The Housing Bubble

Readers suggested a topic on when it is a good time to buy a house. “Are there areas where it IS a good time to buy? Here in Riverside, CA., I’m not so sure. We have put a few offers on homes, but we are offering LESS than asking, not more like most people.”

“The problem for us is nicer homes at lower prices are coming in 1 or 2 at a time and then there are multiple offers where everyone bids asking and higher. So, do we keep offering less (because we have to anyway) for these nicer homes, wait till fall/winter, or settle for less?”

“I’m just not sure it’s going to go that much lower here.”

A reply, “I suspect we have something of a dead cat bounce going on right now in some markets. Many areas of Riverside County experienced gains of 4X from 1999 to 2006 which is simply not sustainable.”

“The area remains a train wreck in slow motion, and will continue to see a very high rate of foreclosures for many years as a tsunami of ALT-A resets loom high on the horizon. Even those buying today, will most likely bolster the next wave of foreclosures going out another 5 years or so…”

Another posted, “Just talk to a friend of mine in the mist of selling her home. She got a listing agent who has been in the business for 30 years and spoke to her about a community that the listing agent was interested in buying a townhouse in.”

“The agent wanted to buy over the last few years, but felt that the price was too high…the agent then told her that the prices are now down to where she could afford it..when my friend said to her ‘So, When are you going to buy it?’”

“Listing agent response..’Oh, I will wait a little longer.’”

“Enough said…”

And another, “Last week I ran into a realtor we worked with a couple of years ago. Extremely honest guy, but my wife didn’t think he was ‘aggressive’ enough (go figure). Anyhow, he was shocked that we still hadn’t bought a home. I explained that our current rent was less than taxes, maintenance and insurance on any home we might buy… so it just didn’t make sense to buy.”

“His response: me too. It turns out that he has been here (Pullman, WA) for four years but never purchased a home because it is so much cheaper to rent!”

“When we get around to buying a home, this guy is going to be our agent.”

The Redland Daily Facts. “Local real estate agent Shirley Harry spoke about the Redlands real estate market Thursday at the Rotary Club. Harry said she believes in a 10-year market cycle.”

“She traced the performance of the Redlands market from the 1960s to the present. ‘At that time, the city of Redlands grew and grew by leaps and bounds,’ she said.”

“She said tracts ‘popped out of the ground in the early ’60s,’ because of Norton Air Force Base and the burgeoning aerospace industry.”

“But supply ‘outstripped demand’ and homes sold for half of their value, Harry said. ‘If you think this is bad now’ she said.”

“The market flattened, dropped, flattened again and rose between 1975 and 1979. In the following ’stagflation,’ interest rates spiked from about 10 percent to 22 percent. In the 1990s, the market began to recover, but Norton closed. ‘We lost a significant job base in the area, so it was a difficult time for the (Redlands) real estate market,’ Harry said.”

“In 1999 the market rebounded, bringing in what is termed the ‘bubble.’ ‘As with all bubbles in Redlands, it’ll last two years,’ maybe three, Harry said. ‘We still have a good job market. Housing is still in demand in Redlands.’”

“She gave figures for foreclosures in Redlands. This year to date, there were 26 homes foreclosed in the 92373 ZIP code and 64 in 92374. Harry then gave a rundown of homes for sale in Redlands. There are 430 on the market, down from 500 about a year ago, she said.”

“The median home price in Redlands is $349,000, nearly $100,000 more than the county median price. The average price of homes in escrow is $328,000. Price per square foot is $253.”

“‘Buyers are looking for bargains - that’s what’s causing them to buy,’ she said. She said the Redlands market is ’seeing multiple offers’ on homes.”

“The affordability rate in San Bernardino County is 37 percent right now, she said.”

“‘What you all want to know, I’m sure, is when we’ll hit bottom,’ she said. ‘The news coming from the industry is we’re getting close.’”

‘She said that the market began to soften in 2006. ‘I believe in my 10-year cycle. We’ll begin to climb out of this next year.’”

“She ended by saying that housing ‘is still a wonderful investment, but it’s a long-term investment.’”

“Harry then fielded a few questions from Rotarians, including one about speculative buying. She said there has been some speculative buying in Redlands but not much flipping. She said that greed, fear and desire drive the real estate market.”

“‘We want desire to come back to the market,’ she said.”

The Eureka Reporter. “It’s a ‘buyer’s market,’ as they say in real estate when home sales have slowed down and prices are more affordable, but with the high prices at the gas pump, people interested in buying a home can hardly afford the luxury of driving around to find which ones are for sale.”

“According to the the Humboldt Economic Index, home sales declined from April to March by 6.7 percent and median home prices fell below the $300,000 mark to $297,000.”

“The report goes on to say that changes in housing prices are consistent with other housing markets throughout the state- from Southern California, through the Central Valley and San Francisco, and says they all tell the same basic story: house appreciation was positive and growing up until around 2005, when the rate of appreciation started to fall.”

“The report states that housing prices are expected to drop even more throughout the state - 14 percent in San Francisco specifically, over the next four-and-a-half years. It cited the ‘increasing inventories on a state and national level’ as putting pressure on home prices, coupled with a rise in the national average of 30-year fixed rate mortgages to 5.97 percent in March.”

“Tom Hiller, President of Humboldt Realtors Association, said the local affordability indices for the county are at similar levels as May of 2005 and savvy investors have taken notice.”

“‘Yes, prices have softened. Interest rates remain low and income is steady, so what we’re actually seeing is numbers of buyers who can afford houses that we haven’t seen since spring of 2005,’ Hiller said.”

“Hiller said, contrary to what the Humboldt Economic Index states, that the California Association of Realtors reported a sales increase of 2.5 percent in April.”

“‘We’re starting now to see savvy buyers get into the market. Investors are starting to take advantage of the huge inventory and soft prices,’ he said. ‘But now is a good time for first time home buyers to do that too. Waiting can backfire, and then you can end up paying somebody else’s mortgage by way of rent payments.’”

“While there seems to be no end in sight to the gas crisis, Hiller said investing money in the housing market instead just might be the answer. ‘Call a realtor and they will drive you around at their expense. Once you own your house, you can stay put and enjoy it for years. You don’t have to drive anywhere - you can just walk in your backyard and smile.’”

The Bradenton Herald reports from Florida. “Foreclosure filings in May for Manatee County numbered 446, down slightly from April’s record-setting 495. By noon Friday, filings for the month had already reached 431, according to Manatee County Clerk of Court. Just four hours later, 15 more foreclosures had been filed, bringing the number to 446.”

