February 29, 2008

Call It Variety, Or A Glut, Either Way Sellers Have An Issue

It’s Friday desk clearing time for this blogger. “A Dallas Morning News analysis of residential foreclosures shows the housing mess extends across North Texas – from high-end urban settings to far-flung suburbs. On the plus side for buyers, foreclosures have cut into housing prices. ‘There’s a lot of deals out here,’ said Valerie Daniels, who said she paid $171,000 14 months ago for her home on Ginger Trail. The 4,000-square-foot foreclosure was appraised then at $250,000.”

“Ms. Daniels, a mortgage banker in DeSoto, said lenders are offering reclaimed houses in her neighborhood for 25 percent to 50 percent below appraised value.”

“Tiffany McAdoo thought she saw a deal, paying $189,000 for a foreclosure on Gardenia Street, a five-bedroom, 3,800-square-foot house appraised at $265,000. But a foreclosure across the street, at just over half the size of her home, is listed at $139,000.”

“‘I’m constantly getting low-ball offers,’ said Ms. McAdoo, a mortgage broker now working at home. ‘I’m basically stuck until the market changes.’”

“Vicki Steele lost the home she hoped to live in with her two children. Ms. Steele said she decided to become a homeowner when she got a job and was no longer eligible for federally subsidized housing. She said she fell behind the payments when the interest rate went up from 8.8 percent to 11.5 percent, pushing her monthly payment from $853 to $1,300.”

“‘They think there’s a sucker born every minute and I looked like a sucker,’ she said of her lender. ‘I tried something for the benefit of my family but it didn’t work.’”

“Joe Osgood is preparing to move his family of five from their home, which is set to be sold on the Hinds County Courthouse steps in two weeks. This was Osgood’s first attempt at home ownership. He got an adjustable rate mortgage 5 1/2 years ago with a monthly note of $496.”

“Osgood said he knew the rate would adjust, but he never thought it would double. ‘You know they aren’t going to tell you that, because then you aren’t going to buy,’ he said.”

“A home-price index released Tuesday shows that Denver home values declined 4.5 percent between December 2006 and December 2007, the worst drop since a 5 percent annual decline in December 1988.”

“Filomena Carrillo lives in a neighborhood that has been hit hard. She bought her Aurora home in the fall of 2004 for $197,000. Today, she estimates she would be lucky to get three-quarters of that amount.”

“‘I’ve tried to refinance for a year now,’ Carrillo said. ‘I have big problems because they told me foreclosures nearby are selling for $150,000 to $136,000.’”

“The Springfield housing market has a wide variety of homes for sale, in all shapes, sizes and price ranges. The problem is that few of them are moving.” ”

“‘This is almost every day; people are slashing prices like you wouldn’t believe,’ said Richard Jones of Carol Jones, Realtors. ‘I have not seen the price reductions outnumber the new listings, thank God, but I’m waiting for that day.’”

“Among the properties being listed at below market value is the 13,000-square-foot home at 3769 E. Eaglescliffe Drive. Listing agent Indy Wallace said the home’s $1.9 million list price is well below the $3 million it cost to build the home for original owners.”

“Call it variety of selection. Or a glut. Either way, Triangle home builders and sellers have an issue: Homes are selling more slowly, and that has caused a buildup of inventory.”

“‘It’s more of a buyer’s market than a seller’s market right now,’ said Jill Flink, a broker in Raleigh. ‘The sellers have had a little bit of a slow time, and they’re much more interested in selling than they were before.’”

“So can you lowball ‘em? Sellers want to sell, Flink said, ‘not take a blood bath.’”

“Fannie Mae, the biggest source of financing for U.S. home loans, told lenders it will probably ban their use of appraisals by in-house employees or those arranged by brokers.”

“About three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes, said said Jonathan Miller, CEO of Manhattan-based appraisal company Miller Samuel Inc. He called the practice ‘laughable’ because it creates a financial incentive for mortgage brokers to push appraisers toward higher valuations.”

“American International Group Inc., the world’s largest insurer, fell in New York trading after reporting the biggest quarterly loss in its 89-year history. The pretax writedown of $11.1 billion wiped out operating profit. AIG also had another $3.27 billion of losses before taxes on impaired holdings in its investment portfolio.”

“AIG guaranteed $61.4 billion in collateralized debt obligations that included subprime mortgages as of year-end.”

“Business terms have a long history of making a mark on the vernacular. Thus, it was probably inevitable that the word ’subprime’ would make a splash. Now, subprime is repeated many times daily, often with a sense of dread for fear the contagion will spread.”

“As a word, it’s become something of a celebrity. In fact, the American Dialect Society last month picked subprime as its ‘Word of the Year,’ underscoring just how far the once obscure real-estate term had barged into the mainstream. Some students, it seems, now describe about poor performance by saying they ’subprimed a test.’”

“‘When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it’s important,’ said Wayne Glowka, dean of arts and humanities at Georgia’s Reinhardt College. ‘You probably also want to pay off that third mortgage.’”

“Foreclosures are on the rise in Douglas County and the rest of Oregon. Two years ago, Christina, 26, and her husband purchased a $192,000 home in west Roseburg with two subprime loans, set up as interest-only payments for the first 10 years. Based on their income, they did not qualify for a single mortgage and allowed their broker to ’state’ their income — inflate it on the loan applications.”

“‘I just really wanted the house,’ Christina said.”

“A few days ago, I heard a talk show host discussing the recent deluge of single-family home foreclosures. He seemed to agree with everyone else that the mortgage crisis was caused by financial institutions that gave out too many mortgages to too many unqualified applicants.”

“The talk show host went further than the rest of the pundits, though. He insisted that none of the blame should fall on those who had borrowed money to buy houses, which they could not afford and were about to lose. It was not their fault that they were drowning in debt. It was the fault of the evil moneylenders.”

“Then he abruptly changed subjects and said something that took my breath away. All banks, he demanded, should be banned from issuing credit cards. Why? Because credit allows us to buy things that we cannot afford, and people should not be subjected to temptation.”

“Good grief, I thought. Life without … temptation.”

“One thing pops into my head. I was young and had just moved from the Midwest to New York for my first full time job. To get to work, I had to walk past a bakery with prettily arranged pastries, pies, and cakes in the display window. The smells! My mouth watered. My taste buds threw up little white flags. I surrendered.”

“That I succumbed to it did not hurt people starving in Ethiopia. It did not topple empires. It would not, however, have felt good to a man suffering from diabetes. For him, surrendering to the enticement of a peanut butter cookie could trigger heart disease, blindness, kidney damage, stomach problems, and heavens knows what else.”

“If he had eaten one cookie, or three cookies, or ten cookies, according to the blame-game philosophy of the talk show host, it would not have been the diabetic’s fault that he landed up in a hospital … or dead. No indeed. It would have been the fault of the bakery. The bakery, you see, had provided temptation.”

“Similarly, department store windows should be covered with heavy draperies so that young secretaries won’t be tempted to buy pretty clothes; motorcycle shops should be forbidden from displaying Road Kings lest they attract the eyes of mid-life-crisis prone males; and brides should be prohibited from reading magazines advertising weddings gowns that they might, or might not, be able to afford.”

“We scrimp. We save. We work three jobs. We count our pennies. We add them up and wait until we can afford to buy it, whatever ‘it’ is. Or, at least, that is what some of us do.”

“Others buy what they want when they want it, whether they can afford to or not. And when they lose it, they blame the bank. They blame the credit card company. They blame fate. They blame temptation.”

“Silly, isn’t it? When we have the choice to be responsible or not …To blame the peanut butter cookie.”

Here Comes The Bad News – Or Good, If You’re A Buyer

The Wall Street Journal reports from California. “As home prices plummet, growing numbers of borrowers are winding up owing more on their homes than the homes are worth, raising concerns that a new group of homeowners, those who can afford to pay their mortgages but have decided not to, are starting to walk away from their homes.”

“Sgt. First Class Nicklaus Skaggs bought his home in April 2005 shortly after returning to California from a one-year tour of duty in Baghdad. The $455,000 three-bedroom home he and his wife purchased in Vacaville, about one hour northeast of San Francisco, is worth an estimated $285,000 today, well below the $453,000 he owes on his mortgage.”

“The monthly mortgage payment, which jumped after its interest rate increased, is now $4,000, up from $2,980 when he bought the house.”

“He can’t sell his home, since there are few buyers, and he can’t refinance because lenders require a large down payment he doesn’t have. Now, the 18-year Army veteran has decided to walk away from his mortgage. He hopes in a few years lenders see his decision as a unique situation created by the housing meltdown.”

“‘I don’t think that house is going to recover in value any time soon,’ said the 40-year-old. ‘I’d just be throwing the money away.’”

“‘It may not be a big thing yet, and hopefully it won’t be,’ says David Berson, chief economist for mortgage insurer PMI Mortgage Group Inc. But if it turns out to be a significant trend, he says, it means that ‘delinquencies and defaults could be higher than the industry is estimating.’”

The New York Times. “Raymond Zulueta went into default on his mortgage last year. In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford.”

“Carrie Newhouse, a real estate agent who also works as a loss mitigation consultant for mortgage lenders, said she saw many homeowners who looked at foreclosure as a first option, preferable to dealing with their lender. ‘I’ve had people say to me, ‘My house isn’t worth what I owe, why should I continue to make payments on it?’ Mrs. Newhouse said.”

“‘You bought an adjustable rate mortgage and you’re mad the bank is adjusting the rate,’ she said. ‘And sometimes the bank people who call these consumers aren’t really nice.’”

“‘I think I could make a case that some borrowers were ‘renting’ (with risk), rather than owning,’ Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard University, said in an e-mail message.”

“‘There certainly appears to be more willingness on the part of borrowers to walk away from mortgages,’ said John Mechem, spokesman for the Mortgage Bankers Association, who noted that in the past, many would try to save their homes.”

“For Raymond Zulueta, the decision to go into foreclosure brought him peace of mind. Mr. Zulueta said he felt he had let down the lender, himself, and his family.”

“‘But you got to move on,’ he said. ‘I know in a few years my credit’s going to be fine. If I want to get another house, it’s going to be there. I’m not the only one who went through this. I know I’m working the system, but you got to do what you got to do. There’s always loopholes.’”

The Mercury News. “Doug Meek, a middle school teacher who lives in Walnut Creek, is looking for a home for his 62-year-old mother. Meek said that he was a critic of the housing boom and was sure the market would eventually subside, something he told his family prior to 2004.”

“‘My wife and I just kept saving money and waited for this thing to really get crushed,’ he said. ‘I kept feeling pressure. I had three kids in one room. I had no idea the market would go down this much.’”

“He and his wife bought in January 2007, when the market was just starting to slow, saying he didn’t time the market correctly, but he hopes his mother and his brother, who was also looking to buy, will.”

“He found a town home in Concord and made an offer of about $200,000 but hasn’t heard from the owner yet. Meek feels a little vindicated though. A few years ago, the ’same little condo’ was twice the price, he said.”

“People are only concerned about the right time to buy when values may go down, said Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy. ‘Previously, there was no timing the market because the price was always going to be higher,’ he said.”

“Levy said that prices are still outstripping wages, a sign of an overvalued market, and to expect additional correction for at least another year. But Levy said that buyers attempting to time the bottom of the market may be disappointed.”

“‘If people had timed the market a year ago, they would have blown that,’ he said.”

