The Housing Bubble

The Daily Bulletin reports from California. “A total of 119 homes and condominiums were up for auction on Sunday, and all but a handful were scooped off the market at prices far below what they would have fetched just a year ago. The firm that hosted the auction, looked to unload homes from all over the Inland Empire which had reverted to bank ownership during the past year’s market meltdown.”

“A house in Victorville sold for $120,000; in Apple Valley for $101,000; in Rancho Cucamonga for $203,000; in Fontana for $269,000; Moreno Valley for $163,000. Almost all the homes sold Sunday drew values between 15 percent and 30 percent below their listed current prices and even more depreciated from market highs.”

“Others didn’t see the deals they hoped for materialize. Chris and Doreen Huie, who were looking to add to the handful of High Desert houses they own and rent, said the prices the market bore Sunday were on the high side, given that they expect housing to further depress.”

“‘This isn’t the bottom, and the prices today weren’t near the bottom,’ Chris Huie said. ‘We’ll wait, it’s still going down.’”

The LA Times. “Once the properties are turned over to the bank, the lender is motivated to sell them as soon as possible — and often for a reduced price, said Michael Carney, a professor of finance and real estate at Cal Poly Pomona.”

“‘They’ve got money tied up in these houses that’s not generating anything for them,’ Carney said. ‘It’s basically a dead loss.’”

“Susana and Edward Salgado arrived at the auction intending to bid on a four-bedroom Lake Elsinore home for their family of four. ‘We’re tired of renting,’ said Susana Salgado. ‘Homes are going for a great price.’”

“But the couple’s bid of $257,000 was topped at the last second by another offer of $258,000. The Salgados didn’t go higher. ‘We should have bid a little more — I think we would have got it,’ she said. ‘We’re a little disappointed.’”

“The median price for a Southern California home last month was $408,000, down 17.6% from a year earlier and 19.2%, on average, from peaks reached last year, according to DataQuick. And property records show that foreclosures are growing as a proportion of the home sales market. About 33% of Southern California homes sold in February had been foreclosed since January 2007, up from 3.5% of sales a year earlier.”

“‘People see these big signs — ‘Sale: 20% off, 50% off.’ Off what?’ Carney said. ‘We don’t know what the price of housing ought to be. The real price right now is whatever they can sell it for.’”

“Armed with $100 million from Dubai and a refined design plan, officials Monday said construction will finally begin next month on the residential and shopping plaza along Grand Avenue that is considered a linchpin to downtown L.A.’s revitalization.”

“The announcement comes after months of delays and questions about the viability of such a massive development in the midst of L.A.’s real estate slump.”

“In the last year, about a third of all proposed housing developments downtown have been put on hold or canceled. At the meeting Monday, some officials noted downtown’s changing landscape.”

“‘We need to continue to wish ourselves good luck,’ said L.A. County Supervisor Gloria Molina.”

The Tribune. “More than 100 Estate Financial investors gathered Monday in Avila Beach, hoping to find ways to reclaim investments from the troubled company’s real estate loan portfolio estimated at more than $340 million.”

“‘We’ve invested in what are now terribly stressed projects in a terribly stressed time,’ said Jonathan Mielziner of Shell Beach, who said he invested around $650,000 in eight real estate projects through Estate Financial.”

“‘Now the situation’s mushroomed into a nightmare, and people are here trying to find a clear agenda to get this solved,’ he added. ‘If we don’t grab hold of the value that’s left right now, there will be nothing.’”

“The company fueled hundreds of millions of dollars worth of California real estate developments. Those included housing subdivisions, condominiums, hotels and winery projects throughout San Luis Obispo County.”

“Known as ‘hard-money lenders,’ lending companies such as Estate Financial pool private investor money to make high-interest loans to developers. Investors get fractional interests in deeds of trusts secured by property.”

“The Childerses said they have invested about $500,000 in Estate Financial. ‘When we were told by Karen Guth that our money was gone, that was quite a shock, and our first reaction was one of denial,’ Colleen Childers said.”