“In addition to short sales taking longer to close, agents also have to be persistent in order to get negotiators from lenders loss mitigation departments to call them back. The departments are swamped as more and more homes move toward foreclosure.”

“‘A lot of people that were trying to get answers on short sales end up in foreclosure,’ said foreclosure specialist May Aston. ‘The sad part is the bank probably would have gotten more on a short sale than they end up getting on a foreclosure sale.’”

“Just because a home is a foreclosure or short sale doesn’t mean it’s the best deal around, agents caution. ‘A lot of people think that if it’s a foreclosure they can steal it,’ said Ron Cornette, director of training and marketing for Wagner Realty.”

“Extremely low offers on houses priced aggressively doesn’t do the buyer any favors. ‘If people are reasonable, they have a better chance of getting a great deal on the house because many are already priced below market value,’ Aston said.”

“This week, the City Council allowed two downtown high-rise condo projects another year’s grace, so the blueprints will gather more dust on the shelf. The makeover of the Pink Palace is on hold, and the Promenade at Riverwalk completed one of three planned buildings before deciding to scale back.”

“Next door, 210 Watermark, formerly known as Main Street, tried to convert from apartments to condos at the tail end of the boom. That failed. It’s back to rentals.”

“In April, the city granted Riviera Southshore another year’s grace, too. That seems quaint today. The developer went belly-up, defaulted on the bank loan and lost the property in a foreclosure. The once-promising $400 million revitalization project on 28 acres sandwiched between the Manatee River and Manatee Avenue in east Bradenton looks like a goner.”

“Wells Fargo hopes to sell the land to another developer. We also hope one shows up. Neighbors worry the land will be an eyesore for years.”

The Tampa Tribune. “Pasco County’s taxable property value dropped by $3 billion - or nearly 10 percent - during a yearlong period ending Jan. 1, while new construction amounted to half of what it was in the previous year, Property Appraiser Mike Wells said.”

“The value of waterfront property, particularly in the Hudson neighborhoods of Sea Pines, Beacon Square and Embassy Hills, is rapidly declining. Selling prices in those subdivisions soared from about $100,000 in the mid-1990s to around $500,000 at the height of the market two years ago, Wells said.”

“Middle class” neighborhoods in central Pasco, where homes sold for $200,000 to $300,000 a couple of years ago, are seeing values drop as well.”

“Contrary to some national analysts, Wells predicts the real estate market in Pasco will bottom out this year or early next spring. ‘My view is that homes are not going to drop another 25 percent,’ in value, he said. ‘If I was in the market for a home, I would be out there.’”

The St Peteresburg Times. “The housing boom giveth, the housing slump taketh away. After four years of double-digit increases, Hillsborough County property values slid 4 percent for 2008, property appraiser Rob Turner said Friday.”

“It was the first decline since the real estate slump of 1992, and another sign that local governments, used to living large on the bounty of the building boom, will need to slim down this year.”

“‘It’s a significantly different environment than what they’ve had to feed from in past years,’ Turner said.”

“Hillsborough property isn’t shedding value in isolation. Across the bay, Pinellas County reported that property values dipped 8.5 percent the past year. This year’s valuations are based on sales as of Jan. 1. So even though most houses are fetching less on the market in the first half of 2008, those declines won’t be reflected on the tax rolls until 2009.”

The Sun Sentinel. “In a stark confirmation of Palm Beach County’s housing collapse, the taxable value of homes and other properties plummeted throughout the county in the sharpest decline in three decades.”

“‘It’s probably the worst we’ve experienced, and I’ve worked in this office since 1974,’ said Palm Beach County Property Appraiser Gary Nikolits.”

“Two years ago, the county’s 2006 property values shot up 24 percent at the peak of a five-year real estate boom. Now, home prices and government tax collections are in a tailspin.”

“‘We don’t have any indication it’s going to turn around,’ Nikolits added, noting there’s a ‘huge inventory of available properties for sale’ as well as foreclosures coming on the market that are dragging down prices.”

The Palm Beach Post. “Once-popular nightclub and restaurant Gatsby’s Palm Beach closed this week. The business was profitable until the local housing boom turned to bust, said Steve Marino, VP of marketing for the Gatsby’s chain.”

“Many of the apartment complexes lining Village Boulevard were turned into condos at the top of the boom, pushing out the younger renters. Now, as the real estate market scrapes bottom, many of those converted condos sit vacant.”

“‘That area in the last two years has declined a lot,’ Marino said. ‘A lot of those apartments went condo conversion, and a lot of them are empty.’”

“The value of Broward County property dropped by more than 5 percent in the past year, one of the largest dips ever recorded and a dramatic reversal after years of double-digit gains, according to a county estimate used to set property taxes.”

“Property Appraiser Lori Parrish warned residents - and municipal number-crunchers - to brace for a far greater drop next year, when foreclosures and reduced real estate prices will take full effect.”

“‘Based on sales for the first five months of this year, it’s going to be a whole lot worse next year,’ Parrish said. ‘I’ve lived here for 50 years, and I’ve never seen anything like it.’”

“‘People are hurting, and we have a lot of belt-tightening to do,’ Hollywood Mayor Peter Bober said. ‘The challenge for all cities, not just ours, is to become leaner and more efficient. I think everyone knew the bubble was going to burst at some point. The pace was not sustainable.’”

The Miami Herald. “On Friday, Neisen Kasdin, head of the Greater Miami Chamber of Commerce’s downtown committee, told the assembled business people that progress has been made.”

“Workers, called downtown ‘ambassadors,’ patrol the streets, assisting visitors, shooing homeless people and reporting problems to police.”

“But banker Lianne Acebo was skeptical. ‘I go to downtown and I don’t see much change,’ she told Kasdin at Friday’s meeting.”

“At another session, about 20 chamber members discussed the shortage of ‘workforce housing.’ ‘We are a community of low-wage earners,’ said Michael Burnstine, outgoing chairman of the chamber’s workforce housing committee.”

“The region has been losing workers and some companies have rejected setting up shop here because of high home prices. A study commissioned by the chamber and unveiled earlier this month found that, even after recent price drops, the ’single-family home price of $306,100 remains unaffordable to approximately 85 percent of Miami-Dade County’s households.’”

The Naples News. “Ave Maria has become more affordable to more people. Hundreds of homes once reserved for low-income earners in the new town could now be sold to the next class of buyers. On Tuesday, Collier County commissioners approved the change with no discussion, as part of their summary agenda.”

“The town’s developers pushed to loosen the income requirements after struggling to find enough buyers for the Middlebrook community, where 326 homes are planned.”

“The community’s builder, Pulte Homes, has done everything it could to market the project to low-income buyers - even meeting with the Collier County Sheriff’s Office and Collier school district. But there has been little success.”