“Roger Stone had spent three months shopping for a home before signing a contract in February for a $465,400, 3,500-square-foot home in Tanglewood at Live Oak Ranch in Oakley.”

“‘In that three-month period, it continued to change, change, change,’ the 46-year-old landscaper and tree-cutter said. ‘I was actually in contract with another builder to buy another house, but by December the price had changed so much. They were not willing to renegotiate, so I canceled it and walked away.’”

“Christopher Thornberg, an economist and founder of Beacon Economics, said that timing the housing market is easier than the stock market. ‘These are markets that are very long; it’s not like stocks, where the price goes up or down erratically,’ he said. ‘Home prices don’t magically rise and fall. When prices haven’t gone down for six months, then you’re good to go.’”

“Thornberg said that in the short-term, the housing market will be going down, with factors such as inflation and recession only lengthening the process.”

“‘If you have the attitude that this is your dream house, and you’re willing to take the loss in order to secure this house that you may never have a chance at again, then by all means, buy it,’ he said. ‘But if you’re not that picky, then wait.’”

From Bloomberg. “When Quinn Cuthbertson looks around his new neighborhood in El Dorado Hills, California, he sees rows of empty homes and barren hillsides. A promised new school and a clubhouse haven’t materialized.”

“Cuthbertson paid $460,000 for a four-bedroom house in this northern California town. He now suspects his neighbor spent $45,000 less. Nearby, 87 of 98 Toll Brothers Inc. home sites are undeveloped.”

“Most of the community’s growth came in the late 1990s when the El Dorado County Board of Supervisors gave approval for construction of 11,598 homes as part of five development agreements, said Laura Gill, the county’s chief administrative officer.”

“Cuthbertson, who has two sons ages 4 and 6, plans to stay in the area, and says he can afford to wait for prices to recover. ‘We’ll wait to see what the neighborhood will be like,’ Cuthbertson said. ‘We know prices might be going down, but in five years we’ll be OK.’”

“Homebuilders can’t wait. They’re cutting prices even further than last year and some are courting real estate brokers and using auctions to get rid of homes. Pacific West Cos. said this month that it’s offering a ‘risk free’ price guarantee to buyers in its California communities, including El Dorado Hills. If a similar property in the same development sells for less than a homeowner paid, the company will refund the difference.”

“Brent Sease, who bought a five-bedroom home built by Miami- based Lennar in El Dorado Hills, said a park and school that were supposed to be constructed are at least two years from being completed. Across the street, red tags that say ‘Available’ are pasted on two houses.”

“‘That’s the thing I’m concerned about,’ said Sease, a software manager with three daughters. ‘It’s going to be a while before they put all that in, because they’re not selling homes.’”

The Sacramento Bee. “Reaction came fast, furious and from all directions after three bus tours roamed the area last Saturday touring foreclosed homes. So did offers to buy.”

“Some real estate agents cringed and wrote that touring these unfortunate properties reflects badly on their profession. Others in the business said the tours provided the media another chance to show the housing market in a negative light.”

“Most, however, could not have cared less about such perceptions. They called and sent e-mails to Home Front wondering how to get on the next bus.”

“As for negative perceptions of running buses up to properties where people lost their way financially, the agents have an answer to that.”

“One tour organizer, Bruce Durham of Keller Williams Realty in Elk Grove, said on Saturday that the agents aren’t the ones who moved the people out of their homes. Agents, he said, are marketing homes as they always do. This time the owners happen to be banks.”

“Meanwhile, there’s the Central Valley of California. Yes, here comes the bad news – or good, if you’re a buyer.”

“Twenty U.S. metro areas lead the nation’s downward race in home prices and seven have Highway 99 in common, says the Office of Federal Housing Enterprise Oversight. The nation’s top three metros for the severity of falling values in the fourth quarter of 2007: Merced, Modesto and Stockton.”

“All showed year-over-year sales price declines of 15 percent to 19 percent. Prices slipped 11 percent during the year in Sacramento and 10 percent in Yuba City. Fresno and Bakersfield were down 8 percent.”

The Press Democrat. “The restored Chauvet Hotel is returning to its roots as a destination for Wine Country travelers. Unable to sell the luxury condominiums it built within the century-old Glen Ellen landmark, an investment group has turned the condos into rentals for well-heeled vacationers.”

“The housing market’s sharp downturn left investors with little choice, said Christine Hansson, a managing partner for the ownership group. ‘This is a total fallback to keep the project out of foreclosure. They are going to be used as vacation rentals until the market improves and we can sell them,’ she said.”

“There was little demand for condominiums priced from $1.15 million to $1.37 million, even at nearly 2,000-square-feet each with three bedrooms, well-appointed kitchens and bathrooms, and a heated pool out back.”

“Prices were cut several times, reaching the $850,000 to $995,000 range. The owners called off an auction last year after few prospective bidders turned up. ‘The auction didn’t work; nothing worked,’ Hansson said. ‘We’re holding it until we can get to a better market.’”

“The five available condominiums have been taken off the market. Hansson and her husband own the sixth unit.”

“Larry Paul, a San Francisco architect and original managing partner with Hansson, and a handful of other investors no longer have an ownership interest, Paul and Hansson said.”

“‘I ran out of time and money. We couldn’t hang on for the next two or three years,’ Paul said. ‘Everybody, I think, will be losing money.’”

“Yet, Paul remains optimistic the vacation rental plan should work and the condominiums will someday sell. ‘I think we had a great project and they were worth what we were asking,’ he said. ‘We were a victim of bad timing and a bad market.’”

It’s Not The Craziness It Was A Couple Of Years Ago

The Press of Atlantic City reports from New Jersey. “House prices fell about 1 percent in the Atlantic City metropolitan area in the fourth quarter of 2007, a federal survey said Tuesday, the area’s first decline since the recession of the 1990s. Franklin Williams, president of the Ocean City Board of Realtors, said he and others in the industry there hadn’t seen significant price weakening.”

“‘Actually, it’s looking like the first quarter of this year is going to be above the last,’ said Williams, who is a broker in Ocean City.”

“A real estate professional who works in Philadelphia and has a house in Margate said the new figures are just starting to reflect significant price drops in the market. Marc Wiser, VP of Legend Properties, was shocked by Realtor figures earlier this month suggesting prices in Atlantic County were still going up.”

“‘It makes no sense, when every single property that is within blocks of my Margate house has been lowered due to a lack of activity,’ Wiser said then.”

“The housing price decline reported in the federal survey makes more sense, but it too has further to go, he said.”

“‘The house next door to mine was listed at $799,000. It’s now $535,000. Around the corner a home was listed for $649,000. It’s now $449,000. Both have been on the market well over two years, and I can go on and on,’ Wiser said.”

The Village Voice from New York. “This is what the subprime meltdown looks like: block after block of brick one and two family homes in this working class neighborhood in the northeast Bronx are for sale, in foreclosure proceedings or simply abandoned.”

“There are six homes in foreclosure or headed there on one short block of East 217th Street, just off the commercial district of White Plains Road. And Nancy Lewis on the corner of the next block is getting notices from Washington Mutual, who sold she and her handyman husband a $400,000 mortgage in 2006.”

“‘A lot of people got scammed,’ she said. ‘People got riped off. Mhmm. And I’m one of them,’ she said, shaking her head.”

“In 2006 Williamsbridge had one of the highest rates of homeownership in the Bronx, 31 percent, nearly matching the citywide average, according to data analyzed by NYU’s Furman Center for Real Estate and Public Policy.”

“With a median household income of $31,000, many people in Williamsbridge couldn’t afford to pay their mortgages to begin with.”

“‘A lot of people are complaining about it, how they are losing their houses,’ said Richard Duodu, owner of the African Market. ‘Most of my customers, they own their own houses and another one. If it’s affected the house owners, it’s affected the businesses too. People come in and they are counting their dollars, how much can they spend?’”

The Daily Gazette from New York. “The slump that dogged the Capital Region’s housing market throughout last year has followed it into 2008, leading to a 20 percent drop in sales in January, according to statistics released Monday by the Greater Capital Association of Realtors.”

“The downturn was most pronounced in Albany County, where sales plunged 36 percent. January’s results marked the softest sales activity GCAR has posted for the month in over five years.”

“Some Realtors blamed the slowing rise of home values on the mounting negative financial news that has emboldened potential buyers. Patrick DeVaney, with the McCurdy Real Estate Group in Latham, said he has seen an increase in ‘goofy, low-ball’ offers that are $20,000 to $40,000 below a home’s listed price.”

“‘The trick is now getting the buyers and sellers to agree on a price,’ DeVaney said.”

“Given that 2007 ended on an especially slow note, that sluggishness might also be reflected in GCAR’s February sales results, said GCAR President Marie Bettini. ‘This market is a good market. It’s not the craziness that it was a couple of years ago,’ said Bettini.”

The Connecticut Post. “Jobs. Get those back and the housing market will take care of itself. That’s what Phyllis Esposito-Doyen, a 25-year veteran real estate professional, said Wednesday after the U.S. Department of Commerce published a disheartening report on the fortunes in the real estate market.”

“Esposito-Doyen, a Trumbull ReMax agent, said the market here has gone through a readjustment and appears to be returning to sanity. ‘It’s a bumpy market,’ she said, but that should have been expected after the outrageous run-up in prices that occurred here.”

“Like mold enveloping a house, the foreclosure crisis is spreading out beyond the state’s urban centers, such as Bridgeport, and starting to eat away at the fabric of suburban communities. January foreclosures in Connecticut continued to rise, according to RealtyTrac, propelling the state into the top 10 nationally based on rate of filings.”

“Connecticut, at number eight, helped round out RealtyTrac’s top 10 list, which now includes some of what, until recently, were the hottest real estate markets of the last decade — Nevada, California, Florida, Arizona and Colorado. There were 3,697 foreclosure actions taken in Connecticut in January.”

“This is not the first time Connecticut has been in the top 10. In April 2007, Connecticut had the third-highest foreclosure rate in the nation and it remained in the top 10 in May and June before falling off the top of the list in July.”

“The difference between Tuesday’s RealtyTrac report and those from 2007 is where the foreclosures took place. In 2007, the foreclosures were happening in Bridgeport, New Haven and Hartford. Now, those white-and-black auction signs are popping up more frequently in suburbs like Fairfield and Milford as well as Stamford.”

“Tuesday, there were 2,100 families in those same communities who had entered preforeclosure. The bulk of the distressed families in these 14 communities remain in Bridgeport, which accounts for about 40 percent of the homes in preforeclosure, but the numbers in other communities have doubled and tripled in just two months.”

“In reaction to the Democratic proposal, Gov. M. Jodi Rell told reporters that funding restrictions within the Connecticut Housing Financial Authority, such as federal guidelines, could limit the extent it is able to assist homeowners.”

“Speaking to reporters in her Capitol office, Rell said lawmakers should craft a bill that would protect the state if homeowners can’t meet the terms of mortgage support.”

“‘Is it going to be credit worthy for us to be able to loan money out?’ Rell said. ‘You want to protect those investments so that you’re not losing funds and you’re at least administering it in such a way that the people who qualify will, in fact, pay off that loan.’”

“The new proposals follow in the wake of a slew of programs unveiled by private lenders and state and local governments during the last year. But groups like the Association of Communities for Reform Now told the Connecticut Post in previous interviews this does nothing but delay the date people get thrown out into the street.”