“President Karen Guth…contended that she is continuing to address the concerns of the Childerses and the other 3,000-plus investors. ‘Yes, in some cases the money is gone. But we are waiting for the projects to be sold, or we’re going to put foreclosure, and they will get their money back,’ Guth said. ‘We are in control of the ship, and we’re working toward the resolution.’”

The Fresno Bee. “Gov. Schwarzenegger came to town Monday to gather support among local officials for his budget reform ideas. ‘The budget, it’s broken, no doubt about it, and we’re facing the consequences like never before,’ Fresno Mayor Alan Autry said in welcoming Schwarzenegger to Fresno.”

“The state is projecting a $14.5 billion shortfall, said H.D. Palmer, a spokesman for the state’s Department of Finance in Sacramento. ‘It’s horrible, terrible’ to cut funds for law enforcement and to fight gangs, Schwarzenegger said. ‘But you can’t give people more money than you have, so I have to make the cuts.’”

“The state’s budget shortfall took state officials by surprise, Schwarzenegger said. ‘No one foresaw the subprime mortgage crisis and the housing market crisis,’ he said.”

The Mercury News. “On Sunday, JPMorgan Chase announced that it would acquire Bear Stearns. The ordeal has toppled one financial titan after another. ‘You keep waiting for the other shoe to drop, and it keeps dropping,’ Greg Rosston, deputy director of the Stanford Institute for Economic Policy Research. ‘You have to wonder, ‘Is this Imelda Marcos’ closet?’”

“On Monday, state officials sought reassurance that California will receive $1.3 billion that Bear Stearns owes the state.”

“In a statement Monday, California Treasurer Bill Lockyer said ‘we received verbal assurances today from JPMorgan officials that they will honor Bear’s commitments.’”

The Press Democrat. “Sales of less expensive homes are outpacing costlier residences, helping pull down the median price for a Sonoma County house to $435,000 in February, down 29.7 percent from the peak in summer 2005 and the lowest in five years…according to the latest Press Democrat real estate report.”

“Sellers accepted offers on about twice as many homes under $500,000 in February compared with a year ago. Recent sales activity under a half million dollars reflects the market’s continuing price decline. The county’s median resale price fell for the 20th consecutive month in February when compared with the same month a year earlier.”

“‘Prices got way out of line, there’s no question about that. But they’ve been coming down, and they keep coming down,’ said Ron Wareham, owner of Hurd Real Estate in Santa Rosa.”

“There remains a glut on the market. At the end of February there was a 12-month supply of homes based on the current sales pace. ‘There’s a lot of buyers who are still holding out who may be missing the boat,’ Wareham said.”

“Helping to swell the supply of homes for sale is the steady rise in foreclosed properties lenders put on the market. A record number of Sonoma County residents lost their homes to foreclosure in 2007, and even more are in danger with default notices also at record highs.”

“‘We’re getting five or six listings a week. I’m busier than ever,’ said David Rendino, a residential investment property specialist now working with lenders.”

“Foreclosure sales and homes sold for less than the amount a homeowner owes on the mortgage contribute to the county’s continuing price declines. The median price fell 13 percent from January, when it stood at $500,000.”

“Sonoma County condominium sales fell 26.7 percent over the same period. The typical condo sold for $254,500 in February, a 13 percent decline from $292,000 in January.”

The Santa Cruz Sentinel. “After a bank repossesses a home, Sebastian Frey often gets a call. Frey works at Thunderbird Real Estate in Capitola. Last month, he invited a reporter to join him as he checked on two newly foreclosed properties in the Las Lomas area, just over the Monterey County line.”

“Number 60 Overpass Road, Watsonville, was vacant so there was no need to offer cash for keys. A notice on the door indicated water service had been cut off. Next door, No. 62 Overpass, was empty, too.”