“Of the nearly 50 homes built at Middlebrook, 36 have sold and 32 of those were bought by Ave Maria University for rentals to faculty.”

“Naples attorney John Passidomo, who represented the town’s developers on the request, said what’s happening at Middlebrook is ‘a reflection of the market now.’”

“With a market slump, there are more affordably priced homes on the market that are competing with Middlebrook. At the same time, a credit crunch has made it tougher for lower-income earners to get financing, and their wages aren’t what they used to be in a slow economy, Passidomo said.”

“‘It’s a spiraling impact,’ he said.”

“In other action Tuesday, commissioners voted to indefinitely postpone a proposal to build affordable housing on county-owned land in the Bembridge planned unit development.”

“With homes on the market for under $100,000 in Golden Gate, Commission Chairman Tom Henning said it didn’t make sense to move forward with the project. ‘I have concerns about doing anything on this item because of the housing market,’ he said.”

“Fellow commissioners agreed unanimously, saying now is not the time to build more affordable housing.”

The News Leader. “Dan McCranie, a personal injury attorney in downtown Fernandina Beach, was unfamiliar with real estate law when Willie Mae Johnson walked into his office on April 26, 2007.”

“Johnson had in hand a final judgment notice saying her house would be sold for foreclosure at 11:30 a.m. May 2, the following Tuesday.”

“Johnson, 83 years old and suffering from glaucoma and cataracts, was nearly blind. She had owned her home on Division Street since 1949 and had raised five children there. She had not worked since 2001 and was receiving Social Security payments of $671 a month.”

“Over time, McCranie found that Johnson’s mortgage lender had filled out Johnson’s loan application for her, and falsified it so that it would appear to underwriters that she could afford a loan of $83,000. The broker also lied on the application about the age of the house, and falsely lowered the size of Johnson’s outstanding debt.”

“He inflated her current mortgage rate on the application from $450 to $778 to make it appear she could afford a higher payment, and lied about the value of her home, saying it was worth $225,000 when it was assessed at $76,000. The application also stated falsely that Johnson received rental income.”

“Why did Johnson sign those papers to re-mortgage her house? She was hoping to get $5,000 cash out of the deal to bury her daughter, who had died of cancer.”

“Johnson never received that $5,000. Her interest rate increased from 5.99 percent for the previous mortgage to a possible rate of 17.54 percent. Her monthly payment, before insurance or taxes, rose to more than she was getting from Social Security.”

“Lynn Drysdale, a Jacksonville consumer protection attorney, said one of the problems is that loans are sold to other mortgage companies, and brokers on the original loan don’t have to take responsibility for repayment.”

“‘The lender could care less if (Willie Mae Johnson) made minimum payments because they were selling loans,’ said Drysdale.”

“An increasing number of economists are…using words like ‘overshoot downward’ or ‘overcorrect.’ What they mean is that potential home buyers, glum where they once were giddy, are content to be sideline sitters.”

“Maybe they want to wring every cent from home sellers. Maybe they’re content to rent. The effect is the same: The recovery is postponed, less for reasons of supply and demand and more for reasons of mass psychology. ”

“There are good reasons to house hunt. Tampa’s median home price has plunged 26 percent from the peak in June 2006. Our median-priced home of about $170,000 is roughly three times local family income.”

“On the downside, recession fears sap buyer confidence and make renting more appealing. Though mortgage rates are low, banks are tight with terms.”

“You can deflate bubbles too much. Markets aren’t always rational. While they hash things out well in the long run, in the short run they’re often candidates for the funny farm.”

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

It’s Friday desk clearing time for this blogger. “Valet attendants stand poised at the porte-cochere of the Ritz-Carlton’s first-ever condominium-only project as a doorman ushers visitors toward the marble lobby. Pathways wind through the manicured lawn and gardens, just steps from a new stretch of downtown Baltimore’s waterfront promenade. The builders can only hope their buyers will be as ready.”

“Sherrie Timmes has a contract on a two-bedroom Ritz condo. She and her husband decided to sell a house in Clarksville and move downtown. The couple put the Clarksville home on the market but has had no acceptable offers. Even so, Timmes said, she is not worried.”

“‘Worse-case scenario is we’ll have a house in the country and a house in the city,’ she said.”

“Sales prices for single-family homes in Massachusetts fell sharply in April, accelerating a decline that is now in its third year, according to Warren Group data. In some cases, said Art Foley, owner of Century 21 Annex Realty in Quincy, sellers are even asking for a lower price than they believe the property is worth, in a bid to stir buyer interest.”

“‘We’ve lived with this for a while now, and I think sellers are understanding better’ that they need to cut prices, said Foley.”

“Last week, Florida International University, crippled by yet another round of budget cuts, indicated that the school would offer no more majors in industrial and systems engineering. ”We’ve gone from cutting the flesh to cutting the bone. But this is amputation,’ lamented Bruce Hauptli, chairman of the FIU faculty senate.”

“Hauptli doubts there’ll be an exodus — thanks to the housing crisis. Florida professors might be unhappy working in a state that’s disinvesting in education. But they can’t leave. They can’t sell their houses.”

“House prices are falling £160 A DAY in the biggest drop for 17 years. The average price tumbled 2.5 per cent - nearly £5,000 - last month, according to Nationwide. Economist Howard Archer said…a large number of buyers having to remortgage at higher rates this year.”

“This could lead to a sharp increase in the number of people forced to make ‘distressed’ sales. ‘Those people who took out 100 per cent or even 100 per cent plus mortgages within the past 18 months or so at the tail end of the market boom are particularly vulnerable.’”

“Short-term speculators who last year borrowed to invest in new ‘high-end’ suburbs and apartment blocks in Ho Chi Minh City are rushing to sell off these properties after banks raised interest rates sharply. The distress selling is also having the effect of pricking the property price bubble that built up since the middle of last year.”

“Prices have plunged by even half in some places. Many speculators are advertising at the original prices they paid, or even lower. A real estate agent in District 7 said many of his clients were trying to sell their apartments, where registration cards - that confers the right to buy an apartment once construction is finished - cost VND300 million ($18,579) last year.”

“Some were willing to sell at cost price and even offered discounts of up to VND50 million ($3,095) for immediate payment, he added.”

“The cost of land in high-end housing projects in District 7 has plummeted to VND45-50 million ($2800 - 3100) per square meter, down from almost VND90 million ($5,573) last year. The situation is so gloomy that some investors who paid deposits for property in under-construction projects have decided to forgo their advances of up to 10 percent of the final price to avoid further losses.”

