped, and Chula Vista’s new mall hasn’t magnetized the hordes of shoppers envisioned.”

“‘The slumping housing market and drop in consumer confidence has a very direct effect on cities in California,’ said Rod Gould, city manager in Poway. ‘I don’t think any will be exempt from this economic malaise.’”

“Officials in the city of El Cajon last week warned its City Council and mayor of ‘an impending fiscal emergency.’We’ve known that we’ve had this imbalance for a long time, and I think we were all hopeful that the sales tax revenue would go up,’ said Mike Shelton, El Cajon’s finance director. ‘But not only did the economy not get better, it got worse.’”

“Haynes said even though the housing price drops have been very slight in some neighborhoods, many city residents have been hit psychologically.”

“‘There may be something to be said for the decline in prices hitting people psychologically,’ Haynes said. ‘Where they used to feel a little bit more insulated, now [they're saying], ‘Maybe now’s not the best time to go out and make a big purchase.’”

“‘People are people, and they’re going to have to buy a new car eventually,’ said El Cajon’s mayor, Mark Lewis. ‘But you’re seeing if you can make a coat go another year, asking, ‘Do we really need to go out to eat again?’”

The Daily News. “Already grappling with a regional economic squeeze, consumers shivered with concern again last week as news of a possible U.S. recession rippled through the San Fernando Valley.”

“Making money is arguably hardest in the state’s housing market. While 4,935 new homes were built in the San Fernando Valley in 2006, just a year later 1,500 fewer homes were constructed, Blake said.”

“And the slip has given way to job loss in the construction industry, where about 6,200 jobs in housing-related industries were lost in December, according to the California Employment Development Department.”

“‘We don’t call it a housing crisis in the construction industry; we call it a housing bust,’ said Bill Davis, executive VP of the Southern California Contractors Association.”

“‘It’s ugly, bad, horrible - it depends on how dependent you were on the housing business as to which one of those adjectives you’d use,’ Davis said. ‘But it’s just plain not good.’”

“Sales of big-ticket items such as vehicles also are taking a hit, with the California Motor Car Dealers Association saying sales last year dropped 8 percent, the worst in eight years. Hummer sales dropped about 41 percent in 2007.”

“‘I think with all the news we’ve heard about the subprime mortgage (crisis), people are seeing they have less equity in their homes,’ said Crystal Jack, spokeswoman for the association. ‘When you see less equity, you feel less able to make those bigger-ticket purchases.’”

From CBS News. “Stockton is a city of 280,000 people in the Central Valley. A few years ago, it was one of the hottest real estate markets in the country; today it is the foreclosure capital of America.”

“As of last week, there were 4,200 Stockton homes either in default or foreclosure; $1.4 billion in bad loans in just one California community, and it is far from over.”

“Matt and Stephanie Valdez say they knew exactly what they were doing when they bought a small two-bedroom for $355,000. They…planned to refinance the mortgage before the interest rate jumped to 11 percent. But they couldn’t do it because the value of the house had fallen below what they owed on the mortgage. They say they can afford the higher payments, but see no point in making them.”

“‘The house keeps going down, payments keep going up. Where’s the logic in that? And how can we fix it? I mean, that’s what this whole thing’s about for us is how can we fix this? And if we can’t fix it, then what do we do?’ Matt Valdez asks.”

“‘Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense,’ Stephanie Valdez adds.”

“‘That’s what you agreed to do when you bought the house,’ correspondent Steve Kroft points out.”

“‘Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,’ Stephanie Valdez replies.”

“Real estate agent Kevin Moran, says it is happening every day. They were never really invested. Most of the people who lost the houses didn’t lose any money because they never put any money down.”

“Though their credit is damaged, and they could face legal action in some circumstances, they got to live in a new house for a couple of years, and some of them even managed to get some money with home equity loans or by refinancing.”‘

“Nobody seems to be saying, ‘Look, I made a contract with you. I borrowed money from you. I’m gonna do everything I can to pay off that obligation.’ People just seem to be saying, ‘Look, take the house. Good-bye. I’m leaving,’ Kroft says.”