“The next stop was 47 Springpoint Road in Castroville. The home sat on an acre on a quiet dead-end road, behind a gate topped by lion statuettes. A group of mobile homes was on the other side of the road. The thick grass hadn’t been mowed in a while. In the back of the house were dozens of latex paint cans, and an old Jeep with one good tire.”

“This property had been listed for $995,000 in December. The current asking prices: $414,900 for No. 60 Overpass Road and $410,000 for 47 Springpoint Road.”

“‘It’s hard to figure out what these homes are worth,’ Frey said. ‘It’s not a science, it’s an art.’”

“Sales in Watsonville have been slow. So many homes are for sale it would take more than two years to sell that inventory at current sales rates.”

“Currently there are 196 single-family homes in Watsonville on the market. Sales have picked up, he said, counting 23 houses or condos in Watsonville in escrow in the past 30 days.”

“‘I’ll bet 20 of those are REOs,’ he said, using the term for a sale of a bank-owned property after a foreclosure.”

“‘It’s sad for people who want to sell their homes,’ Frey said, mentioning a friend who bought a house in Watsonville for $850,000. ‘There’s a house on his street selling for $600,000. No way he’ll sell for $600K.’”

“‘Most of the foreclosures today are people who bought in 2005,’ Frey said. ‘People were told, ‘Don’t worry, because the value of the your home will increase in a couple of years and you can refinance — or you can sell.’ Those lines were probably said hundreds of times, and it turned out not to be true.’”

“As for those two homes in Monterey County, Frey said he just got an offer on one of them. The offer was less than the asking price.”

“‘Very few people offer the full price,’ he said. ‘I wouldn’t offer the full price. It’s a buyer’s market.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Housing starts in the U.S. dropped in February and building permits fell to the lowest level in more than 16 years. Builders broke ground on homes at an annual rate of 1.065 million, the Commerce Department said today. WCI Communities Inc., a Florida homebuilder, reported its fifth straight quarterly loss on March 17. The company’s cancellation rate was 110 percent in the period and new orders dropped more than 300 percent because of ‘defaults’ on sales contracts.”

Las Vegas Now. “Kyle Canyon Gateway in the northwest, the Cosmopolitan Resort right on the Strip and Inspirada in Henderson are all facing the same problem, empty pockets and too much debt.”

“No one from Inspirada or the Cosmopolitan Resort would comment about the financial troubles. A representative from Toll Brothers, one of the builders in Inspirada said no comment and that they wanted to keep it quiet.”

“Bank of China Ltd., the nation’s biggest subprime mortgage investor, tumbled below its initial public offer price for the first time in Hong Kong, capping a five-month slide that’s wiped out $88 billion in market value.”

“Investors including Goldman Sachs Group Inc. and Bank of America Corp. have seen their investments in China’s banking industry erode as rivals including Industrial & Commercial Bank of China Ltd. followed Bank of China lower. ICBC, the world’s largest bank by market value, has fallen 33 percent in Hong Kong since Nov. 1. Goldman owns 4.9 percent of ICBC.”

“Goldman Sachs Group Inc., the world’s biggest securities firm by market value, reported first- quarter profit dropped the most since 1999, reduced by $1 billion of writedowns for high-yield loans and a $135 million decline in the value of its stake in Beijing-based Industrial & Commercial Bank of China Ltd. Losses on mortgage loans and related securities were about $1 billion.”

“Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, reported earnings were depressed by a $1.8 billion writedown caused by the slump in the mortgage market. Reducing the value of those assets pushed fixed-income revenue 88 percent lower.”

From Reuters. “After Lehman Brothers announced a fall in revenue but beat fearful expectations, its credit default swaps traded at 360 basis points. That makes protecting its debt pricier than protecting that of Turkey or Nigeria, traders say.”

“‘You could say Lehman is riskier than Nigeria,’ one trader said, asking not to be named. ‘But it’s not a trade or a comparison people often try to make.’”

“In credit derivative swaps markets, Turkey was trading at the same level as British bank HBOS, while healthy Brazil…was roughly level with Royal Bank of Scotland, BB Securities said.”