“Torontonians were treated to an unusual sight yesterday as a tracked excavator officially began demolition for the 80-storey 1 Bloor condominium and hotel development. Yet it may also mark the end of an era.”

“Individual projects are having a tougher time as a huge number of developers - 148 in the high-rise market, compete for buyers. Brad Lamb, one of the city’s most prominent real estate agents, has noticed the pinch. ‘Of what we expected to sell in a month,’ he said, ‘we are now selling half. … We’ve come down to earth.’”

“In it’s obsession with property prices and housing affordability, Sydney has overlooked a startling fact: the city is awash with empty buildings. The number of unoccupied residential dwellings in Sydney counted by census workers in 2006 was 122,211, with the highest number found in the inner city. That does not include the thousands of empty warehouses, pubs, churches and shops.”

“‘It’s an amazing figure, isn’t it? It begs analysis,’ said Col James, the director of the Ian Buchan Fell Housing Research Centre, in the University of Sydney’s architecture faculty. ‘The numbers would be swelling now there are more mortgage defaulters,’ he said. ‘There are empty properties all over the place if you know how to look for them.’”

“Northwest Arkansas‘ code officers are struggling to keep the grass cut at empty houses that are cluttering neighborhoods during the downturn in home sales and rash of foreclosures.”

“The report shows more than 27,000 empty lots in active subdivisions in Benton and Washington counties, and another 18,000 lots approved for development. In addition to the empty lots, Bentonville has the second-largest inventory of vacant residential construction - 372 houses - in Northwest Arkansas.”

“‘There’s no question it’s a problem,’ Bentonville code enforcement officer Marvin Saunders said. ‘The economic conditions are such that folks just walked off and left.’”

“In a recent interview with U.S. News, ZipRealty CEO Pat Lashinsky predicted that Seattle’s so-far resilient housing market would suffer big losses relatively soon. What makes you think the Seattle housing market is going to crash?”

“‘In Seattle, if you look at it right now, on a year-over-year basis, you will see that inventory levels [of unsold homes] are up between 45 and 50 percent. And in the price report that just came out-it would say that prices are down in Seattle by 4 percent. This is exactly what we saw in the rest of the country six to nine months ago.’”

“‘And so you get into this scenario where buyers don’t buy, because they have too many choices and they are trying to get a good value, and sellers are trying to hold on to their value. So now, nobody buys a home today, and then more homes go on the market tomorrow. And then all of a sudden, people have to sell or foreclosures come in. And all of a sudden it pops because everyone is competing against a significantly lower price.’”

“The John Ross condominiums have sweeping views, an elegant shape that inspires architectural envy, and a whole lot of unsold units. To date, just 177 of its 303 units have attracted buyers.”

“According to the Regional MLS, there have been just 138 new units sold in the downtown area so far this year. At the John Ross, sales peaked at 40 in April 2007 and fell quickly to zero by November, according to county records.”

“Today, Portland has about 2,500 unsold condominiums, a figure that includes developers’ inventories and another 1,000 ‘phantom units,’ which refers to condominiums bought by investors who intended to turn a quick profit and who apparently are holding out for the market to return.”

“Gene Grant, a real estate attorney, said foreclosures are inevitable. ‘It’s grim,’ he said.”

“Not surprisingly, one local lender said it isn’t writing any new condo loans. ‘My very best customers wouldn’t ask me. That’s why they’re our very best customers. They don’t sell ice to Eskimos,’ said Nelda Scott Newton, VP for Wells Fargo Real Estate Group.”

“More than a few analysts and economists have been singing the lyrics to ‘A Cockeyed Optimist’ these days.”

“‘I could say life is just a bowl of Jello
And appear more intelligent and smart,
But I’m stuck like a dope with a thing called hope,
And I can’t get it out of my heart!’”

“And so some in that chorus were belting out the news of a uptick in new single-family home sales in April, to an annual rate of 526,000 from 509,000 in March as a sign that somehow the worst decline in housing activity since the Great Depression was close to an end.”

“Of course, this pace was still down 42% from a year ago and 62% from the peak. But these cockeyed optimists continue to clutch at the feeblest of straws.”

“Ian Shepherdson of High Frequency Economics points out the 17,000 increase was far smaller than the margin of error. Moreover, this year’s extremely early Easter boosted April’s total at the expense of March’s.”

“‘Taking the two months together, sales in March and April were 11.7% lower than in January and February, and inventory rose to an average of 10.9 months of current sales compared to 9.8 months,’ Shepherdson writes. ‘There’s no relief in sight.’”

“Sign of a great deal to be had, or a property in a great deal of physical distress? Both, it seems, as foreclosures climb to record levels in the Inland Empire - a stark reality that has local government scrambling to reduce the inevitable blight that comes with vacant, unmaintained properties.”

“It’s more than an aesthetic problem. Vacant, run-down properties become breeding grounds for crime and can dramatically lower already deflating property values throughout a neighborhood. That, in turn, can spur more foreclosures, more empty properties. Clearly, something has to give.”

“The failure of the housing market in 21st century America is that it has become too clinical. Houses became spreadsheets, not homes. The ideals of George Bailey’s fabled Building and Loan vanished as the American dream became a high-risk mutual fund.”

“Fining lenders won’t change that, but it might help protect what little remaining sense of community we have. And if it convinces banks to exercise a little more discretion during the next housing boom, all the better.”

“In that regard, it’s rather simple: You break it. You own it. You maintain it.”

“This column will challenge how most of you view your houses. So let me begin with the most-provocative comment: In general, I think it’s a good thing that house prices are falling.”

“I honestly believe lower house prices will strengthen the national economy in the long term. And, much as the Great Depression helped people understand the risk of stock-market investing, I’m hopeful that what might be the worst national housing market since the Depression will force people to rethink the value of owning a house.”

“For decades, a hoax has been perpetrated on Americans by a greedy, or naive, residential real estate industry. It’s the notion that your house is an investment, a retirement nest egg.”

“So why is it good that house prices are falling? Well, first-time buyers and anyone trading up can now buy a house for a smaller down payment and lower mortgage than this time last year. And I’m not talking about a pittance, either.”

“For every $5,000 you reduce the price of a house, you can cut your down payment by $1,000, and your monthly mortgage by about $25 for a 30-year fixed mortgage at 5.75 percent. In eight months, a married couple buying a house will have more money to either save or spend than they will get from President George W. Bush’s tax rebate.”

“And the couple will continue to save $300 every year. Now, that’s a stimulus package!”

“If you did the prudent thing, you didn’t rely on your house to fund your retirement. But I know reality is far different. Most homeowners are counting on their houses to fund their golden years. And that’s the attitude I hope will change with falling house prices.”