“And Tuesday, the head of RealtyTrac wondered the same thing. ‘The big question is whether those efforts are truly helping owners avoid foreclosure in the long term or if they are just temporarily forestalling the inevitable for many beleaguered borrowers,’ RealtyTrac CEO James Saccacio said.”

The Gloucester Daily Times from Massachusetts. “Numbers released last week by The Warren Group sounded an alarm: with 800 foreclosures statewide last month, Massachusetts had hit its highest numbers since August of last year.”

“Essex County saw a 268 percent increase in foreclosures over last year, with a total of 1,038 homes seized.”

“‘Everybody was seeing home prices go up so fast, it was very tempting to participate and join in the real estate market,’ CEO Tim Warren said.”

“‘What I find astounding is that 30,000 homes entered into the foreclosure process last year (statewide),’ Warren said. ‘That’s 30,000 desperate households that have to do something, 30,000 distressed properties. Only 50,000 homes were sold across the state.’”

“Warren said experts differ on whether the real estate market has ever seen a crisis of this magnitude, but that some believe foreclosure rates were higher during the last major real estate downturn in the mid-1990s.”

“‘In that case, the real estate market turned down for five straight years and then took five years to turn back,’ Warren said. ‘I’d certainly hope we aren’t in that type of cycle again.’”

The Salem News. “The number of foreclosures on the North Shore more than tripled last year, according to figures from the Southern Essex Registry of Deeds. ‘There has been a large increase of (abandoned) properties,’ Peabody Building Inspector Kevin Goggin said. He cited a number of reasons, including foreclosures.”

“‘We’re seeing a few more empty houses, which is highly unusual,’ Tom St. Pierre, Salem’s building inspector, said. ‘When you see an empty house, (usually) there’s a For Sale sign up on it. Now, we’re seeing empty houses with nothing up.’”

“The foreclosure problem has become so serious that last week the Southern Essex Registry of Deeds launched a program to help North Shore residents find out who owns empty buildings in their neighborhoods.”

“‘We got a couple of phone calls from people who were looking to find out who the bank was that owned a piece of property,’ Register John O’Brien said. ‘It happened to me in my own neighborhood. A couple of my neighbors wanted to know about a foreclosed (house) that was just sitting vacant … and not shoveled. That got me thinking — this must be happening everywhere.’”

The Boston Globe from Massachusetts. “Are high prices a sign of Boston’s success, or a damper on that success?”

“An opinion piece in the latest issue of Banker & Tradesman that argued Massachusetts needs more home construction — even now, when the market appears glutted — because housing prices are too high and only a lot more homes can change the situation.”

“The writer is Benjamin Fierro of the Home Builders Association of Massachusetts, which has a professional interest in the debate.”

“The basic argument is certainly correct. The current drop in housing prices is extremely modest compared to the climb that preceded it. The middle of the Massachusetts market is still roughly twice as expensive as it was a decade ago. And while prices are likely to keep dropping in the coming months, almost no one thinks we’re on our way back to 1997 prices, even adjusting for inflation.”

“But a recent research note from the Boston Fed says: ‘While young professionals do spend a greater share of their income on housing in New England, they tend to earn enough to purchase a home in the region…’”

“Are Boston’s housing prices sending young professionals to other cities? A recent editorial in the Salem News tells the story of Maureen Hentz, a recruiter for a company based in Danvers, who says that job candidates routinely reject her offers of six-figure salaries because they’d rather buy a larger house in another state.”

“‘I can’t get somebody to move from Cleveland to here,’ the paper quotes Hentz as saying.”

“The mayor of Salem is quoted as responding, ‘I’ve been to Cleveland, and you can’t touch what we have here.’”

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February 28, 2008

The Foreclosure Situation Is Affecting Prices In California

Bloomberg reports from California. “A muddy gravel road winds uphill through a redwood forest to Jake Terhune’s $985,000 home just outside of Geyserville, in the heart of California’s Sonoma County wine region. Terhune, a self-employed cabinetmaker put down $100,000 and agreed to pay about $6,900 a month for 30 years to buy the three-bedroom house in 2006. Things started going wrong almost immediately after he moved in. Demand for Terhune’s custom cabinetry dried up. His business’s income, which had been about $20,000 a month, plunged 50 percent.”

“After making his first payment, he fell behind. Unable to persuade Ameriquest Mortgage Co. to modify his loan, he stopped paying and ignored calls threatening to take his home. By the summer of 2007, Ameriquest, once the biggest home lender to people with credit problems, put the loan up for sale.”

“‘I was working on two houses, but they got foreclosed,’ Terhune says. ‘If my customers can’t pay what they owe me, the mortgage company can’t get what I owe them.’”

“Terhune was in trouble almost right from the start. When his second $6,910.89 mortgage payment came due, he didn’t have the money.”

“‘I called AMC and told them I only had $5,000,’ Terhune says, referring to Ameriquest Mortgage Co., which is no longer doing business. ‘I asked them if we could work something out, but they were not interested,’ he says.”

“The following month, Terhune owed $14,000; he says he had $10,000. ‘I had worked on a house but that house got foreclosed, so I’m not going to get paid,’ he says.”

“A mortgage collector told him not to send any money unless he could pay the entire amount, he says. By the time National Asset Direct bought the loan and offered a plan to reduce his payments, Terhune was $70,000 in arrears. Even with the easier terms, he missed the December payment.”

“‘I’m keeping good faith and trying to catch up,’ he says. ‘I’m flying by the seat of my pants.’”

The Record Searchlight. “When it comes to the sagging real estate market, Siskiyou County is not immune. Local real estate agents and sellers are taking a hit. Realtor Shelley Sarason (who) specializes in sales in Mount Shasta and Lake Shastina, knows the pain.”

“‘We didn’t have enough homes for sale in ‘05,’ she said. ‘Lots in Lake Shastina were selling like crazy, and we had a few bidding wars on houses that were priced to sell.’”

“Season Johnson, a loan officer in Mount Shasta, thinks the change began as early as 2002. ‘In ‘02 real estate began to really appreciate. More people began investing, and Wall Street did, too. More money led to more loan programs and some people began upgrading to bigger homes while others were getting into the market and often into homes they couldn’t afford in the real world,’ she said.”

“The county has seen fewer foreclosures, however, than other areas of the state. Augusta Meyers, owner of Augusta Meyers Realty in Mount Shasta, had some advice for first-time buyers: ‘Remember, you are not buying a dream home. It’s your dream to own a home.’”

“The last time the median sales price in Shasta County was lower was in January 2005. January home sales in Shasta County dipped to their lowest level in the 14 years DataQuick has tracked the area.”

“‘It’s almost like a bunch of people are standing on the side of a pool and waiting for somebody to jump in,’ lender Ken Lawrence said of the state of the market.”

“Joe Rodola, a Redding credit counselor who leads monthly first-time home buyer classes, believes prices are still falling because consumers are still scared.”

“‘I think it’s generally created by the national media, they report another 100 homes foreclosed today, and it’s oh my gosh,’ Rodola said. ‘The other side of it is people still don’t want to get one of these bad (subprime) loans. I tell people they’re not making them anymore.’”

“Redding Realtor Ron Largent said home prices rose so sharply during the boom years that the fall has been long and hard. ‘Is it going to drop more? That will be a question of supply and demand. If buyers surface, then prices will hold,’ said Largent.”

The Telegraph. “Quick, where’s the foreclosure rate higher – upper-middle class Folsom or low-upper class El Dorado Hills? It’s higher in suave El Dorado Hills, significantly higher – by 50 percent.”

“‘We’re still going to see foreclosures increase, as long as people can’t get out of adjustable-rate mortgages,’ said mortgage lender Barbara Ott, in Placerville. ‘Banks are eating hundreds of mortgages.’”

“‘A lot of ’stated-income’ programs are gone,’ she said. ‘Lending limits on stated-income are dropping — instead of 80 percent of (home) value, it’s now 65 percent.’”

“Also disappearing is a lending habit of loaning to borrowers who had proven they were bad risks. ‘The sub-prime market is gone,’ said Greg Clines of Century Oak Mortgage of Folsom. ‘There will be more ’short’ sales and foreclosures in the next one and a half years. They won’t be a majority of houses offered, but they will be a majority of houses actually selling.’”

The Daily Pilot. “After watching the foreclosed home down the street slowly devolve into a state of dilapidation, Mary Dinius said she was forced to take matters into her own hands. The Mesa North resident paid her gardener an extra $40 to mow her former neighbor’s lawn on Cheyenne Street.”

“Dinius didn’t know the home’s former residents, but it is only one of many foreclosed homes in the Mesa North/Del Mar neighborhood that have slid into a state of disrepair.”

“Costa Mesa real estate agent Larry Weichman said the neighborhood reflects a growing pattern: the rise of neglected, foreclosed residences throughout the city that will most likely get worse before it gets better.”

“‘People will no longer take care of the properties because they don’t have any vested interest in them,’ he said. ‘Sometimes you’ll even find them stripped of appliances, or with holes left in the wall.’”

“‘[These homes] will affect the values of surrounding properties — there’s no doubt about it,’ he added.”

“Costa Mesa Chief Code Enforcer Jim Golfos said that the city has fielded such complaints about a number of such homes. Technically, whoever owns a property, in this case, a bank or other loaner, is legally responsible for its maintenance. But, given the vast size and influence of national banks, a number of properties tend to slip through bureaucratic cracks, Golfos said.”

“‘Recently, it took us about three weeks to get through [a lending institution’s] lawyers — that can be a lot harder than dealing with an individual resident,’ he said. ‘This is a phenomenon that just came to light [in] the city three to four weeks ago.’”

The Desert Sun. “Palm Desert housing sales in January were up 10.4 percent from a traditionally slow December, according to DataQuick. The median price for 92211 was $377,500, down 17.8 percent from January 2007. The median for 92260 is $340,000, down 21.8 percent.”

“In the Coachella Valley, 526 homes were sold in January. It’s been nearly 12 years since monthly sales in the Coachella Valley dipped that low. In September 1996, 493 homes were sold, according to DataQuick.”

“Relatively steady sales in the desert’s condo market are helping make up for plunges in sales of new home construction, January’s numbers show. ‘If condos were down as much as other categories, then the overall decline would be sharper,’ DataQuick analyst Andrew LePage said.”

“The median price for the valley stands at $330,000, down 13.2 percent from January 2007.”

“In January, new home sales took the biggest year-over-year sales hit. Only 80 new homes were sold last month - a drop of 64 percent from January 2007. The local Building Industry Association is projecting fewer than 1,500 permits will be issued this year, down from the more than 8,000 issued in 2006.”

“‘A lot of contractors are having to lay people off,’ said Aimee Schrumpf, executive director for the Desert Contractors’ Association. ‘Because of the layoffs, we’re hearing more and more of people just trying to feed their families.’”

The LA Daily News. “The median price of a San Fernando Valley home plunged a record $113,000 in January from a year ago and sales sank to an all-time low as credit and foreclosure problems further pounded the market, a trade association said Wednesday.”

“The 18 percent price drop, to $500,000 from $613,000, is the first double-digit percentage decline since the early 1990s, said the Van Nuys-based Southland Regional Association of Realtors.”

“The latest median is nearly 25 percent below the record $655,000 set last June and is at the same level as in December 2004.”