“Liquidity in global debt markets remains poor with the world’s largest banks suspecting each other of not coming entirely clean on losses in the U.S. mortgage market, and many analysts saying more bad news is to come.”

“‘I think with Africa people feel they know what they are dealing with,’ said Razia Khan, head of Africa economics at Standard Chartered in London. ‘In contrast, everything else is a great unknown.’”

The New York Times. “The shouts, hoarse and high-pitched, rang out in the cavernous boardroom late Sunday at Bear Stearns’s headquarters on Madison Avenue. Just like that, some people’s stakes of $100 million or more in Bear were ravaged, and senior executives…were furious.”

“For James E. Cayne, the firm’s chairman and former chief executive, holding on to his Bear stock was a point of pride, and he rarely, if ever, sold. A billionaire just over a year ago when Bear’s stock soared past $160, his 5.8 million shares are now worth about $28 million at Monday’s closing price of $4.81.”

“Across the firm, executives and employees declined to speak publicly, a reflection of the fluid events as well as a reluctance to anger their prospective bosses from JPMorgan who were already on the premises Monday, appraising their new investment.. Privately they expressed raw dismay, their voices heavy with sadness and shock.”

“‘My life has been flushed down the drain,’ said one person. There was talk Monday that with their life savings nearly depleted, some executives had moved quickly, putting their weekend homes on the market.”

“‘Basically we’re all wondering first, if we’ll keep our jobs, second, if we’ll get severance if we don’t,’ said an investment banker outside Bear’s headquarters, declining to give his name. ‘And then we’re hoping that Lehman won’t go under because then there will be way too many bankers looking for jobs.’”

The Globe and Mail. “Shortly before markets closed on Friday, traders at Bear Stearns Cos. Inc.’s New York headquarters did something that had never happened in the Wall Street firm’s 85-year history: They left.”

“Hundreds drifted away from their trading desks on the 8th floor of the firm’s Madison Avenue office tower and walked out of the building. Why? Because there was nothing for them to do.”

“A firm that had survived the Depression, the Second World War and numerous stock market collapses faced the humiliation of a government-assisted takeover by rival investment bank JPMorgan Chase & Co. that will likely vaporize most of the personal wealth of the firm’s executives and cost the jobs of more than half of its 14,000 employees.”

“‘It’s a tragedy,’ said Christopher Whalen, a former Bear Stearns banker. ‘There are thousands of people who are going to lose their jobs and their financial security because of this idiocy.’”

“How did one of Wall Street’s toughest firms, with a prized reputation for betting on the right side of risk, become synonymous with idiocy? The simple answer is that Bear Stearns placed a bigger bet than any competitors on subprime mortgage loans.”

The Staten Island Advance. “For the average Staten Islander, the bargain-basement sell-off of Bear Stearns to JPMorgan Chase & Co. means it’s time to reassess investment portfolios, tighten belts and take some heart that interest rates will fall again, experts said yesterday.”

“‘I’m afraid I’m going to lose my house,’ said a Staten Island woman, who called the Advance to say her husband works at Bear Stearns and she feared for her economic survival.”

“John Coffee, a business law professor from Columbia University, said that less mortgage money would be available with the market for mortgage-backed securities discredited.”

“Bear Stearns is largely believed to have failed when the value of its mortgage-backed securities, which included an unknown number of problematic subprime loans, plunged.”

“‘Less credit to borrowers means lower prices to sellers and some decline in home prices,’ Coffee said. ‘No one can quantify the magnitude of these changes and the market is likely to be volatile for some time.’”

From USA Today. “‘The market is at least reassured that there won’t be another run on a primary dealer,’ says David Rosenberg, chief North American economist for Merrill Lynch.”

“But the Fed did nothing Sunday that would alleviate the cause of the financial crisis: an economy that had binged on debt. ‘Nothing the Fed did Sunday will prevent residential real estate prices from falling further,’ Rosenberg says.”