“Even if you believe your house is an investment, you need to understand that it’s highly illiquid. And if your house is your primary investment, you’re facing huge risk from lack of diversification.”

“My hope is that with house prices falling, people will realize they need to invest their cash in assets that have a credible value and can be bought or sold in an instant. Most importantly, buy a house sensibly, understanding that its true value is psychological, social and emotional - not financial.”

The Sacramento Bee reports from California. “When home builders ruled the earth earlier this decade, a customer had to be humble. You waited in line, paid to get on eligibility lists and endured lotteries to buy houses that might jump another $5,000 if you didn’t sign now and use the builder’s lender. That was then, the old days: 2002 through 2005.”

“In a bust that has lasted three years, they have gone through phases: denial, blaming the media for messing with the heads of buyers, predicting bottom soon and laying off staff. Now a chastened industry has reached a new stage, openly acknowledging its mistakes.”

“The new humility was on display Thursday during a Sacramento-area builder seminar by San Diego-based Sullivan Group Real Estate Advisors.”

“‘We’ve effectively stolen from the future. The demand we should be having now we stole in 2005 and 2006,’ president Tim Sullivan told the industry. ‘We’re paying for the sins of our past right now.’”

The Desert Sun. “Palm Springs’ home sales during the first three months of 2008 were down 23 percent from first quarter last year. There were 9,214 homes on the market in April, according to the latest numbers from California Desert Association of Realtors.”

“In many cases, the amount of inventory would take several years to sell off at the current sales pace, Real Data’s figures show. In Palm Springs, it ranged from a low of 9.1 months worth of homes priced between $350,000 to $499,999 in 92262 to two years worth of $2 million-plus homes in the 92262 zip code.”

“In Indio, it ranged from 12 months worth of homes in 92203 that are priced between $750,000 to $999,999 to more than five years’ worth of homes priced between $1 million and $1.49 million.”

“In Cathedral City, it ranged from a low of 10.6 months’ worth of single-family homes priced between $350,000 to $499,999 to five years’ worth of homes priced between $750,000 to $999,999.”

“Local housing experts…said it is too soon to declare the housing slump is over. ‘I don’t think we can call it right now,’ said Greg Berkemer, executive VP of California Desert Association of Realtors. ‘This is a housing cycle that is different. It has different causes, it has different cures.’”

The Press Enterprise. “During last week’s public meetins’ about Fox Plaza, the Mixmaster Of Uses proposed for downtown Riverside, Kimberly Hodges, a Realtor specializing in downtown properties said m solé — a new 10-unit ‘live-work’ development ‘had officially been on the market for nearly 140 days and nothing has sold.’”

“Developer Alan Mruvka sees it differently. ‘Technically, they might still be listed, but I haven’t been trying to sell them. People want to see a finished product. I’m going to put them up for sale in about two to three weeks. That’s when the ticking clock will start.’”

“Asking price for the 2,400-square-foot office-condos ranges from $620K-$720K.”

“‘If he can sell, I can sell,’ says developer Mark Rubin, who’s building Phase 1 (141 units) of 282 condos right across the street. Prices from about $280K. Rubin hopes the market rebounds, but says he’ll rent if they don’t sell right away.’”

“Fox Plaza developer Siavash Barmand will rent his initial 40 condos if they don’t sell, too! Meanwhile, Barmand’s watching Mruvka’s live-work units to see how the market treats the first wave of new downtown housing since the Great Collapse.”

“Rubin is bullish on downtown projects. Realtor Hodges ain’t so. ‘I don’t believe we have the job infrastructure to support live-work (she lumps all proposed condos in this group). I don’t believe they will sell,’ citing a soft condo market and downtown’s historic visage. ‘Do you want to live in a historic district in something new or something old?’”

The Salinas Californian. “Last month saw 190 homes sold in the county - a 68 percent increase over March’s numbers - and the highest figure since August 2006, when 202 were sold, according to statistics from the Monterey County Association of Realtors.”

“But while the number of homes selling has rebounded lately, prices haven’t, especially in Salinas. For example, in north Salinas last month, the median sale price for a single-family home was $336,250 - a little more than half the August 2006 median price of $610,000.”

“Countywide, the average sale price fell from $946,937 to $689,950 during the same time. Sandy Haney, CEO of MCAR, said probably half of the 75 homes sold in Salinas last month were foreclosed properties. ‘Market closing remains strong because the market price went down,’ Haney said.”

“A twist in the housing market right now is that a majority of people who lost their homes to foreclosure were first-time homebuyers, Haney said, while most of those purchasing the foreclosed properties are also buying for the first time.”

From Reuters. “In some areas of California, so many foreclosed homes are available to buy on the cheap that real estate agents are discouraging prospective sellers from even putting their houses on the market.”

“Perhaps the most extreme example of this is Stockton, about 85 miles east of San Francisco, where roughly three of every four homes for sale are in or on the path to foreclosure.”

“The city’s resale market is ‘pretty much gone,’ said Cameron Pannabecker, owner of Cal-Pro Mortgage Inc.”

“‘I don’t know an agent today who would take your listing unless you’re a hard-luck case. There is just too much competition,’ Pannabecker said. Properties that at the peak of the market two years ago were selling at $500,000, or appraised at $500,000, are now selling for $200,000, he said.”

“‘Honestly, there isn’t a huge amount of difference between a foreclosed home and a regular home than the prices,’ said said John Knight, a professor of finance and real estate at Stockton’s University of the Pacific Eberhardt School of Business.”

“Distressed borrowers who manage to sell their houses are in many cases able to rent equivalent properties for about half the cost of their monthly mortgage payments. ‘I don’t know of anybody who has been foreclosed who is moving into an apartment,’ said Paul Jacobson, an associate at W.T. Hull Co.”

The New York Times. “Some of the biggest losers in the real estate slump are not purchasers of mansions they could not afford. They are buyers of second homes - or third ones, for that matter - who are sitting on a tax time bomb.”

“Two years ago, Lilia Garcia and her husband, Jesus, bought their dream house in Linden, Calif., for $535,000 and financed it in part by taking out a bigger loan backed by their previous house in nearby Stockton. They decided to hang onto the Stockton house and rent it out, believing that it would more than pay for itself and could be sold years in the future to help pay for college for their two children.”

“‘We wanted to make it an investment,’ Ms. Garcia said. ‘I should’ve sold it.’”

“The Garcias, who earn about $65,000 a year, fell behind on their payments after their tenant moved out and the interest rate on their mortgage rose, bringing their monthly payments on the rental home to nearly $2,700 a month, from less than $1,000. They view foreclosure as inevitable; they have not paid the mortgages on either house for months and now rent a home in Linden.”