“Similar conditions are now also in play in the Santa Clarita Valley. The report showed that last month the median price there plunged an annual 21.8 percent, or $127,900, to $460,000 and sales fell 42.4 percent, to 99 transactions.”

“The condominium median price fell 20.9 percent, or $75,100, to $284,900 and sales tumbled 57.5 percent, to 31 transactions.”

“Prices would have to fall further to make them affordable and turn around the sluggish sales market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.”

“‘I’m still not seeing a light at the end of the tunnel,’ Blake said. ‘If there is one, we’re looking at it about this time next year. And I hate to say that to a Realtor.’”

“Nevertheless, the Realtors group still believes that fire-sale prices won’t result from the market upheaval. ‘Buyers need to realize that prices are not nose-diving, especially in a mature market like the … Valley where there is a finite supply of homes for sale,’ said Jim Link, the association’s executive VP.”

“While January’s big price decline is surprising, it came down from a high level, Link said. Nevertheless, January brought the fourth consecutive month of price declines.”

“‘If you are a seller, you’ve got to be realistic and realize you will not be getting what you would have 18 months ago,’ Link said.”

“Randolph Rogers knows that all too well. ‘The third time was the charm,’ said Rogers, as movers loaded the last of his family’s belongings into a big van Wednesday.”

“He put his 1,500-square-foot home on the market last May for $539,000 after retiring from the Los Angeles Unified School District. He dropped the price three times, finally striking a deal for $425,000.”

“Why that price point? ‘So they could get a conforming loan,’ he said of the buyers. So on Wednesday they locked up the house they bought new in 1987 and moved to Leisure World in Camarillo.”

“Last month, home sales plunged an annual 43.2 percent, to 323 transactions, 246 fewer than a year ago. That’s the lowest monthly total since record-keeping began in May 1984.”

“Association President Mary Funk said short sales are becoming more common now. She said some offers are coming in ‘way under’ the list price but that lenders are submitting counterproposals. And some are willing to pay the buyer’s closing costs.”

“That’s good for buyers, she said. But severe problems persist. ‘The foreclosure situation is affecting prices. The problem is the buyers feel that homes that are owner-occupied should be going for the same price as a foreclosure or a short sale,’ Funk said.”

A Real Estate Hypochondria

A report from the Oklahoman. “The mess in the mortgage industry is hitting home for some Oklahomans. Bob and Dorothy Harper of Yukon grudgingly put their dream home up for sale Jan. 16. They had it custom built in 2002 to fit their every desire. ‘It’s not easy to come out of this house,’ Bob Harper said. ‘It’s everything we worked our whole lives for. We’ll never own anything like this again.’”

“A real estate broker with variable income, Harper took an adjustable loan, figuring he’d refinance it later. He took out a second to furnish it.”

“Three years later, the interest rate on Harper’s 30-year loan reset from more than 6 percent to 11 percent. The hike coincided with Harper’s wife’s hip replacement surgery, which caused her to lose her livelihood as a beautician.”

“‘We were like deer caught in the headlights,’ Harper said. ‘We liquidated our 401ks, Roths, everything to hang onto the house and pay our bills.’”

“Refinancing wasn’t an option because in today’s crippled mortgage industry, lenders are making few, if any, stated-income loans — the type of loan that helped the Harpers buy the house. The couple have listed their 2,153-square-foot home for sale and priced at $220,000, $8,000 less than what they paid for it.”

“Tamela McSwain married and moved into her husband’s home in Mustang in September, but has been trying unsuccessfully to sell her home in west Edmond since late July. The newlyweds have been carrying two mortgages, at about $3,500 a month.”

“‘I’d like to dump the second mortgage, but I don’t want to be silly and just dump the house,’ McSwain said. She already has dropped the price on the 1,975-square-foot home $3,400 to $198,500.”

“Houses that sold in January took an average of 95 days from listing to closing, according to the Oklahoma City Metro Association of Realtors. That was three days longer than in December, when marketing came to a virtual standstill after an ice storm knocked electricity out for days across the metro area.”

“‘We’re doing pretty well,’ said Marolyn Pryor, president of the Metro Association of Realtors. ‘I think the word’s getting out. We haven’t had near the low offers we were getting.’”

“Pryor said the slowdown isn’t surprising considering the increase in the number of houses on the market since the end of the 2002-2005 construction boom.”

“‘Builders are certainly exercising discretion in regard to inventory, and keeping tabs on the pulse of the market,’ said Jeff Click, VP of the Central Oklahoma Home Builders Association. ‘It’s really a psychological condition within the market marked by delusions that Oklahoma City is suffering from the same ailments found elsewhere in the country, a real estate hypochondria of sorts.’”

The Enid News and Eagle from Oklahoma. “Anna Blubaugh, of Century 21 Homes Plus, said the Enid market is doing well. Some owners also are helping with closing costs, but have not taken discounts, depending on where they choose to start the listing price.”

“‘It’s market driven. Condition, location and price are always the same. I’ve been at it for 50 years and it hasn’t changed,’ said Jim Nicholas, of Nicholas Realty.”

“The only down market in Nicholas’ career was the period between 1984 and 1990, he said, but a recovery began in 1987. Rates in the last five years have allowed people who thought they could afford $200,000 homes to buy a $400,000 home, because the interest has been reasonable, he said.”

From Tulsa World in Oklahoma. ” The approximately 5,670 foreclosure filings in the metro area represented a 3.66 percent drop from the year before, according to RealtyTrac …although the city’s foreclosure rate of 0.912 percent of all households made it the 56th highest.”

“‘We didn’t enjoy the bubble, so now we’re not going to feel the pain of the bust,’ said Steven Admire, president of Advantage One Mortgage.”

“Margo Mitchell, executive director of Consumer Credit Counseling Service in Tulsa, welcomed the news, though she expects local foreclosures will start piling up soon.”

“‘We’ve had a lot of calls in January with people struggling, and we’re now seeing a lot more past-due situations than we did in the fourth quarter of last year,’ she said.”

The Times Record News from Texas. “The Wichita Falls housing industry took another hit in January, but Wichita Falls Association of Realtors president John Wilson it not rattled by the numbers. A total of 85 homes were sold last month, compared to 148 in January 2007, and the total number of active residential listings for January hit the 916 mark.”

“‘We anticipated it would be down, but I didn’t know it was going to be that much,’ Wilson said. ‘If you are a buyer, it is tremendous for you now.’”

“‘The national media still has people scared. They have been bombarded by the national media. People get to believing it,’ Wilson said. ‘It is a mental thing right now. People are sitting and waiting for the sky to fall. All the economic indicators here show it is a great time to buy a house, or a car.’”

From NBC 5 in Texas. “A North Texas Realtor is making the most of the flood of foreclosed homes on the market. Real estate agent Tess Langevin started a bus tour to connect buyers with foreclosed houses. Foreclosures throughout the Dallas-Fort Worth area are setting record numbers. More than 4,100 are scheduled for next month’s foreclosure sale.”

“‘We have felt it, you know, but we have a steady stream of buyers,’ Langevin said. ‘I think what they’re looking for are deals. We don’t want all of these houses sitting empty and deteriorating.’”

“Take one home on the tour — it’s $180,000 cheaper than other houses in the neighborhood.”

“In one Desoto subdivision, 13 homes are for sale between $150,000 and $250,000. Of those 13 houses, 10 of them are foreclosures. Robert Zitske’s house has been on the market for nine months. He’s lowered the price three times and still hasn’t found a buyer.”

“‘I think at this point, I’m able to break even with the price listing that I have,’ Zitske said. ‘Beyond that, I’m losing money.’”

“The banks now own many of the homes in the neighborhood. They are willing to sell at deep discounts, making it difficult for people such as Zitske to compete. Realtors said some sellers end up with 30 percent less than what they paid for their house.”

“‘They’re not going to be able to leave this neighborhood, leave this house, without having to spend money,’ Jon Warren of Realty World said.”

“The only upside is for buyers. One 3,900 square-foot foreclosure is selling for $181,000.”

The Palestine Herald from Texas. “While national news media have broadcast stories about slumping real estate markets and rising foreclosures, local realtors say that’s not reflective of Anderson County.”

“Demand for homes has driven prices up over the past three years, said realtor Mike Whitworth, noting that homes in Westwood which sold in the $62,000-$72,000 price range in 2005 now were averaging more than $80,000 each, with many selling in the $90,000 to low-$100,000 range.”

“A combination of lower-than-average cost per square foot, more people wanting to leave larger areas such as Houston and Dallas and supply and demand are helping drive home prices higher, he said.”

“‘We have been cheaper for a long time. We used to have over half of our inventory (of homes for sale) in the $50,000-$100,000 range. Now more than half of our inventory is over $100,000,’ Whitworth said.”

“While that may push some home ownership out of reach for those looking for housing under $60,000, he said, the same home may seem like a bargain to someone moving from an area with much higher housing costs. ‘They’re selling homes for $200,000 and coming here and getting more for their money,’ Whitworth said.”

The Killen Daily Herald from Texas. “Fort Hood Area Association of Realtors president Marcia Worthington thinks the negativity in the news might have had some effect. She credits the industry with offsetting any jitters by maintaining good media relations and pumping up morale with the association’s newsletter for members and regular advertisements about the good points about the local housing market.”

“Although home sales dipped in the local area while so many troops were overseas, market forces seem to be taking hold for hope on the horizon, regardless of what the national market does.”

“‘We’d see more effects of the nationwide troubles here if we didn’t make a conscious effort to combat them,’ she said.”

The American Statesman from Texas. “Sales of Central Texas homes fell 10 percent in January, the seventh month in a row that year-over-year sales dropped. The 1,321 sales last month were a two-year low, based on data from the Austin Board of Realtors. The number of Central Texas homes on the market increased by 24 percent to 8,727 active listings.”

“Jim Gaines, research economist at the Real Estate Center at Texas A&M University, said the market was almost too tight last year, when there was about 3 months worth of homes for sale in January. He said that level ‘is almost unsustainable and probably not a good thing over a long period of time.’”

“Sellers must ‘get real or be prepared to take longer to sell, and even then you’ll take longer to sell with an adjustment,’ he said. ‘You have to deal with the market you’re in, not the market you wish it to be or the market it was a year ago.’”

“The struggles of the national housing market are changing the face of development in Central Texas, delaying some projects and causing big builders to back out of others.”

“‘The national home builders have almost completely pulled out of the market, not just from a lot-development standpoint but also from a home-building standpoint,’ said Chris Ellis, a principal with Endeavor Real Estate Group. ‘They have either dropped their positions and land they were looking at or sold their positions or are actively looking to sell their positions.’”

“‘The local guys know the demand is still there, and the national builders know the demand is still there, but Wall Street is cutting them off,’ Ellis said.”

“Dallas-based DR Horton had options on lots at Headwaters at Barton Creek, a project east of Dripping Springs that will have 1,000 single-family homes and a 1,000-acre park. Rather than develop the lots, however, Horton agreed to be bought out.”

“‘Their home office told them to cut back, and they agreed to back out on a mutually agreeable price,’ said Dick Rathgeber, who is one of the developers behind Headwaters.”

“Three of local developer Bob Wunsch’s Central Texas projects have been stalled because of the national real estate downturn. ‘Some of our projects have been delayed a year,’ said Wunsch, CEO of Waterstone Development.”