The Wall Street Journal. “The best thing about Sunday night’s Federal Reserve-inspired sale of Bear Stearns to J.P. Morgan Chase is the price. At $2 a share for a total of $236 million, this was less a ‘bailout’ than a Fed-mediated liquidation sale. Bear wasn’t too big to fail after all.”

“The hard capitalist truth is that Bear’s most senior managers have mainly themselves to blame. They bought their second or third homes with fabulous bonuses during the good times, and they must now endure the losses from Bear’s errant investment bets.”

“Bear…let its standards slide in the hunt for higher returns during the mortgage mania earlier this decade. There’s no joy in seeing a venerable firm expire, but it has to happen if financial markets are going to have any discipline going forward.”

“Bear Stearns‘ forced sale days after the SEC chief’s reassurances is raising questions about the vigilance of the top U.S. securities regulator, which is charged with making sure Wall Street firms have enough cash to survive a crisis.”

“U.S. Securities and Exchange Commission Chairman Christopher Cox was asked on March 11 if he was concerned about the financial condition of Bear Stearns Cos. ‘We have a good deal of comfort about the capital cushions at these firms at the moment,’ Cox told reporters.”

“‘It’s really speaking to the lack of good supervision by the SEC,’ said David Hendler, an analyst at CreditSights Inc. in New York. ‘They’re not really a real regulator staying on top of things.’”

“The SEC, as part of its supervision of Bear Stearns and its rivals, tries to ensure that the industry has adequate funds to meet expected obligations for at least one year during periods of ’stress,’ according to the agency’s Web site.”

“Cox said on March 11 the SEC was monitoring firms’ capital levels on a ‘constant’ basis and sometimes daily in response to the subprime-loan meltdown that triggered the crisis. The agency’s oversight abilities were overwhelmed by the speed of events in the Bear Stearns collapse, said Christopher Whalen, managing director of financial consulting firm Institutional Risk Analytics.”

“‘None of the SEC’s stress testing began to anticipate’ what happened, Whalen said. ‘This is a systemic breakdown where people are running away from banks,’ he said.”

“In a statement on March 14, after the Fed announced it would provide funding to Bear Stearns, the SEC reiterated that the firm had ‘a substantial capital cushion’ on March 11, citing information the company provided to the agency.”

“‘Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm,’ the SEC said. ‘As a result, Bear Stearns’ excess liquidity rapidly eroded.’”

“The SEC and the Fed ‘are both equally guilty on regulatory blame for being asleep at the switch,’ said Anthony Sabino, a business-law professor at St. John’s University in New York and head of a securities litigation firm.”

“‘The smart move would have been two years ago to tell these firms to shape up, you’re not telling the market enough, you’re gambling too much,’ Sabino said, citing the firms’ investment in securities tied to subprime mortgages.”

Dow Jones Newswires. “The Bear Stearns deal highlights the need for faster action on legislation to enable the widespread modification of bad loans, consumer advocates say, and the importance of improving related asset quality.”

“‘It’s almost stunning to witness the shoring up of a major financial institution, but not addressing the problem that the quality of housing assets is deteriorating with each minute we wait,’ said said Jim Carr, chief operating officer of the National Community Reinvestment Coalition.”

“‘There has to be a plan that addresses the loans that are increasingly upside down,’ Carr said. ‘Every day that we wait more and more people’s home loans become upside down because housing prices continue to fall.’”

“Danilo Pelletiere, research director at the National Low Income Housing Coalition, said there has not been enough attention and action on helping low- income homeowners in trouble.”

“‘The folks that are very likely to need to be bailed out are those that were brought into homeownership and invested all their wealth,’ Pelletiere said.”

“In his Saturday radio address, President Bush said the government can help ‘responsible homeowners weather this rough patch,’ but that some actions could have unintended consequences and hurt some homeowners.”

“‘For example, one proposal would give bankruptcy courts the authority to reduce mortgage debts by judicial decree,’ Bush said. ‘This would make it harder to afford a home in the future, because banks would charge higher interest rates to cover this risk.’”