From The Sun. “It’s almost like having a piece of Orange County under your feet. But no Meadowbrook Park Lofts homeowner opening their front doors will experience that hip, trendy lifestyle once they step outside.”

“Twelve live-work townhomes on Third Street in downtown San Bernardino went on the market a couple weeks ago, boasting two-car garages, balconies, and ground-level space for office or retail use. As of last week, one loft was sold. They range from $350,000 to $360,000.”

“If you’re pondering whether to buy, be prepared to get showered with monetary incentives. ANR Homes and San Bernardino have partnered to offer some pretty hefty draws, like a $100,000 down-payment assistance program for people who already live or work in the city.”

“‘We’re just trying to stimulate some interest in downtown,’ said Lisa Pereira, director of sales and marketing for ANR.”

“The facts are as plain as day: These pristine townhomes are surrounded by a moribund downtown. Adjacent to a jumble of older tract homes, the lofts are located across the street from a couple of old business buildings and Meadowbrook Park.”

“‘The disadvantage to that project, particularly for a senior, is two flights of stairs,’ said Dale Rauch, a contractor who lives in Grand Terrace and took peek at the lofts a week ago.”

“But seniors aren’t the sales target. City leaders hope young professionals - county workers, lawyers, teachers - will move into Meadowbrook.”

“Rauch can’t picture himself living there, at least for now. ‘I think it’s a little ahead of its time,’ Rauch said.”

“His wife works right down the street for the San Bernardino County Superintendent of Schools Office. ‘It’d be fantastic for her,’ he said. ‘But … just down around the corner they found two people murdered.’”

“If dreams of transforming downtown San Bernardino come true, getting in on the ground floor could be one of the best real-estate decisions you’ll ever make. The area, though, has a long way to go.”

“Night life is virtually nonexistent unless you count the homeless people hanging out at local parks after the sun sets. Also, 48 registered sex offenders live in the 92408 ZIP code.”

Some housing bubble news from Wall Street and Washington. Associated Press, “Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years. The Commerce Department reported Monday that sales of new homes dropped by 26.4 percent last year to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.”

“The median price of homes sold in December was $219,200. That was down 10.4 percent from a year ago, the biggest 12-month price drop in 37 years. It would take 9.6 months to eliminate the backlog of unsold new homes at the December sales pace, the longest stretch of time since the month’s supply stood at 10.3 months in October 1981.”

From CNN Money. “This decline probably doesn’t accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers’ closing costs or offer other incentives in order to maintain sales.”

“Prices have been driven down by the glut of new homes on the market. The report showed a record 195,000 completed new homes available at the end of the period.”

“The weakness in prices made buyers reluctant to jump into the market, even if the availability of financing was not an issue. The number of new homes bought with cash fell nearly 24 percent, while mortgages guaranteed by federal agencies such as the Federal Housing Administration or the Veterans Administration fell 16 percent.”

From MarketWatch. “Inventories don’t include homes thrown back on the market due to canceled sales. The inventory of completed homes now represent nearly 40% of the homes on the market, the biggest percentage ever, up from 21% during the heart of the boom two years ago.”

“November’s sales pace was revised to 634,000, down from the 647,000 reported earlier. Large downward revisions to the data have become common.”

“In December, sales of homes costing more than $400,000 fell fully 50% compared with a year earlier — likely a reflection of how difficult it has become to qualify for a jumbo mortgage.”

“‘A lousy end to a lousy year,’ summarized Richard Moody, chief economist for Mission Residential.”

“The average sales price fell a record 11.5% to $267,300 compared with December 2006.”

The Philadelphia Inquirer. “The average new-home price, which peaked at $329,000 in March, had slipped to $293,000 by November, according to Census Bureau data.”

“Ryland Group reported a 10 percent drop in its average sale prices, and a 30 percent drop in sales, in its 2007 earnings report Friday. ‘Ryland is in a position to weather this storm,’ CEO R. Chad Dreier told investors in a conference call. Dreier offered a ’silver lining’: It’s getting cheaper to buy vacant lots.”