“‘Now that the large national builders have pulled back and walk away from deal after deal after deal, there are opportunities that have allowed … all the local guys to jump back in,’ said Clark Wilson (of) Wilson Holdings Inc. ‘We’ll take increasingly large shares of the market because we will be able to get in and get the land deals and get the good subcontractors and be positioned for the impending boom.’”

“Groundbreaking has been delayed for the condo project called 1155 Barton Springs. Yesterday, Elisabeth Waltz wrote in an email: ‘These times seem to call for a measured approach. It may take us a few more months to start construction; we will start when we have 50% or more of the residences sold. (Personally, having been a real estate broker for many years, I would prefer all of them pre-sold).’”

“Owners (will) be shelling out anywhere from $1 million to $4.3 million for the 27 units.” “And although it’s located next to a railroad track, the Waltzes have said the building’s concrete and sound-proofing insulation will minimize noise from the railroad.”

“‘Everyone is amazed on how little impact the train will have, if any. It moves very, very slowly in anticipation of the upcoming 90-degree turn across the lake,’ she said.’”

From KRIS TV in Texas. “As Richard Alligood stands on the corner of West Second Street and South Oak Street, he remembers Saturday nights downtown in the city he’s now mayor of.”

“But now, as the lunch hour approaches, the streets are vacant. The two-year mayor said this is largely due to absentee owners of the buildings. ‘It’s like a lot of downtown areas in West Texas,’ Alligood said. ‘It’s got a lot of potential, it just needs someone to come in and take it over.’”

“Alligood’s not just talking the talk about downtown. He’s actually moved there. He’s currently refurbishing a living space above his downtown telecommunications business. ‘I thought it was unique to do,’ he said. ‘I’ve seen them in Austin and Dallas. I’ve just been amazed by loft apartments.’”

“As part of Pecos’ downtown rejuvenation program, there’s interest in putting offices and restaurants on the first floor of the old Woolworth’s store, with apartments on the second floor. Other housing could soon be available, even for those with slightly higher incomes. Alligood said a California company is looking to build 120 town homes.”

“But Alligood knows he faces an uphill battle in a town where trailer homes sit next to restaurants on major streets. Zoning could take some getting used to.”

“‘It’s a complete change of mindset,’ he said. ‘When you have a city that had no growth and no economic development, and somebody says Let’s do this,’ you say, go ahead!’”

Reaping The Results Of The Excesses

The Chicago Tribune reports from Illinois. “Chicago-area sales of existing homes took their worst plunge since at least 1998 in January, and the median price dropped for the first time in at least a decade, according to the Illinois Association of Realtors. January sales of single-family homes and condos in the Chicago area were off 34 percent from January 2007. ‘We can’t blame it all on the weather, but we all know what January was like,’ said association spokeswoman Ann Londrigan. ‘Compounding problems with consumer confidence and mortgage tightening, there’s not much good about January that you can say.’”

“Though Chicago real estate agents report that many sellers are cutting their prices, analysts see others clinging to outdated notions of pricing and remaining a roadblock to the recovery.”

“‘I do think there’s a stubbornness there, particularly in high-priced markets like Chicago,’ said Caroline Sallee, an economist for Anderson Economic Group. ‘People aren’t coming down on the price, so the home doesn’t sell and you continue to see inventory [of homes for sale] rise.’”

“Linda Rizzuto, for one, said she isn’t inclined to come down from the $444,900 she’s asking for the Northwest Side home where she has lived 17 years, though not one would-be buyer has looked at it since she listed it in January.”

“‘My friends think I’m crazy for putting the house up for sale now because the market is bad,’ she said. ‘If I had to sell, I would be panicking, but I don’t have to sell.’”

“Glen Ellyn real estate agent Karen Lippoldt said sellers ‘need to get more aggressive with pricing.’ Nonetheless, asking prices are coming down. ‘I had over $500,000 in price reductions for the year in 2007,’ she said.”

“She said that in her area, builders were skewing the price data with huge cuts just to get homes off their books. And homes do sell, she said. ‘I have three homes under contract,’ Lippoldt said. ‘None of [the sellers] got what they wanted, but was it a fair price? Yes.’”

“Hoping to avoid bankruptcy, home builder Kimball Hill Inc., said Wednesday that it will scale back on operations and reduce staff, including at its headquarters.”

“The Rolling Meadows-based builder will exit the Florida housing market. It also will lay off 132 employees at its headquarters and elsewhere around the country by December, the 39-year-old company announced.”

“Kimball’s fortunes have taken a radical turn since 2006 when it had more than $1 billion in sales. By the end of its fiscal year Sept. 30, it reported losses of $220.5 million on revenues of $894.7 million. It is holding 10,955 house lots that are in development or completed.”

“This year, ‘the marketplace is fickle, buyers are fearful and traffic has fallen off sharply’ during a frigid, snowy winter, said Kenneth Love, Kimball Hill’s CEO during an interview.”

“Property markets are reaping the results of the lax underwriting criteria that prevailed early in the decade and pumped up house sales to booming levels, he added. ‘We’re now seeing results of the excesses of 2003 through 2006,’ Love said.”

“At its Settlers Ridge subdivision in Sugar Grove, where it has sold about 100 units since May 2006, it still has approximately 800 unsold house lots, said Elizabeth Drozdik, director of market research for a Schaumburg-based real estate consulting firm.”

“The timing of the development was unfortunate. ‘Sugar Grove came on market when housing was already hurting, but the industry was in denial and no one understood how bad things would get,’ Drozdik said.”

The Beacon News from Illinois. “Allyn Burkett has shown her house five times in five months, and not a single offer. The Sugar Grove woman has concluded it’s not her but the market that is straining her finances and delaying her move back home to Texas.”

“And she should know. Burkett is a Realtor in Elburn who said she has tried ‘all the tricks of the trade,’ but ‘I just don’t know anymore.’”

“‘I thought I was going to get (an offer), but they decided my living room was not big enough,’ Burkett said. ‘It was one measly thing that broke the deal.’”

“Now that Burkett has stepped foot in her clients’ shoes, there’s some advice she has for sellers: ‘You just have to be patient.’ She also says, ‘If you don’t have to sell right now, don’t.’”

The Herald News from Illinois. “Over the last two years, Gladstone Builders has used a number of methods to stay afloat in a sinking housing market. When the company ran out of ways to reduce costs, it turned to village hall. In order to maintain its lower prices, Gladstone asked the village to consider slashing its fees if the company buys building permits in bulk.”

“‘I need the village’s help, quite frankly,’ said Adam Dontz, VP of Gladstone Builders and Developers.”

“Trustee Paul Fay said he was reluctant to support the plan and that the village’s first responsibility is to its taxpayers. Trustee Larry Vaupel noted that helping residential builders like Gladstone could send a message to commercial developers, who need residential rooftops to be successful.”

“‘I can hear naysayers and critics already, saying … we’re giving in to developers or letting developers off the hook,’ Vaupel said. ‘This isn’t government versus big business. I wonder how a half-built subdivision serves (taxpayers’) interests.’”

“Gladstone’s marketing campaigns gave the company a boost — an offer to reduce its single-family homes by $100,000 generated 20 sales in two days. Gladstone homes are priced at about $496,000 for single-family houses and more than $300,000 for townhomes.”

“Of the 33 building permits the village issued in January, 14 were for Gladstone homes. However, faced with a local residential lot supply that far exceeds demand, Dontz said Gladstone likely would not issue 14 permits in a single month again without the village’s help.”

The News Democrat from Illinois. “Home sales were down about 25 percent in January from the same month a year ago in St. Clair and Madison counties, according to local Realtors’ associations.”

“Lynn Turpin, of Belleville, has been attempting to sell his condo on Garrettsen Drive for the last four or five months. ‘We’ve had an awful lot of people interested,’ the 77-year-old said, although no deal has come through on the two-bedroom condo with hardwood floors and a Jacuzzi.”

“‘I don’t think I’ve got it overpriced,’ he said.”

“Belleville Realtor and National Association of Realtors director Stan Sieron said the recent subprime market woes and declining sales have forced Realtors to work harder and smarter. ‘The days of order-taking are out the window,’ he said.”

From Crain’s Detroit Business in Michigan. “For local banks, 2007 was interesting. It was also a financial mess. Driven by much higher provisions for loan losses and by bad-loan write-offs — the bulk of which bankers said were caused by the collapse of land development, housing sales, and commercial and real estate development — most banks lost money.”

“Most had worse years than in 2006. Many of them finished with fourth quarters that would have seemed disastrous a year ago.”

“‘A lot of the home builders in Michigan have wiped away years of earnings and many have filed bankruptcy. It’s hard to say it’s stabilized,’ said Terry McEvoy, an equity analyst for Oppenheimer & Co Inc. ‘If there’s a continuing decline in home values, those banks with exposure to the real estate market will continue to face losses.’”

“David Scharf, senior equity research analyst with Cleveland-based FTN Midwest, said one positive note is banks are rethinking how aggressively they’ve been moving assets off their balance sheets, in some cases by selling foreclosed properties at fire-sale prices, which just creates problems for other customers trying to move inventory.”

“‘In some cases, they’ve been taking a 50 percent haircut. Now, they’re going to take a more thoughtful approach,’ he said.”

The County Press from Michigan. “With foreclosures of homes in Lapeer County soaring to new heights, the federal government is offering a beacon of hope to deter the onset of blight in neighborhoods devastated by the housing crisis.”

“The U.S. Department of Housing and Urban Development is offering local governments the chance to buy unsold repossessed HUD-owned homes for $1.”

“‘They’re vacant homes the Federal Housing Administration is unable to sell after six months,’ said Lapeer County Community Development Director Mike Partlo. ‘There is a 10-day window where local governments may purchase the single family homes for $1.’”

The Grand Rapids Press from Michigan. “A home in foreclosure, plastered with postings, warning signs and notices, is a symbol of loss for the previous owner. But for those participating in West Michigan’s first foreclosure tour Saturday, the bank-owned properties represented potential, at a deep discount.”

“‘This is what I do,’ said William Bryant, who owns four rental properties already. ‘I’m a businessman. I want to know how to get the best for my money; that’s why we’re shopping for foreclosures.’”

“Realtor James Goetzka started the tour by telling the group that the current housing market, although unfortunate for those losing their homes, is providing an opportunity. ‘It won’t last long,’ he said. ‘It will be a little window in history.’”

The Journal Sentinel from Wisconsin. “Twenty-one Wisconsin banks didn’t turn a profit last year, as the housing slump lingered and a slowdown in the economy deepened, a new report by regulators shows.”

“Banking consultant David L. Donihue said the housing market remains weak and that the slowdown appears to be spreading to commercial construction in addition to residential developments.”

“‘I think it’s going to take the rest of this year for things to turn around,’ Donihue said. ‘I think people are just kind of pulling back on what they had been buying and waiting to see what’s going to happen.’”

“Daryll Lund, CEO of the Community Bankers of Wisconsin, said the housing and economic slowdown have caused bankers to ‘hunker down’ for the time being and bolster lending standards.”

“‘Segments like the condo market have really kind of hit the wall a little bit,’ he said. ‘Some of those development projects that probably a few years ago were given the green light a lot more quickly are now demanding higher amounts of units be sold before the financing can be put in place.’”