“The president also opposes proposals that would ‘artificially prop up home prices,’ reasoning that delaying a correction would prolong problems.”

“‘We are focused on helping a targeted group of homeowners — those who have made responsible buying decisions and could avoid foreclosure with a little help,’ Bush said.”

“Dean Baker, co-director of the Center for Economic and Policy Research, said a number of proposals that are geared toward helping homeowners facing foreclosure will actually benefit banks and other holders of bad mortgage debt, institutions that could ‘earn tens of billions of dollars at taxpayer expense.’ He added that owning can be much more expensive than renting.”

“‘It’s really infuriating for me that we pushed low- and moderate-income people to buy overpriced houses with really bad mortgages,’ he said. ‘And even now, after it’s proven so disastrous, you have politicians that still can’t take two minutes and think for a second that maybe it’s not a good idea for everyone to be homeowner regardless of what price they’re buying at.’”

The Naples News reports from Florida. “The Cape Coral-Fort Myers area was once again named — for the second month in a row — as having the highest foreclosure rate in the nation, according to RealtyTrac. Not only are properties being left vacant with trash, weeds, debris and worse, but parties responsible for abating the nuisance cannot be found at times. No one remains living at the residential address. ‘We’re trying to track them down,’ said Bonita Springs code enforcement supervisor Chris Campbell.”

“‘On the books, the old owner is still responsible,’ Campbell said. ‘They’ve walked away. They say ‘I don’t care, what’s a lien going to do?’”

“‘We don’t get the response we used to,’ he said about owners abiding by a notice to remedy the problem. ‘For the most part, they kind of walk away and the banks won’t touch it until the foreclosure. That process is taking longer because of the amount of foreclosures. They’re through the roof.’”

“‘We’re going through due process,’ Campbell said. ‘It’s like the old saying: ‘You can lead them to water but you can’t make them drink.’ There’s no one there to take them to the water.’”

“Campbell related how one property owner walked away, leaving a potential hazard behind. ‘We had one guy being foreclosed on and the fence company just installed the fence,’ Campbell said. ‘The owner didn’t pay the company so they repo-ed their fence, and there’s a pool half-built. They didn’t finish it because they didn’t get paid.’”

“Sheriff’s Office Sgt. Keith Day said most of the homes in the Bonita Springs area are older, and that many of the newer homes are the ones in foreclosure. ‘In Cape Coral and Lehigh Acres, those are usually the ones being foreclosed upon,’ he said. ‘A lot of these places going into foreclosure are owned by banks.’”

“There were 289 homes and condos sold last month in the Naples area, down from 304 a year ago, according to a Naples Area Board of Realtors report released Monday. There were 12,377 homes on the market as of February, and the largest group of homes were the 4,447 listed at less than $300,000.”

“Overall, median sales prices for single-family homes dropped $33,000 since last year to $406,000 last month. For condos, the median price dropped $57,000 to $293,000. “Decreasing prices reflect a return to ‘realistic prices,’ said Arlene Carozza, NABOR president.”

“‘When people see prices dropping, what they’re seeing are the people who hadn’t really come to Jesus yet,’ said Realtor Marlene Graham. ‘If people really are sincere about trying to sell, then they have to be sincere about their price.’”

“When Carozza talked about looking into a crystal ball at the future of the market, she was cautious. ‘You just don’t know really know what’s going to happen,’ she said. ‘But if we haven’t hit bottom yet I think we are close to it. What wasn’t real was what happened in 2005.’”

The Herald Tribune. “Horizon Realty’s broker-owner Matt Augustyniak says he has devised a new plan for ‘desperate home sellers.’”

“‘The threat of foreclosure causes an enormous amount of distress, but we are here to help,’ Augustyniak said. ‘Sellers were forced to vacate their property early because they felt they wouldn’t be able to get a rental if their credit got any worse.’”