“Will new-home prices keep dropping? For lower-priced homes, ‘demand is probably being affected by affordability,’ said Fred Cooper Sr., spokesman for Toll Bros.”

The New York Times. “A company that analyzed the quality of thousands of home loans for investment banks has agreed to provide evidence to New York state prosecutors that the banks had detailed information about the risks posed by ill-fated subprime mortgages.”

“Clayton Holdings, a company that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.”

“The investment banks pooled the mortgages into securities, often by blending loans from different lenders. Information on those mixed pools was then delivered to the rating agencies, which assigned the securities a score. Pension funds and other big investors bought them because they had triple-A ratings.”

“But investment banks did not give the rating agencies their due diligence reports, and it appears that the agencies did not demand them, people familiar with Mr. Cuomo’s investigation said.”

“In January 2007, Clayton briefed at least one credit rating agency about the exception reports it was producing, the person involved in the agreement said, but the credit firm did not ask to see the reports.”

“Last week, the CEO of Moody’s Investors Service pointed the finger at investment banks. The executive, Raymond W. McDaniel Jr., said in reference to the information the company received, ‘Both the completeness and veracity was deteriorating.’”

“Chris Atkins, a spokesman for Standard & Poor’s, said the firm was not responsible for verifying information provided to it by the issuers of securities.”

“In November, Fitch Ratings published a detailed review of 45 loans in an effort to identify what went wrong as mortgages were turned into securities. It found extensive inaccuracies and fraud. The firm noted that many of the problems would have been easy to identify by looking at loan applications, appraisals and credit reports — but it appears that such review was either never done or ignored.”

The San Francisco Chronicle. “At least two GOP senators have expressed opposition to the proposed yearlong increase in conforming loans limits, arguing that the government should first establish a new regulator with the power to reduce the $1.5 trillion mortgage holdings of Fannie Mae and Freddie Mac.”

“Complicating the debate are the substantial financial losses that both Fannie and Freddie have racked up during the mortgage meltdown. In light of such problems, Sen. Richard Shelby, the senior Republican on the Senate Committee on Banking, Housing and Urban Affairs, said it’s imperative to increase control over Fannie and Freddie before allowing the companies to take on additional risk.”

“‘Doing so in the absence of such a process enables thinly capitalized entities with recent accounting problems to provide a high-risk benefit to the wealthiest Americans without any real consideration of the need to do so or of the risks it presents to the taxpayer,’ Shelby spokesman Jonathan Graffeo said in an e-mail.”

The Arkansas Democrat Gazette. “While Arturo Reyes Jr. sits in jail on charges of harboring illegal aliens, his wife and co-defendant, Silvia Reyes, is under federal detention at their home — a brick house with a soaring foyer and a soccer goal in the yard.”

“There’s also a hole dug for a backyard pool. That’s a project that may have to wait.”

“The Reyeses’ plans were upended last month when immigration agents raided the family business, Acambaro Mexican restaurants. Prosecutors are not only mounting a criminal case but also moving to seize the Reyes home and other properties that they call the fruits of the illegal labor the Reyeses allegedly used in their restaurants.”

“Largely overshadowed: The bank that holds the mortgages. Arvest Bank, based in Bentonville, is one of few the banks in Northwest Arkansas where an illegal alien can hope to get a home loan.”

“Arvest lent the Reyes family more than $ 2 million for houses and restaurant properties that government prosecutors are now moving to seize, mortgages on file at the Benton County courthouse show.”

“In each case, the bank made the loans to Arturo Jr. and Silvia Reyes, who prosecutors have identified as illegal aliens, the documents show.”

“Arvest Bank Group Inc. spokesman Jason Kincy…said mortgages extended to borrowers without Social Security numbers make up a ‘very small’ portion of Arvest’s mortgage portfolio and that the bank complies with all federal rules on mortgages.”

“‘We’re well within the regulations to make those loans,’ Kincy said.”

“Arvest, owned by the Walton family of Bentonville, is only following a path that federal banking laws and regulations plainly set out, Kincy said. He said the bank’s policy is also in keeping with its efforts not to discriminate.”