The Sun Times. “While numerous suburban home builders are struggling, Chicago-based Terrapin Properties LLC is emerging as the first major condo developer here to see operations spin out of control in the current housing slowdown. A foreclosure suit filed against Terrapin over a project in Kenosha, Wis., indicates the company could be dissolved.”

“Indymac Bank, the primary lender on the 162-unit condo development in Kenosha, last month sued Terrapin for more than $13 million in back debts.”

“But the case isn’t a garden-variety foreclosure in which a lender has no recourse beyond getting the keys to the property. Terrapin’s principals, including James Geleerd and Michael Ezgur, personally guaranteed the loan, according to the suit. Indymac is going after them, as well as principals Sherwin Braun and Greg Braun, to collect.”

“As a result, the control of other Terrapin projects could be in play. Terrapin also controls units left over from previous projects. The company’s Web site said it also has projects in Arizona and Florida, plus commercial space in Chicago buildings.”

“Sources said Geleerd begged for time Friday on a conference call with a large number of creditors. They said Geleerd asserted he was close to selling the Burnham Pointe condo inventory to somebody whose cash would prop up the company.”

“‘The atmosphere was pretty intense,’ one person said. ‘And nobody believes that in this market, there’s an investor looking for condos.’”

The Pioneer Press from Minnesota. “The CEO of Franklin Bank in Minneapolis has watched during the past year as foreclosures in North Minneapolis have multiplied to the point where just about every block in the neighborhood has at least one vacant home.”

“‘I think there is opportunity in the midst of this chaos for community banks to be back at the table and be one of the main lenders in the mortgage industry again,’ Dorothy Bridges said.”

“For Bridges, North Minneapolis is more than a place to do business. She owns a home there, and…she also encouraged her son to buy a home there. Six years ago, Myron Bridges paid $130,000 for a new two-story beige and white house on Dupont Avenue.”

“Until recently, Myron Bridges’ home looked like a smart investment. In November, it was appraised at $171,000. But then a string of foreclosed homes on Dupont Avenue and in the surrounding area pulled the property value down. Last month, his mortgage company said the home was worth $105,000. He didn’t have enough equity in the home to refinance again.”

“To make things worse, his mortgage payment recently jumped $200 to $1,310 a month, when the adjustable-rate mortgage he got when he refinanced three years ago reset. ‘I can’t sustain that rate for a whole year,’ he said. ‘We’re stretching.’”

“As much as Bridges wants to help, there are limits to what the bank can do. She’s running a bank, not a charitable organization.”

“‘The risk and the reward is something we’re in the process of investigating,’ she said. ‘If it doesn’t have a mutual benefit (to Franklin and the community) then it doesn’t make sense for us to do. We still have to generate some level of profit.’”

The Minnesota Daily. “In the last year, the explosion of residential property values of the early 21st century slowed, partly because of repercussions of the sub-prime mortgage crisis. Though it wasn’t good news for Wall Street, the resulting higher vacancies and lowered property values could be a boon for renters in the Twin Cities, especially students.”

“V.V. Chari, an economics professor, said the foreclosures that came out of the sub-prime mortgage crisis have put downward pressure on housing costs. ‘Difficulties in the sub-prime mortgage debacle and the slowing of the economy in general, reduced land prices quite substantially,’ Chari said. ‘It has tended to reduce housing cost.’”

“While student neighborhoods have largely escaped the foreclosures that plague other parts of the Twin Cities, renters, who make up more than 90 percent of residents in the University neighborhood, still benefit from this spillover. Although students live in a region of Minneapolis with a low vacancy rate - about half that of the city as a whole - rent in the University area, at $818, is still below the city average of $868, according to the 2007 Minneapolis Trends Report.”

“The condominium boom of the early 21st century, which introduced thousands of units into the city, has also helped stabilize rent prices.”

“Cecilia Bolognesi, principal planner for Community and Economic Development, said a factor affecting rent could be the many condos transformed into rental units in recent months, in a sense, flooding the market.”

“In October 2007, three large condo projects in Minneapolis announced they were being foreclosed by lenders. Together, the three projects had a cumulative 553 units.”

“Bolognesi said another factor is that many developers in Minneapolis have turned to building rental units instead of condos or single family homes.”

“Senior Kait Sergenian said she currently lives in the Phillips neighborhood of Minneapolis. ‘It’s slightly easier every year,’ Sergenian said. ‘I had less people with me, and also we were looking outside campus, so the quality of houses was slightly better.’”

“Junior Skyler Nowinski said he pays roughly $400 a month to sublease a room in a house with three other roommates. ‘Personally, things have become cheaper for me,’ he said.”

Bits Bucket And Craigslist Finds For February 28, 2008

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

February 27, 2008

The Thing About Bubbles Is, They Have A Habit Of Popping

The LA Times reports from California. “Effie Micheals placed her three-bedroom, three-bath South Pasadena condo on the market last August for $750,000. Great neighborhood, great school district. She figured she’d get top dollar. And why not? The Southern California property market had been minting money for years. Buy a home, sit back and let the dollars pour in.”

“It was as close as you could get to a sure thing. Kind of like buying tech stocks in the late 1990s. But the thing about bubbles is, they have a habit of popping.”

“A few months after Micheals’ condo was listed, it was reduced in price to $725,000. When that didn’t work, it was knocked down again several weeks ago to $679,000.”

“Micheals bought the nearly 1,700-square-foot condo for $675,000 in 2005. She saw it as a steppingstone to another home in the vicinity, and planned to use the cash from its appreciated value to buy something even nicer.”

“‘There was no way I thought I’d ever let my home go for less than $800,000,’ Micheals said. ‘Everyone wants to live in South Pasadena.”

“Now she figures she’ll take a loss once all the fees are taken into account when the condo’s sold at its current bargain-basement price — if it’s sold, that is. ‘It’s very disheartening,’ Micheals said. ‘I’m very upset.”

The North County Times. “San Diego posted the highest rate of home price depreciation in the nation during the fourth quarter of last year — losing more in three months than the national average of homes lost in one year, according to a housing report.”

“Home sales prices in the county dropped more than 3 percent in just one month and 9.14 percent in three months, according to December data from the Case-Shiller Home Price Index, compiled by Standard & Poor’s. The national 20-city composite lost 9.08 percent from December 2006.”

“Year-over-year, homes in all of San Diego County lost about 15 percent in value. Many real estate agents and housing analysts said in interviews that they think the price decline will continue because foreclosures have hit new highs and sales new lows.”

“‘As long as the sales are going down, that means the market sucks and there’s no bottom in sight,’ said Jim Klinge, owner of Klinge Realty in Carlsbad. ‘But really, the market’s great if you’re a seller and you’re willing to put an attractive price on it. Buyers are out there. But they don’t want to sell it. They want to goose it up 10 (percent) or 20 percent and try and hit the jackpot like they’re in the casinos.’”

“Lyle Anderson, a Poway real estate agent, said it is possible San Diego’s January numbers will post a monthly decline just as large as December’s, which would make three straight months in which homes lost more than 3 percent in just one month. If that happens, the county’s homes would lose slightly less than 12 percent in four months.”

“‘Then you’re hitting a historical number,’ he said. ‘If you were to look at the statistics … the worst we’ve had before was 11 (percent) or 12 percent — and that was for the year.’”

“Lower-end homes, defined as those priced below $431,605, have borne the brunt of housing depreciation, plummeting 23 percent in value in one year, according to Case-Shiller. The higher-end tier, homes priced above $638,891, has lost 8.6 percent in one year, the report stated.”

“‘In the boom of the market, there was not much gap between the nice homes and the fixer-uppers. That gap is back, and it’s bigger than ever,’ Klinge said. ‘It’s compelling for buyers now to wait until they get a nice deal on a screaming big house.’”

The Voice of San Diego. “National foreclosure tracker RealtyTrac reported Tuesday that San Diego County foreclosure activity rose 20 percent between December and January.”

“‘Judging from memory and so on, it’s way way way beyond what we saw before,’ said Ramsey Su, a retired real estate broker and investor who sold bank-owned properties in the 1980s and 1990s.”

“‘There still seems to be the complacency that we are in this position. Nobody seems to be concerned that this is going to hit home, hard, sooner or later. How do you handle so many foreclosures?’ he said.”

“Yamila Ayad is the president and broker of Mission Home Loans in San Marcos and a board member for a local consortium of nonprofits that hosts events for distressed homeowners. She said San Diegans, even some of the professionals attempting to curtail the spread of distress, are growing used to new records being set every month in the data.”

“‘I think that the sad thing is that we’re just not amazed anymore,’ she said. ‘I hate to say this, but we end up feeling numb, anaesthetized by the issue.’”

“In her specialty market, the corridor surrounding Interstate 15, real estate associate broker Kris Berg said she’s noticed that trend among the lower-priced homes.”

“‘Some communities are being hit more dramatically — the lower end communities, like Mira Mesa,’ she said. ‘And certainly the condo markets, regardless of their location.’”

“Berg said she is seeing buyer activity picking up, an interest level growing among people who are tired of waiting. That’s not necessarily translating into a slew of closed transactions, though.”

“‘No buyer wants to feel like they’re going to buy a house today and it’s going to be worth less tomorrow,’ Berg said.”

From NBC San Diego. “The number of foreclosures for San Diego in January was up 165 percent compared with the same period last year, according to RealtyTrac. One mortgage broker said that there are still a lot of adjustable-rate loans that will reset at higher rates in the next two years.”

“‘If people are losing their jobs or not getting the high-paying jobs they anticipated, they may not be able to make those adjusted-mortgage payments,’ CalPacific Mortgage spokesman Tom Rice said.”

“People in financial trouble aren’t the only ones going into foreclosure. There a growing number of people whose home values have dropped so sharply that they are choosing not to continue paying for the residences.”

“‘When you’re under water, what’s the upside?’ Rice said. ‘They figure that taking a foreclosure is a hit from a credit standpoint. They will walk away from it.’”

The Sacramento Bee. “As fears of falling home values continue to grip the Sacramento-area market, more home builders are offering limited protections against losses to help worried buyers sleep at night.”

“‘No one wants to purchase a home or a car or a microwave and know that two months, three months or five months later there was a better deal out there,’ said Barry Grant, Sacramento territory president for Los Angeles-based KB Home.”

“To woo anxious buyers, KB promises if it lowers prices during the three or four months between a signed sales contract and finished construction, the buyer will get the lower price. The same applies to interest rates.”

“Grant said the builder ’sporadically’ offered the guarantee in local projects last year, but ‘has made a commitment this year that we’re doing it on every built-to-order home in Sacramento.’”

“One of the Sacramento region’s leading town house and condominium builders, Reno-based Pacific West Cos., is going a step further. It’s telling customers that if they buy today and the builder drops prices before the development is finished, even as far out as two years, they’ll be reimbursed for the difference.”

“‘It becomes kind of a psychological edge. You feel comfortable with what you’re buying now,’ said Taylor Cohee, the builder’s VP for sales.”

“The deal is being offered at two of the builder’s condo communities in Folsom and El Dorado Hills, and also in Reno and Fresno. The Folsom and El Dorado Hills projects already sell in the low $200,000s.”

“Among buyers won over was Luis Gallardo. He is moving to El Dorado Hills. ‘I think it gives you some comfort level that with the economic conditions being what they are, and the housing market being what it is, that you’re not going to continue to lose more money,’ said Gallardo.”