“Then they discovered that they could expect a painful tax on the rental house. If the rental house sells for $160,000, which is about what they paid for it in 2003, they may still owe tax on $120,000 - the difference between the sale price and the $280,000 they borrowed against it over the years. That could mean a tax bill of more than $30,000.”

“‘I just thought we would file for bankruptcy and everything would be clear. We’d start all over again,’ said Ms. Garcia. Now she and her husband are waiting to see what price the house brings before seeking bankruptcy. ‘It’s bad.’”

From CBS 5.com. “It was one of the Bay Area’s most trusted banks. Now some consumer advocates question its lending practices in certain East Bay neighborhoods.”

“The bank was World Savings, bought by Wachovia in mid-2006. They were a popular lender. But now some advocates want to know why so many of their loans were made in some of Oakland’s low-income minority neighborhoods.”

“Welcome to zip code 94621, where homes are going vacant and residents are uneasy. ‘Our neighborhoods are becoming blight because of all the foreclosures,’ said Diane Busby.”

“‘We have quite a few foreclosures on this block,’ said Fannie Brown, who took us for a tour of her neighborhood. ‘We had older people that lived in the homes and they were here like today and tomorrow they were gone.’”

“‘When I have a caller who says I am in this negative loan. I never wanted this. When I ask them who their lender is I already almost know without fail, it’s going to be World,’ said Oakland housing advocate Maeve Elise Brown.”

“Mae Washington lives in one of the hot spot zip codes. ‘I received a letter in the mail from the lender stating that I had been pre-approved,’ she told CBS5 Investigates.”

“The loan was from World Savings, who held her mortgage at the time, but offered to refinance it with what sounded to her like a better deal: A pick a pay loan offering a lower monthly payment. ‘I was thinking that you know, it was something that was going to be good for me.’ But now? ‘I think it’s a terrible loan,’ she said.”

“Because like many others, Washington didn’t know that paying that lower minimum payment each month meant her principal loan balance would increase over time by thousands of dollars. ‘My principal went up by $20,000 to $25,000 that I owed, in a year.’ Now she says she doesn’t know if she’ll be able to keep up with her rising payments.”

“A report released Thursday by Chapman University in Orange showed consumer sentiment statewide has dropped for the third consecutive quarter.”

“The index stands at 57.6 during the second quarter of this year. It’s the lowest rating the university has reported in eight years and down from a reading of 94.4 during the third quarter of last year.”

“Riverside resident Jeff Lasman echoed some of the survey’s sentiment. He said he’s cut back on dining out and even opted for cheaper fast food rather than more expensive restaurants.”

“‘I guess I’m worried about America’s future,’ he said. ‘So many Americans have no idea how to tighten their belts.’”

The Fresno Bee. “Here’s a question for restaurateurs: Are you following the example of the Hi-Life Prime Steakhouse in Kingsburg? Just a few years ago, when housing prices seemed they’d never stop rising, racks of lamb and filet mignons were mainstays on the Hi-Life’s menu.”

“A couple of weeks ago, the restaurant stopped serving racks of lamb. Likewise, filet mignon is a thing of the past. Instead, folks are coming in for $14-$28 meals.”

“‘No one seems to miss it,’ says Hi-Life co-owner Tim Pa- shayan. ‘They’re not spending money on the $30-$40 entrées.’”

“The lower food costs — and resulting lower entrée prices — have brought in more diners, but they’ve also prompted the owners to open an extra night. They need more customers to make up for the lower prices, they say.”

“Pashayan expects other restaurants to follow suit. ‘If these restaurants here don’t change,’ he says, ‘they’re going to die.’”

The Ventura County Star. “Rather than deferring dreams, University Village in Thousand Oaks is deferring payments to help people move into the retirement community while they wait for their homes to sell. It’s a creative approach tailored to a down real estate market.”

“People can move in to a unit and enjoy all the amenities by paying the required monthly fee, but their one-time entrance fee is put on hold until their homes sell.”

“For Allan and Shirley Walter, the program meant that they didn’t have to let go of the one-bedroom residence they locked in at the pre-construction price even though it took longer than expected to sell their Spanish Hills home.”

“Walter said he lowered the price on his Camarillo home, but it was worth it because he might have lost the locked-in price at University Village. Their Camarillo house sold in October.”

“Warren Spieker III, VP of University Village Thousand Oaks, said many people who move into University Village have lived in their homes for decades and have more realistic assumptions about price. That often leads to faster sales.”

“‘These are folks not holding out for top dollar or last year’s price,’ he said.”

“If sellers hold out for an unrealistic selling price, the community can give them notice that they need to pay within a certain amount of time or move back into their homes. It lets both sides know that they’re not stuck, Spieker said.”

“Doug Michie, an adjunct professor at California Lutheran University, said every house will sell if it’s properly priced - even in the current market. The problem with a lot of sales on the market now is that a lot of people have more mortgage debt than their home’s current value, he said.”

“Many seniors are in a better position, having paid down or paid off their mortgages.”

“‘Coming out of the Depression, the children of that era are of the attitude of trying to pay their mortgage down by the time they retire,’ he said. ‘Perhaps we’re now seeing the reason why the older generation put such an emphasis on paying down their mortgage.’”

“The Walters moved into University Village in November during Thanksgiving week. ‘We’re very happy here,’ Walter said. ‘Golly, it’s so wonderful,’ his wife added.”

And send in your housing bubble pics to:

hbbphotos@gmail.com

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

I’m going to be visiting San Diego not this weekend but the next. We’ll be having a meet-up for anyone interested. I’m also going to Los Angeles and San Francisco the two days after that. Send me an email for detail. Please put OTR-SD, or OTR-LA, etc, in the message bar.

thehousingbubble@gmail.com

Update: For SD, it’s in Carlsbad in the afternoon on June 7th. For LA, tentatively in Redondo Beach the afternoon of June 8th. And SF in the evening of June 9th on Haight near Market Street. Look for an email this weekend for details.

A report from the Arizona Republic. “Complaints to the county about algae-laden “green pools” behind vacant or abandoned homes have leaped almost 250 percent since a year ago, increasing to 2,069 during the first five months of 2008 compared with 597 during the same period in 2007, said Johnny Dilone, spokesman for Maricopa County Environmental Services.”

“Kara Cox, a Maricopa County vector-control specialist, said she is working six 10-hour days a week, responding to as many as two dozen complaints every day. About 80 percent of the properties she visits are vacant, Cox said.”

“‘Our workload has increased significantly,’ she said.”