“‘We don’t have an aggressive push to go after those loans,’ he said. ‘But as customers come to us, that’s an option we can provide.’”

From CBS News. “It sounds complicated, but it’s really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can’t pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments.”

“It sounds like a shell game or Ponzi scheme; in some ways, it was a house of cards rife with corruption, greed, and negligence.”

“Developers started turning asparagus fields into subdivisions, and lenders handed out free money to anyone who wanted to buy. ‘What do you mean by free money?’ correspondent Steve Kroft asks Jim Grant, one the country’s foremost experts on credit markets.”

“‘I mean free money. I mean you had to apply not to get a loan, almost. Sometimes you have to apply to get a loan, you almost had to apply not to get one,’ Grant says.”

“‘When you opened your mailbox in 2004, 2005, you could barely — people were pressing on you, if you were not institutionalized, all matters of schemes in which to expand your personal debt and mortgage debt. You could, and people did, borrow more than 100 percent of the price of a house with the most fragile of financial bonafides,’ Grant explains.”

“Jerry Abbott, who runs the Coldwell Banker office in Stockton, California, says it didn’t concern the borrowers, many of whom were getting mortgages for more than their houses were actually worth. ‘They were getting loans in excess of 100 percent of the value of the property,’ Abbott says. ‘That type of thing. So, most of ‘em were actually putting a little bit of money in their pocket at close of escrow.’”

“‘So, they were getting paid to buy a house?’ Kroft asks. ‘They were getting paid to buy a house. Yes. Yeah,’ Abbott says.”

“And strangely enough, it didn’t seem to bother the lenders either, who were collecting huge fees just for landing the loans. ‘Whatever they wanted to state for their income. The bank accepted that at face value and made the loan based on that income,’ Abbott says.”

“‘Bonds marked triple-A are now quoted at 50 cents to the dollar, 40 cents on the dollar. Some of them, much less,’ Grant says. ‘Some of them are worth nothing on the dollar. Nothing on the dollar. This is the worst thing that has happened to Wall Street in a long time,’ Grant says.”

“The day Kroft went along, there were two busloads checking out houses that are now 70 percent cheaper than they were when the crisis began. The consensus seemed to be prices are going to drop still further. Not particularly encouraging news for the past two chairmen of the Federal Reserve Board.”

“‘Alan Greenspan and his successor, Ben Bernanke, would say over and over that it’s contained. The problem’s contained. It turns out, it is contained only on planet Earth,’ Grant says, laughing. ‘That’s it.’”

“The central bank’s dramatic three-quarter of a percentage point rate cut last Tuesday was the equivalent of shoving a pacifier in a crying baby’s mouth. And that only stopped the whining for a little bit.”

“Dallas Federal Reserve president Richard Fisher, speaking in Philadelphia on the same day that Bernanke was giving his blessing to an economic stimulus package during testimony on Capitol Hill, made some interesting remarks that the market pretty much ignored.”

“He warned that the Fed still has only two mandates, fostering price stability and supporting economic growth. Keeping the markets happy is not a new third mandate.”

“‘Our job is not to bail out imprudent decisionmakers or errant bankers, nor is it to directly support the stock market or to somehow make whole those money managers, financial engineers and real estate speculators who got it wrong. And it most definitely is not to err on the side of Wall Street at the expense of Main Street,’ he said.”

“Most importantly, he stressed how crucial it is for the Fed to not go overboard in response to current doom and gloom headlines. ‘We must be mindful that short-term fixes often lead to long-term problems,’ Fisher said.”

From USA Today. “The current housing recession is the worst his company has seen since 1974, Toll Brothers CEO Bob Toll says.”

“Toll describes a builder’s survival strategy: ‘You concentrate on what’s necessary to hold your business steady and prepare yourself to ride out the storm and take advantage of opportunities that must come. Then, as fast as you can, you go to concentrating on liquidity … (because) when you’re out of money, you’re out of Schlitz, you’re out of beer, you’re done. You must recognize that very fast,’ says Toll.”

“Toll didn’t see it coming. Just before the market peaked in 2005, Toll predicted that boom-and-bust real estate cycles were over and that housing would continue a smooth upward climb. ‘Prices will keep going up in double digits for years,’ he told Fortune magazine.”