The Santa Cruz Sentinel. “Lenders unable to sell mortgages on their books have turned conservative. Investors stuck with billions in bad loans have turned cautious. Borrowers are frustrated. Appraisers who have to calculate home values are challenged. Home sellers forced to drop asking prices are disappointed.”

“‘There’s not a lot of good news,’ said Mark Junod of First Horizon Home Loans, one of six local mortgage brokers and lenders assessing the state of the market (at a) presentation organized by the Santa Cruz Association of Realtors and Santa Cruz Home Finance.”

“Rick Campbell of Wells Fargo Home Mortgage offered a bright spot: The bank’s analysts expect to upgrade the Santa Cruz County market from ’soft’ as of Dec. 15 to ’stable’ as of Feb. 29. In contrast, Santa Clara is expected to fall from ’stable’ to ‘depressed’ and Monterey from ‘distressed” to ’severely distressed.’”

“Lenders want money down and proof borrowers can repay the loan. Credit score under 740? Expect higher interest rates. ‘A lot of people got loans that shouldn’t have gotten loans,’ said Dwayne Dawson of Washington Mutual Home Loans.”

“Borrowers had ‘no skin in the game,’ said Graham Morland of Sterling Properties, offering an opinion from the audience. ‘A majority of the short sale cases here were 100 percent financing.’”

“Campbell faulted borrowers who didn’t read their loan documents, and Junod faulted loan agents unable to explain complex loans to their clients. ‘A cleansing was needed,’ said Junod. ‘About 31 percent of loan agents are out of the business.’”

“Dawson agreed with Tai Boutell of Santa Cruz Home Finance that it’s too easy to become licensed as a lender. ‘The test is not geared to lenders,’ Dawson said. ‘I pulled out my calculator twice.’”

“Asked if struggling borrowers can get a loan modified, the lenders said: It depends. ‘Our modification department is swamped,’ said James Giuffre of Wachovia Mortgage. ‘The question is: What can you afford?’”

“Junod said lenders are looking for permanent solutions. ‘If they think it’s temporary, they won’t make adjustments,’ he said.”

The San Francisco Chronicle. “Daniel Mudd is president and CEO of Fannie Mae, the giant government-sponsored entity that, along with Freddie Mac, buys and packages billions of dollars of mortgage loans for resale in secondary markets, which helps to keep interest rates low. The following interview was edited for space and clarity.”

“Q: How did the mortgage crisis happen and who’s to blame?”

“A: For a period of time, the market grew. It grew too fast. It had a big adjustment and a period of big dislocation came in the summer, and now we are in a period of volatility and uncertainty…The market is looking to find a new level. And by the market, I mean home prices, housing starts and mortgage rates.”

“Both lenders and borrowers had a huge amount of confidence that ultimately led to overconfidence. The lack of other things to invest in caused people to invest in real estate, and a lot of the products, and I think it’s specifically pronounced in California, were designed to get monthly payments down at the beginning.”

“Q: Is there any sense of responsibility from any of the people that are involved in this, the mortgage brokers, the lending industry? We are finding evidence of fraud and lots of it.”

“A: There were instances where people got put into homes that they couldn’t stay in and it should have been known at origination that they weren’t going to be able to stay in those homes. There is responsibility there. There is liability there and there should be people prosecuted for that.”

“Q: Do you feel that 100 percent of those people should be helped out in some way? A: No. Mixed in that humongous set of almost $1 trillion dollars worth of mortgages are out-of-state investors that purchased three, four or five properties. We took a sample in Las Vegas and the problem in Las Vegas is not actually at the working-class part of the market. It’s in the second home, condominium-investor property and those are where the subprime loans are.”

“Q: There are people that are making $80,000 in homes that cost $800,000. How can you justify giving mortgages to people who don’t have the means to repay them? A: I think that putting people into homes that they can’t stay in is clearly a problem and I don’t think there is justification for it.”

“Q: Is Fannie Mae, in your opinion, backed by the full faith and credit of the federal government? A: No.”

“Q: Your lenders, your creditors are giving you a preferential rate. Do you think they think you are backed by the full faith and credit of the government?”

“A: My opinion derives from my own experience. I go out and see investors around the world. Foreign investors are lending money (for) housing in the U.S. market. So I go around and see investors and on the front page it says we are not an agency of the federal government. We are not fully backed by the federal government. When I am asked that question, the answer is no.”

An Inherently Healthy Process

Some housing bubble news from Wall Street and Washington. CNN Money, “New home sales slipped to a nearly 13-year low in January, according to a Census Bureau report showed, down 2.8% from 605,000 in December. Sales fell 33.9% from the same month last year and hit their lowest levels since February 1995. The median price of a new home sold in January was $216,000, down 4.3% from $225,600 in December and 15.1% from $254,400 a year earlier.”

“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 such as expensive features for free in order to maintain sales.”

“‘We may not pull out of this for another 5 years,’ said senior economist at the Credit Union National Association, Mike Schenk.”

“The latest housing boom was about nine years long, and there’s a way to go to undo some of the excess, Schenk believes. ‘Prices were up 45% over the last boom,’ said Schenk. ‘Prices that are down 10% do not return us to normalcy.’”

From Bloomberg. “A decline in inventory failed to keep pace with the drop in demand. The number of (new) homes for sale fell to a seasonally adjusted 482,000, and the supply of homes at the current sales rate jumped to 9.9 months’ worth, the most since 1981.”

“Sales of previously owned homes, which account for about 85 percent of the market, fell in January to the lowest level since records began nine years ago, the National Association of Realtors also reported.”

“New-home purchases, which account for the rest of the market, are considered a timelier indicator because they are based on contract signings. Existing home sales are calculated when a contract closes, usually a month or two later.”

“Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its biggest quarterly loss in 22 years. The results included pretax writedowns of $245.5 million.”

“The average price of Toll’s gross signed contracts in the fiscal first quarter fell 13 percent to $634,000 from $730,000 a year earlier. The average price of the canceled homes in the quarter was $770,000.”

“‘Ceaseless talk of a recession continues to dampen the mood of consumers,’ CEO Robert Toll said in the statement. ‘This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures, has kept pent-up demand on the sidelines.’”

From MarketWatch. “Home builder Toll Brothers took more write-downs in its current quarter as revenue dropped 23% and its backlog of orders fell 42%. And what did the company blame that poor performance on? Loose lips.”

“Whether or not a recession occurs in the overall economy, it is here in spades in housing. And what is doing the talking is data. How about a conversation that begins with housing starts: They were down 30% in 2007 and they are likely to fall nearly that much this year, according to the National Association of Home Builders.”

“Then keep your jaws flapping over new-home sales, which are expected to fall to at least a 25-year low of 632,000 units this year.”

“Need another cocktail-party zinger? Cut in with existing-home sales, which are going to drop to a 20-year low in 2008. And if you want to halt everyone else’s chatter bring up the topic of home prices, which showed the first overall nationwide decline in 2007 since statistics have been kept.”

“Maybe the drumbeat that home builders really should have paid attention to was the thumping that occurred a couple of years ago as unqualified buyers and greedy investors beat a path to their subdivisions and high-rise condominiums.”

“But back then the only tune companies heard was sales and the only rhythm sales agents swayed to was the one brought by steady commission checks.”

From Reuters. “U.S. banks and thrifts set aside record amounts of money last year in anticipation of higher loan losses, as the housing and credit markets soured, U.S. regulators said.”

“FDIC Chairman Sheila Bair linked the earnings drop to weakness in the housing sector and the credit squeeze in financial markets. ‘We can expect these problems to continue in 2008,’ she told reporters.”

“Analysts said they see broad signs of deterioration in bank credit quality, mostly concentrated in a half dozen states led by Michigan, Florida and Georgia.”

“Banks set aside record reserves in the fourth quarter and for the year to cushion against expected loan losses. They set aside $31.3 billion in the fourth quarter to offset weakening conditions in the housing and credit markets, and $68.2 billion for the full year.”

“The industry’s delinquent loans jumped 32.5 percent to $26.9 billion in the fourth quarter, the biggest quarterly percentage rise in 24 years, the agency said. U.S. lending standards are being tightened and loan demand is slowing, FDIC officials said.”

“‘This is an inherently healthy process and it won’t last forever,’ Richard Brown, the FDIC’s chief economist, told reporters. The weakness in the credit markets ‘probably has several more quarters to run,’ he added.”

“Fannie Mae, the largest provider of financing for U.S. home loans, reported a $3.6 billion quarterly loss on Wednesday and said it expects a ’significant’ worsening of the housing bust.”

“Fannie Mae said its results were largely driven by a $3.2 billion loss on derivative contracts used to hedge its investment portfolio as interest rates declined.”

“Washington-based Fannie Mae, which was created in 1938 to boost homeownership, is now struggling to strike a balance between enlarging its business while tightening underwriting guidelines to protect itself from further losses.”

“Regulators and lawmakers have leaned harder on Fannie Mae and Freddie Mac in recent months to bolster the housing market, most recently by increasing the size of loans eligible for their purchase. However, losses at the companies have squeezed their profits and reduced their ability to expand.”

The Wall Street Journal. “Mortgage giants Fannie Mae and Freddie Mac are close to a deal with New York Attorney General Andrew Cuomo to make changes meant to discourage inflated appraisals, widely viewed as an important contributor to the mortgage crisis, according to people familiar with the matter.”

“The proposal, in which the two government-sponsored companies would require lenders they work with nationwide to change their appraisal practices, would cap a year-long probe by Mr. Cuomo’s office that has already resulted in a lawsuit against an appraisal-management company, for allegedly submitting to pressure by a big lender to inflate appraisals.”

The Advocate. “A Stamford hedge fund that has been steadily losing assets since the summer has informed investors that it has begun liquidating its remaining holdings and plans to close up shop for good.”

“Sailfish Capital Partners made a number of bad credit bets tied to subprime mortgages and has been dramatically affected by the widespread financial credit crunch, the firm’s founding partners, Mark Fishman and Sal Naro, wrote investors earlier this month.”

“Founded in 2005, Sailfish had managed as much as $1.9 billion last year, before it began losing assets. Clients of the firm, who couldn’t withdraw money until Sailfish reached its two-year anniversary last summer, pulled about $400 million from the fund in January, according to published reports.”

“In their letter, the fund’s partners talk about the difficult economic conditions dating to last summer, when the housing market blew up and the credit markets collapsed. ‘The world has changed dramatically and rapidly since August 2007,’ the letter said.”

The Chicago Tribune. “Nationwide, 233,001 homes received at least one notice from lenders last month related to overdue payments, an increase of 57 percent from a year earlier, according to RealtyTrac.”

“‘You have more people going into default and a higher percentage of the properties going back to the banks,’ said Rick Sharga, RealtyTrac’s VP of marketing.”

“Nationally, attempts to help struggling homeowners seem to be falling short. ‘The loan workout modification programs aren’t having a significant material effect on keeping properties from going back to the banks,’ Sharga said.”

“One dramatic trend last month was a 90 percent spike in the number of properties that were repossessed by banks, compared with January 2007. ‘It suggests that there’s little or no equity in a lot of these homes, because they’re not even being sold to investors at auctions,’ Sharga said.”

“Efforts to save U.S. homeowners from foreclosure should not unduly alter the contracts behind troubled loans, a senior Treasury Department official said on Tuesday.”