“Roughly 75 percent of green-pool calls to Maricopa County Environmental Services since July 1 have been for swimming pools behind abandoned or unoccupied homes, up from just 25 percent of calls the previous year, said John Townsend, manager of the Vector Control Program in Maricopa County.”

“In all, the county has received about 8,000 mosquito-related calls during that time and expects the number to reach 10,000 by the end of June.”

“‘It’s all kind of new,’ Townsend said about complaints leading to abandoned properties. ‘Last year, we had a few, and this year we’ve seen a lot.’”

“The increase in abandoned homes also has created an enforcement dilemma for the county, Townsend said, because in most cases the listed owners are long gone.”

“Townsend said if homeowners facing foreclosure decide to abandon their property and don’t want to drain the pool, they should at least call the Vector Control Office to pick up free gambusia fish from the county.”

“Troy Corder, committee member and resident of Surprise, said his community’s greatest concern is the consensus of housing-industry experts that the foreclosure rate has only begun to climb.”

“‘We haven’t even hit the tip of the iceberg when it comes to foreclosures,’ he said.”

The East Valley Tribune from Arizona. “The Valley’s average apartment rent hit a record high recently, but experts say it’s still the best time in years to be a renter. That’s because landlords are being forced to compete with thousands of vacant single-family houses put up for rent by frustrated home sellers.”

“Valleywide, 67 percent of landlords offered some sort of special deal to lure renters in the first three months of 2008. That’s up from 55 percent a year ago, according to a report by Pete TeKampe with commercial real estate brokerage Marcus & Millichap.”

“‘Compared to the last two years, this is a great time to be a renter,’ said TeKampe.”

“Failed condominium conversion projects have also added to the excess supply of rentals as investors returned thousands of units to the rental pool.”

“‘There’s just so many rooftops for people to live under,’ said Greg Thielen, associate partner with Hendricks & Partners.”

“Investors bought properties based on projected rents that never materialized, he said. And some investors are starting to miss payments to their banks, Thielen said. ‘Lending’s gotten more difficult, as well,’ he said. ‘In the past, they’ve been able to refinance to get help.’”

“The state’s new employer sanctions law has also hurt some apartment operators. Many landlords were impacted in December, when tenants left before the law went into effect, Thielen said.”

“The vacancy rate in one area near 29th Street and Greenway Road jumped from 7 percent to 22 percent in a year, said TeKampe. ‘That’s an area that just got absolutely devastated,’ he said.”

“Thielen said he’s heard of some buildings that are up to 30 percent vacant. It’s difficult to know if the growing vacancies are just related to immigration reform or also job losses in certain industries, such as construction, he said.”

The Las Vegas Business Press from Nevada. “Las Vegas’ housing downturn has ratcheted up competition amid area contractors, increasing bid lists and lowering profit margins, panel participants said at a National Association of Industrial and Office Properties event.”

“Several specialty trade companies which had relied on the housing boom for steady income, are finding themselves out of work and struggling to make ends meet. There were 1,781 Clark County housing permits pulled in March, a 77.7 percent drop from a year ago. Also, a 22.5 percent decline was reported in the number of active Las Vegas Valley subdivisions in March.”

“‘We’re definitely seeing longer bid lists,’ said Frank Martin, president of Las Vegas-based Martin-Harris Construction. ‘A couple of years ago, some of these jobs were lucky to get a couple of bids. Now, we’re seeing double and triple the number of bidders.’”

“Yet many of those companies are ill-equipped to move from residential to commercial construction.”

“The market slowdown is especially noticeable due to the deluge of general and specialty contractors that have migrated to Las Vegas in recent years, attracted by its building bonanza.”

“‘There is more competitiveness in the construction industry than we’ve seen in the past few years,’ said Kevin Burke, president of a Las Vegas general contracting firm.”

“The number of bids is reducing contractor margins, in some cases creating unrealistic expectations. Owners will ’shop’ bids, pitting one contractor against another, to secure the lowest project cost estimate.”

“‘It will drop margins by a percent, which, in contracting, is significant,’ said Brooks Williams, president of a Las Vegas general contractor. ‘We have (subcontractors) calling us constantly looking for anything to bid.’”

The Review Journal from Nevada. “Sen. Barack Obama led a sober town hall meeting Tuesday in North Las Vegas where people told the Democratic presidential candidate that there’s more to the housing crisis than foreclosures and that its effect isn’t limited to those who bought more home than they could afford.”

“The Illinois senator used the campaign stop to highlight his plans to address the nation’s real estate troubles. Obama also told the crowd that he favored a plan proposed by Sen. Chris Dodd, D-Conn., that would use the Federal Housing Administration to convert high-cost mortgages into more traditional, and affordable, loans.”

“The mortgage lending industry needs more monitoring and consumer protection requirements, he said.”

“During the North Las Vegas town hall meeting, Francisco Lomeli told Obama that tighter lending standards in the wake of the foreclosure crisis, with student loan debt, were preventing him from buying a home.”

“Lomeli and his wife decided to put off buying a house until she finished nursing school, he said.”

“‘It seemed back then that the house dream was there. Make it through college, we can make it happen,’ he said. ‘But now the dream seems to have gotten further away from us. We don’t know who to trust. We don’t trust the lenders. We don’t trust the banks.’”

“And because they have student loan debt, the lenders do not trust them either: ‘Now the credit people are, ‘No, no, no,’ because we’re in debt.’”

“Tighter regulation of lenders could have prevented their plight, Obama said. ‘A lot of this wouldn’t have happened if we had done a better job of regulating the banks and the mortgages. Nobody was watching them,’ he said.”

“Before the town hall meeting, Obama stopped briefly at the downtown Las Vegas residence of Felicitas Rosel and Francisco Cano, who are worried they might lose the home they bought three years ago with an adjustable-rate mortgage.”

“‘At the beginning it was OK, but all of a sudden, it started going up and up,’ Rosel told Obama.”

The Spectrum from Utah. “Southern Utah’s real estate sales were at their peak in May of 2005. The numbers had dropped by nearly half in December of 2007. While it’s not what it once was, the market is still solid. That was the message from Joseph McPhie, general manager of Southern Utah Title, at Wednesday’s meeting of the Chamber.”

“‘There’s a lot of good news, particularly if you’re a buyer right now,’ McPhie said. Foreclosures, unfortunately, ‘are something that can’t be ignored’ because they are affecting the product available as well as the price point.”

“McPhie said drawing something from the numbers is a matter of attitude. He told the story of an ancient ruler who dreamed he was losing all his teeth. When he asked for an interpretation, one wise man told him all his family members would die before he did.”