“In hindsight, he says, ‘We miscalculated the extent of the speculation that was taking place in the market.’”

“Toll and other builders tried to protect themselves from house-flipping investors. They made buyers sign contracts, promising they’d live in the home and not resell it for a year or two. But industrywide, these contracts were handled by a mortgage sales force paid largely on commission. Salespeople thus had a financial incentive to overlook suspect buyers.”

“Toll also wrongly predicted at the end of 2006 that the industry’s excess number of newly built homes sitting on the market would all be bought up in the spring selling season of 2007.”

“‘I said that?’ he asks. ‘So foolish.’”

The Boston Business Journal reports from Massachusetts. “A report issued Monday on the Bay State housing market finds sales dipped in 2007 to their lowest level in over a decade, but a separate group contends that the year was still strong when based on historial figures. There were 50,435 single-family home sales in Massachusetts last year; about 5,000 fewer than in 2006, and the first time since 1992 that sales were that low, according to The Warren Group.”

“Single-family home sales in 2007 fell 8.4 percent from 55,054 in 2006 to 50,435. During December, sales continued the sharp decline that has been evident in every month since September, and fell 23.3 percent from 4,074 in December 2006 to 3,123 in December 2007, the report stated.”

“The median price for single-family homes in 2007 also declined, falling 4.6 percent from $325,000 in 2006 to $310,000. The median price of homes sold in December saw the largest drop all year, falling 10.5 percent from $309,000 in December 2006 to $276,568.”

“Another report from The Massachusetts Association of Realtors, which does not include homes listings that are for sale by owner, painted a more optimistic picture.”

“‘There is no question that 2007 was a challenging year for the real estate market for many reasons, yet people continued to buy and sell homes on a daily basis,’ said MAR President Susan M. Renfrew. ‘When you take a step back and look at the year in historical context, it was actually pretty good.’”

The Boston Globe from Massachsuetts. “Homebuyers lured by cheap prices took Route 2 into Fitchburg and Leominster at the height of the housing bubble a few years ago. Longtime residents displaced by those newcomers followed Route 2 west to buy homes in rural towns like Athol and Orange.”

“Now the towns along Route 2 and west of Interstate 495 are among those with the highest rates of foreclosures in Massachusetts, according to the Warren Group.”

“‘Our incomes here are much lower than they are in the Boston area. People were stretching to buy homes,’ said Mark Dohan, director of the Twin Cities Community Development Corporation in Fitchburg.”

“In 2006, for example, the Fitchburg-Leominster region had the seventh-highest number of subprime mortgages in the nation, 187, that went delinquent just three months after the borrowers closed on their loans, a Mortgage Bankers Association study released last year found.”

“‘People bought their homes and immediately stopped paying for them,’ Dohan said.”

“‘You see rising foreclosures because of falling house prices,’ said Prabal Chakrabarti, director of community affairs for the Federal Reserve Bank of Boston. ‘People borrowing to the margin and people lending to the margin, that’s the population that, when house prices go down, goes into foreclosure.’”

“In 2002, Christine Mackie bought a 150-year-old, two-story Cape with an attached barn for horses in Townsend on the New Hampshire border. Her mortgage was $178,000, but as the years passed, the house skyrocketed in value and she refinanced twice, to $268,000, to generate extra cash from her equity.”

“When Mackie split up with her boyfriend in 2006, she realized she couldn’t handle her $1,750 monthly payments alone. Her mortgage holder, Ameriquest, agreed to not bring a foreclosure and ruin her credit, if she could sell the house. In late September, she found a buyer who offered $245,000.”

“Mackie spent around $40,000 renovating it with her partner. At first she listed it for sale for around $330,000. Eventually Mackie lowered her asking price, to compete on a glutted market. And when the time came to finalize the sale, the bank made sure she had been tough in negotiating the best possible price.”

“‘They wanted us to prove that we were trying really hard,’ said Mackie. ‘It was close to a year at this point.’”