“Proposals that ‘would retroactively change contracts on existing loans’ could cause long-term harm to the housing finance system, Treasury Assistant Secretary for Economic Policy Phillip Swagel said, according to prepared remarks.”

“Such a move ‘would make it more difficult for future subprime borrowers to get into a house in the first place,’ he said.”

“Swagel said the Treasury Department is examining whether there is enough market discipline in the current mortgage finance system. ‘The originate-to-securitize model succeeded in dispersing risk … but had the unwelcome effect of also dispersing information,’ he said.”

“Investors had too little information about the true risks of mortgage-backed securities collateralized debt obligations and other products that helped fuel the recent housing finance bonanza.”

“Besides lacking information, investors relied on a faulty assumption that U.S. home values would continue to rise and so put aside some of due-diligence work.”

The Sacramento Bee. “Mortgage rates are rising, putting additional pressure on the troubled housing market, and a new report on inflation suggests that rates might go up even more. Mortgage rates tend to move in tandem with the yield on long-term government bonds, which have increased in recent weeks as investors react to concerns over inflation.”

“‘We keep seeing more and more horror stories about the economy,’ said Michael McGee of a Rancho Cordova mortgage brokerage firm. McGee said higher mortgage rates aren’t helping a housing market that he believes is the worst of his 36-year career. ‘It’s never been as bad as it is today,’ he said.”

“Consultant Steve Dutra said higher rates will blunt the impact of falling housing prices, which analysts had hoped would kick-start a new round of buying.”

“‘With prices coming down, we were hoping interest rates would stay low as well,’ said Dutra, a VP in the Sacramento office of John Burns Real Estate Consulting. Higher rates means ‘a certain amount of people will be taken out of the market,’ he said.”

“Dean Wehrli of consulting firm the Sullivan Group said higher rates aren’t especially worrisome – but the economic trends are. ‘We have to be worried about jobs again – Sacramento’s job growth has slowed down so much the last few months,’ he said.”

“Sacramento-area unemployment has risen to 5.9 percent, while job growth is at its lowest level since 1993.”

“The recent uptick in mortgage rates has proved frustrating to potential homebuyers and existing homeowners, given the publicity over the Federal Reserve’s decision to slash interest rates. The Fed’s moves affect short-term rates and don’t necessarily influence the long-term rates to which mortgage pricing is pegged.”

“‘People are calling me up and saying, ‘Hey, I heard the rates are going down – I want to refinance,’ McGee said. He’s had to turn away most of his callers.”

Sellers Trying To Catch A Slinky Going Down The Stairs

The Naples News reports from Florida. “The Cape Coral-Fort Myers area had the highest rate of foreclosures in the nation in January, a mortgage research firm said. Charlie Green, the Lee County Clerk of Courts, said there were 2,297 foreclosures in the county during January. During the first four months of fiscal 2008 — from October through January — there were 7,766 foreclosures.”

“‘For the first third of the year foreclosures were up 2,100 percent,’ Green said. ‘It’s insane.’”

“Tom Moss admits buying a condo in Estero was an ill-advised investment. The Naples resident bought the property two years ago with thoughts of turning a profit. He paid $232,000 for the two bedroom, two bath, 1,416 sq. ft. unit with a third-floor view of the sunsets. Now, Moss will be ‘happy’ if he can sell for $180,000.”

“‘I got caught,’ Moss said. ‘After years of complaining about the growth, I decided to buy into it. But I got in too late and now I’m getting smoked.’”

“He listed his condo on Craig’s List, and wants to limit his losses to just over $50,000. ‘I don’t want to pay someone else money that I’m already losing,’ said Moss about resisting to list the property with a Realtor.”

“You could hear the despair about the market in Ray Garvey’s voice. The Realtor/investor has two homes in the foreclosure process and is trying to salvage a condo investment. Garvey admits the $239,000 asking price on his South Fort Myers condo might need some adjustment.”

“But having plunked down $220,000 for it a year ago, he’s faced with a losing proposition.”

“‘I’d take any reasonable offer but I’m not getting even that,’ said Garvey. ‘Someone offered $160,000 via e-mail but that means I’m going to have to come up with $55,000 at closing and I don’t have it.’”

“‘I don’t think you can find an enthusiastic Realtor right now,’ said Garvey who moved to Southwest Florida four years ago from New York.”

The News Press from Florida. “Lee County’s residential real estate market is in recovery as bargain hunters snap up great deals — but prices are likely to fall further before a huge backlog of homes is absorbed.”

“That was the word Tuesday night from real estate broker Denny Grimes of Denny Grimes & Co. at The News-Press Market Watch annual real estate symposium. ‘We are in recovery but that does not mean the bottom of the market,’ said Grimes.”

“Grimes said the sales price for houses is declining and likened a seller’s situation to somebody trying to catch a Slinky going down the stairs. Get ahead of the falling prices so you can sell the house, he urged.”

“‘It’s almost impossible to catch from the top,’ Grimes said.”

“He said there’s a silver lining to the cloud of falling prices, however: ‘Lee County is becoming affordable again’ with almost 3,000 houses for sale at $225,000 or less with at least three bedrooms and 1,500 square feet.”

The Herald Tribune from Florida. “January home sales in Southwest Florida gave further credence to Realtors who contend that the market is ahead of the rest of the state if not the nation in recovery. The 4 percent increase in sales for Sarasota-Bradenton and the 13 percent increase for the Charlotte County-North Port marked 2 of only 3 sales gains for Florida’s 20 largest markets.”

“But the sales gain came at a cost, with the median sales price dropping — 13 percent in Sarasota-Bradenton and 21 percent in Charlotte County-North Port.”

“Robert Milligan, a 26-year-old broker in Sarasota, says he is convinced that the market has hit its nadir, a notion shared by some Florida economists like Hank Fishkind.”

“‘We have hit bottom in Sarasota,’ Milligan said. ‘I am eating my own cooking by purchasing property now.’”

“Milligan has bought six houses and plans to hold them as rentals. He has found single-family homes in Sarasota that sell for $150,000 or less, and can finance them as rental property for $1,200 to $1,300 per month to cover his expenses.”

“‘Rentals are more favorable in Sarasota than in Charlotte or North Port since they had such a huge building boom there,’ Milligan said.”

“Pricing remains the focus for most of the region’s agents, said Brandon Kekich, a Lakewood Ranch-based team leader for Keller Williams Realty, who added that the current environment is testing the skills of Realtors, separating the ‘the pros from the Joes.’”

“‘We are having a big push of proper-pricing clinics because a Realtor is not not doing his client any good by wearing rose-colored glasses,’ Kekich said. ‘He should be telling his sellers to drop the prices’ to a realistic point ‘or get out of the market.’”

The Sun Sentinel from Florida. “Prices and sales of existing homes plummeted last month as South Florida’s housing downturn stumbled into a third year. Palm Beach County’s median price fell 12 percent in January, to $343,200 from $388,000 a year ago, the Florida Association of Realtors said Monday.”

“Sales tumbled 26 percent, to 369 from 496. It was the fewest homes to change hands in any month countywide since the Realtors’ group started releasing monthly housing statistics in 1994.”

“Last month, 1,746 Palm Beach County homeowners were notified by their lenders that they intend to take back the properties, more than double the 634 from a year ago, according to Realestat.com.”

“Palm Beach County’s existing condominium market also is in free fall. The median price slid 26 percent in January, to $157,700 from $213,100. Sales declined 20 percent, to 303 from 381.”

“Ken and Mindy Rohlman recently sold a Boca Raton condo for $300,000 and bought a four-bedroom house with a pool nearby for $375,000. The house was priced at $450,000 after the owner had turned down a $550,000 offer last year.”

The Atlanta Journal Constitution from Georgia. “Home sales in metro Atlanta have slowed to a trickle and likely will remain sluggish until sometime next year, according to Roger Tutterow, professor of economics at Mercer.”

“Monthly housing permits in metro Atlanta for single-family homes were 31,029 in December, a nearly 50% drop-off from June 2006. There were 3,244 housing starts in north metro Atlanta in the fourth quarter, down 49.4 percent from a year earlier. In south Atlanta, the tally was 1,661, down 65.8 percent.”

“Builders have watched with concern as the region’s inventory of unsold houses has swelled to almost a year’s supply in some areas. But Tutterow said the glut is partially responsible for a brighter consumer outlook.”

“‘It means there’s tons of property for them to choose from,’ he said.”

“Consumers are beginning to feel empowered because of their bargaining power and wide selection, ‘They know they have the upper hand in negotiations,’ Tutterow said.”

The Index Journal from South Carolina. “For home buyers, the time is now, but sellers might want to hold off putting their property on the market, officials said Tuesday in the wake of three reports showing large drops in existing-home sales.”

“‘I think this is a continuation of what we’ve seen in the past 18 months. We continue to see inventory increase and prices go down,’ said Walter Todd, portfolio manager for Greenwood Capital.”

“‘I think all the areas around the lakes are going to continue to grow rapidly,’ Tripp Whitmire, co-owner of Whitmire Real Estate Agency, said. ‘The problem is all the people in Florida can’t sell their places down there. We see a lot of people who come here and say, ‘This is where we’re going to retire as soon as we sell our house.’”

“Whitmire also said the coast is seeing a much larger price gap than the Upstate.”

“‘I do a little development down there (on the South Carolina coast), and it’s almost like the whole place is for sale,’ he said. ‘You just didn’t have the same number of investors down there that you had for a while. The prices on the coast spiked so rapidly in the ’90s and again in 2003 and 2004, so it’s in the middle of a price adjustment.’”

“‘I do see a lot of the prices dropping, but I think they were artificially high,’ he said.”

“Most local officials said the Greenwood market will continue to favor buyers as long as the supply of for-sale homes continues to grow. ‘We’re seeing a significant decline in housing starts, and that’s a positive thing,’ Todd said. ‘We need to stop building houses before we can stabilize. It just takes time.’”

The Sun News from South Carolina. “The cost of living on the Grand Strand is rising, and some residents are getting squeezed at both ends by paying higher prices for necessities while their paychecks grow less. Staples such as groceries, gas and housing costs have risen over the past year and forced people to dip into savings or cut corners.”

“Average wages in South Carolina grew 3.5 percent in 2007 to $37,246, according to Schunk. The most recent data for Horry County show average wages in 2006 were $27,905; the statewide average was $34,281; and the national average was $38,651.”

“Home prices driven up by the housing boom of 2005 and 2006 are fueling the cost of living increases, said Coastal Carolina University research economist Don Schunk. The median price of a condo rose $7,148 in 2007 to $192,148, according to fourth-quarter statistics from the Coastal Carolinas Association of Realtors. And single-family houses rose $9,455 to $216,500.”

“That makes for a $93,648 spike in condo prices and a $79,550 increase in single-family house prices in the past five years.” “‘Homes are much more expensive,’ Schunk said. ‘We have problems with a lack of affordable housing in our area that feeds into a higher cost of living.’”

“‘I basically turn [the electricity] off as much as possible,’ said Christina Pullen, who lives in Carolina Forest. She said she had to find a way to curb the $50 to $75 per month increases she saw in her bill recently.”

“That and pay cuts in her job as a flight attendant have made for tough times, she said. ‘It’s ridiculous. I took a home equity loan, and I’m living off my equity in my home. That’s not right,’ she said.”