“Horizon’s ‘Short Sale Investor Program’ consists of investors who are willing to buy the homes and allow the sellers to then lease the property for up to two years for a ‘reasonable amount of rent.’”

“‘Everybody wins and the desperate sellers don’t have to incur additional moving expenses,’ Augustyniak said.”

“Sue Wolverton, regional senior VP of Coldwell Banker Residential Real Estate’s Sarasota Bay Division, said interest from home buyers is rising. ‘For savvy home buyers, opportunity is not just knocking,’ Wolverton said. ‘It is kicking down the door.’”

The Sun Sentinel. “Recognizing a dire need, North Lauderdale officials want to venture into real estate. They want to seek money from charities to buy the city’s many foreclosed properties, fix them and sell them at cost, rescuing them from blight.”

“Something needs to happen, said Commissioner Rich Moyle. ‘We need to be on top of this thing before it gets away from us,’ Moyle said. ‘We need to keep North Lauderdale in good standing in the real estate community.’”

“About 22 percent of the North Lauderdale homes sold in 2007 went through foreclosure — the highest percentage of any city in Broward County, according to a company that reports on real estate sales.”

“‘We approach these foundations and ask them to help us to buy these foreclosures so we can keep them from becoming blighted,’ Moyle said. ‘We could go on the property, fix it, resell it — not for profit, for cost — and get people into a home with a good mortgage. A sane type [of] mortgage, not an insane type.’”

“Trying to find money from charities is crucial now because officials think the city is spending too much in-house time and money from its general fund to clean private property.”

“‘We’re really trying to get more things done,’ said Vice Mayor John Cangemi. ‘It’s a serious problem here in Florida. Everybody is feeling it, but we’re feeling it the worst.’”

The Orlando Sentinel. “John Artimovich and his sons spent about three years building a palace of a home. What looks like a bed-and-breakfast inn transplanted from the Swiss Alps is lined with ridged-teak floors and dotted with details such as European wrought iron, stair treads cut from raw cypress and a sculptured-tin ceiling.”

“But Artimovich said a souring real-estate market left him, like many others, without a buyer. So he decided on another idea: to raffle off the 4,570-square-foot house.”

“‘Hundreds of people came through here,’ Artimovich said. But even after a change in real-estate agents, he said, he had no luck. ‘The market prevails.’”

“Artimovich and his son Michael filed papers to start a nonprofit charity, Sons of Toil. The goal is to raise enough money through $100 ticket contributions to pay for the house, and to fund, among other causes, an apprenticeship program for budding and out-of-work trade workers.”

“Artimovich will face challenges. Across the country, house raffles that have started with good intentions have ended up in disappointment for the raffle holders and their donors.”

“‘A lot of times, they just go on forever,’ said Mary Stimmel, regulatory-program administrator at the state Division of Consumer Services. ‘They just never end because they don’t get enough money to pay back the lender.’”

“In 2006, a house raffle in Rancho Cucamonga, Calif., was postponed indefinitely after a local cultural center failed to sell the necessary 15,000 tickets it needed to give away a $1 million house. Some participants received cash prizes, but nearly 10,000 were left in limbo.”

“Artimovich must collect as many contributions as he can through Sept. 30, the cutoff date for his Oct. 14 drawing. He said he’s confident he will and that the raffle will go as planned.”

“‘It’s gonna go through no matter what,’ he said. ‘That house will exchange hands with the winner regardless of the contributions.’”

“Inheriting the home will come with expenses. Assuming the house has a fair-market value of $1 million, the winner would have to pay up to $350,000 in income taxes and more than $17,000 in property taxes.”

“While state law doesn’t allow charities to require contributions for tickets, Artimovich said he needs a minimum of 16,000 $100 ticket donations to comfortably turn over prizes, clear debt and fund charitable programs.”

“Artimovich said he plans to hold cookouts for visitors to the house from 1 to 4 p.m. Saturdays through the summer. ‘You’re going on guts and you’re going on hope,’ he said. ‘There is no failure.’”

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