The Enterprise from Massachusetts. “Bargains abound as developers respond to a slumping market by slashing prices When the downtown condominium lofts started selling at SoCo146 a year ago, the highest selling price for a two-bedroom, two-bath unit was $214,900.”

“Those units on Court Street are now selling from $165,900 to $182,900, and developers say the drop in price is due to a slumping real estate market.”

“‘We’ve had to respond to the market. We had to. We’re doing what the market is telling us,’ said Ellen S. Goldberg, a spokesman for Cathartes Private Investments, which co-developed the SoCo146 property.”

“And in the last week, prices on the units have dropped anywhere from $3,000 to $6,000, said Gail Carter, on-site broker.”

“What is happening in the downtown condominium market is reflective of condominium sales overall, local Realtors say. ‘Citywide, countywide, statewide — condominium sales and prices are down,’ said Bernie Hassan, manager of Weichert Realtors-Briarwood Real Estate in Brockton.”

“‘The saturation in the market place is the reason probably as to why the prices have come down,’ Hassan said. ‘That would be right cross the board in real estate right now.’”

The Metrowest Daily News from Massachusetts. “Whatever the state of the economy, one thing is clear: consumers are thinking twice before opening their wallets.”

“Michelle Walker of Natick said she’s cutting out the family’s annual February vacation because of of travel costs. ‘Wages don’t seem to be keeping up with inflation,’ she added.”

“‘We’re in for a tough retail stretch here,’ Jon Hurst, president of the Retailers Association of Massachusetts. ‘There are a lot of similarities to 1991 with what’s happening in the real estate market place. It is so much of what drives consumer sentiment and how positive they feel about their short and long term, because for most people, their number one asset is their home.’”

“Natick real estate agent Andy Luke of Re/Max Home Finders said the housing decline has thinned out his industry, with colleagues and related mortgage consultants leaving the business. ‘I’m enjoying the shakeout in a way, because those agents who shouldn’t have been in the business are leaving,’ Luke said.”

“People who could have sold their homes for $500,000 are now competing with bank-owned properties down the street that are selling for $480,000. That’s what’s driving price declines for home sellers, he said.”

The Hartford Courant from Connecticut. “Petra Unander, who lives in a spacious, four-bedroom colonial in a scenic subdivision high above the Naugatuck Valley, can tell you exactly when she realized for sure that she was slipping out of the middle class.”

“It was three weeks ago, on Jan. 4 — the day her latest bills arrived from Connecticut Light & Power and Yankee Gas.”

“‘I couldn’t believe it when I opened those envelopes, because my CL&P bill was $221.15 — $30 more than the month before; and my gas bill was $292.33 — $110 higher than the month before,’ Unander said. ‘With programmable thermostats that keep the house at 57 degrees all night, and no lights on during the day, I thought that my bills would be going down by now. But I’m just falling behind every month.’”

“So, Unander did what she often does in a pinch — she called her close friend and neighbor, Rachel Huzior. Huzior, a compulsive budgeter and frugal with her money, would be able to tell her what she was doing wrong. ‘Well, I nearly had a heart attack when I talked to her, because Rachel’s utility bills were even higher than mine — by $150,’ Unander said.”

“Unander and Huzior were, in a sense, already economic refugees when they met after moving to Naugatuck. In 2005, both had ’surprise’ third children after they thought their families were complete, both needed larger houses and both migrated to the Naugatuck Valley to take advantage of better housing values.”

“Housing prices in the Fawn Meadow subdivision are in the $400,000 range. The Unanders and the Huziors both are in a supposedly comfortable, almost-six-figure income bracket, and Petra earns extra money by running a home business.”

“While transferring money from her savings to her checking account to cover the escrow, Unander realized she had crossed a new financial threshold. In November, Roger Unander’s first paycheck no longer covered the mortgage, and Petra began borrowing from savings to cover it, which she now does every month.”

“‘Some of my friends who live in smaller houses down the hill think we’re rich,’ Unander’s son, Chris said. ‘But I tell them, no, I’ve got to wear my hoodie inside all the time. I’m very aware that my parents are always trying to save money.’”

The Union Leader from New Hampshire. “Personal bankruptcy filings in New Hampshire jumped significantly last year, and bankruptcy attorneys say the mortgage crisis is driving much of that increase.”

“Nearly 3,000 Granite Staters filed for bankruptcy last year. And the number of individuals trying to repay their debts through bankruptcy — known as Chapter 13 filings — is at the highest level since the modern Bankruptcy Code was enacted in 1978.”

“Richard Gaudreau, a Salem attorney who specializes in consumer bankruptcy law, said the mortgage crisis is driving the increases in both Chapter 7 and Chapter 13 bankruptcy filings.”

“Typical is the couple he met just Friday, who fell behind when their adjustable mortgage interest rate went up. ‘They’ve got a house they can’t sell, they can’t afford,’ he said. ‘What do they do? They’re facing a $50,000 mortgage deficiency and they’re filing a Chapter 7.’”

“Gaudreau said he’s been turning away clients. ‘I don’t have the staff or the time to handle everybody who needs to file,’ he said. ‘It’s very reminiscent of the late ’80s, early ’90s, when the mortgage market was crashing. The market’s adjusting, the bubble’s burst and everybody’s trying to go pick up the pieces.’”

“Concord attorney Mary Stewart is also handling more Chapter 13 bankruptcies. ‘It’s because of housing,’ she said. ‘They’re in default on their mortgages and they’re trying to catch up. It’s people who have paid their bills all their lives, and they’re humiliated to be sitting in my office.’”

“‘It’s not deadbeats. It’s happening to people who never thought they would be here,’ she said.”

“Gaudreau said some of his clients seeking bankruptcy protection are themselves working in the housing industry. ‘I’m seeing appraisers, real estate brokers, mortgage brokers, so many contractors. All these people are dependent on the real estate market and it’s having a domino effect.’”

“Londonderry attorney Nancy Michels said most bankruptcy cases she’s currently handling are mortgage-related; some people are ‘just walking away’ from their homes.”

“It’s rare to find someone with a subprime loan who understood what they signed, she said. ‘I have professionals who have gotten themselves into these mortgages who are clearly very bright people, and they just have no concept of what they’re really gotten themselves into.’”

The Nashua Telegraph from New Hampshire. “At first, a four-bedroom ranch on Belmont Street in Merrimack with a walkout basement and recent upgrades was on the market for $259,900 – just what the seller needed to recoup what she owed.”

“But when the property didn’t move right away, and taking the vacant house off the market wasn’t an option, the owner steadily lowered the price, said broker Richard Jean.”

“It took six months and more than $50,000 in price reductions, but there’s finally a pending sale – for $204,900. ‘It’s called a short sale,’ Jean said. ‘That’s what it took to get it done. And the house is in very good condition.’”

“Flash back to just more than two years ago, and this house probably would have sold quickly and close to asking price, Jean said. That’s when the market in southern New Hampshire was hot.”

“‘You can’t expect the market to be the same way it always had been,’ said real-estate agent Lisa Waller, of Nashua. ‘I can tell you, the media has sensationalized it. New Hampshire’s really not doing that bad.’”

“According to new figures from the New Hampshire Association of Realtors, single-family home sales in Hillsborough County took a double-digit hit for the second year in a row in 2007. Sales prices also dropped, but only slightly.”

“After a surge in prices from 1998 to 2004 – when the average home doubled in value from $127,500 to $254,702 – the market peaked in 2005 and has since retreated, according to the Association of Realtors.”

“All of this is a problem for potential sellers who don’t have a lot of equity built up – namely because they purchased a property at peak price just a few years ago and the house is worth less today.”

“‘The biggest problem today is somebody having to sell something in order to buy something,’ said Dave Moran, associate broker in Nashua, adding that more buyers are requesting contingency plans that allow them to back out of a purchase if their home doesn’t sell.”

“But there’s plenty of good news in this market for first-time buyers or anyone who doesn’t have to worry about losing money on a sale. There are plenty of houses to choose from in the Nashua market, and they’re often selling below asking price.”

“Waller said she just closed on a home that went for nearly $100,000 less than the seller originally wanted.”

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