“Disliking that message, the ruler had the man beheaded. The second wise man told him he would live a long life and outlive many of his family members. Same message, different delivery.”

“McPhie’s ultimate message is that the market has been growing slowly the past few months. He said he believes that growth will continue.”

“‘I hope all of us will be cheerleaders for our area,’ he said of the way to help the area rebound. ‘We live in a great place with great people. I think we’ll enjoy a renewness(sic) in our market.’”

The Daily Herald from Utah. “A Las Vegas real estate auctioneer is putting up for sale more than 50 foreclosed residential properties and lots in Utah in yet another sign of softness in the high-end residential market.”

“The inventory, owned mostly by Centennial Bank, is valued at more than $20 million in total. About 35 of the 52 homes and lots for sale are located in northern Utah County.”

“On the auction block are 23 finished and unfinished homes ranging between $175,000 and $2.6 million, based on previous list prices or bank-appraised values. Also included in the sale are 29 custom lots that range between $111,800 and $408,000.”

“‘Many of those properties were owned by speculating owner-builders who had hoped to finish the homes and resell them, but ran out of money and time,’ said Eric Nelson, founder of Eric Nelson Auctioneering. ‘If the bank can sell the properties all in a short period of time, that prevents vandalism, reduces holding costs and helps them recover the loans faster.’”

“‘The bank is not in the business to hold real estate. If they find themselves with a lot of foreclosed property, auctioning them is one of the fastest and fairest ways to sell the properties,’ said company co-founder Aleda Nelson. ‘The builders may have been unable to sell the properties, make payment on the lots or obtain financing for construction.’”

“Sales of homes priced above $500,000 in Utah County plunged 71 percent in April from a year ago. No sales were recorded for homes priced above $1 million in April — the second time this year, said said Taylor Oldroyd, CEO of the Utah County Association of Realtors.”

“‘Mapleton and Alpine are some of the highest-priced areas that are seeing a lot less sales,’ Oldroyd said.”

“Median sales prices of all residential types in Utah County fell to $219,500 in April from $225,000 last year, according to the latest data from the Utah County Realtors.”

“Nelson sees more bank-owned property auctions being held in Utah in the coming months. ‘We’ve held two such auctions in Arizona in the past few months. And we’re doing the same thing in Nevada, and now Utah, although the market here isn’t as bad as in Nevada or Arizona.’”

“‘These are basically brand-new homes, the majority of which are 80 percent to 90 percent finished,’ he said.”"

Some housing bubble news from Wall Street and Washington. Reuters, “House prices fell a record 2.5 percent in May, the Nationwide Building Society says. The monthly decline, the largest since the lender started compiling records in 1991, wiped 5,000 pounds off the value of the average home and took prices 4.4 percent lower than a year ago — the sharpest rate since the 1992 economic slump.”

“Prices have now fallen for seven months running — the longest stretch of falls in 26 years when the last housing market crash plunged millions of Britons into negative equity, or owing more on their mortgage than the value of their home.”

“‘The sheer size of the drop in house prices, without the economy having yet slowed significantly, suggests that this housing market correction will be deep and prolonged,’ said Seema Shah of Capital Economics.”

“‘All this is with the support of a still relatively healthy labour market. Imagine then, what will happen to house prices once the economic downturn gathers pace and unemployment rises,’ Shah said.”

“Two-thirds of British households own their homes, making prices an extremely emotive issue up and down the country.”

“‘Correlation between house prices and consumer spending in the UK is high, and indeed it is the highest among major industrial countries,’ said Michael Saunders, economist at Citigroup.”

From Bloomberg. “KeyCorp fell the most since the stock-market crash of 1987 after doubling its forecast for loans that won’t be repaid, prompting concern that regional banks have underestimated the cost of bad mortgages.”

“The revision by the Ohio bank, which last month quadrupled its provision for loan losses to $187 million, may foretell similar increases at U.S. commercial banks as home prices keep sliding, analysts said.”

“‘Banks are a little bit delusional right now about when they’re going to turn around,’ said said Mark Fitzgibbon, an analyst at Sandler O’Neill & Partners LP. ‘Recessions don’t turn around in days or weeks or months. It’s a multiyear kind of thing.’”

“Banks are concluding that they must unload foreclosed properties to get the properties off their books, said Jeff Davis, an analyst at FTN Midwest Securities in Nashville. ‘We’re getting to the point where reality is sinking in and the sellers are cutting prices,’ Davis said. ‘The deeper we go into the year, the more foreclosed properties trading hands will impact the data.’”

The Atlanta Journal Constitution. “Synovus Financial Corp. said it has turned to auctions to speed up the disposal of foreclosed homes, many of which are concentrated in the Atlanta area.”

“Synovus CEO Richard Anthony said the Columbus-based banking company is in the ‘fifth inning’ of dealing with its credit problems stemming from the nationwide meltdown of home values and mortgage defaults.”

“Almost 12 percent of Synovus’ $1.67 billion residential loan portfolio, or $199 million, is classified as nonperforming, accounting for more than half of its problematic home loans, according to the bank’s presentation.”

“‘Our attention is more focused on turning the … assets in Atlanta than it is in Florida,’ said Anthony, because it is a much bigger share on Synovus’ problem loan portfolio.”

The Houston Chronicle. “Kenneth Hocking watched as the auctioneer began to drop the prices on his Inner Loop duplexes, in hopes that someone in the audience would start the bidding. $225,000 … $200,000 … $170,000.”

“When he hit $100,000 and the audience remained motionless, the auctioneer moved on.”

“‘It’s a reflection of the market,’ said Keith Jaehne, a commercial real estate broker and investor who attended Wednesday’s real estate auction. ‘There are a lot of new houses on the market without a lot of activity.’”

“We’re in a correction period,” said Kelly Toney, co-owner of Tranzon VenueBid, the real estate auction franchise running the event. ‘That was very evident today.’”

“A handful of the 25 properties being auctioned didn’t get a single bid.’

“‘Buyers are leery of prices falling further,’ Toney said. ‘They don’t feel like the market has bottomed out yet.’”

“The high bid on a 3,000-square-foot duplex on Hutchins near the Museum District was $75,000. It was a court-ordered sale, however, and the minimum bid had been set at $135,000. Several Midtown townhomes were left unsold, as no one was willing to pay the $315,000 and $415,000 minimums.”

The Detroit News. “Metro Detroit home builders, battling a nearly three-year slump in new home sales, are sweetening their deals to lure scarce buyers. They not only are dropping prices, but also are offering to buy customers’ existing houses…and throwing in upgraded fixtures and finishes that just a few years ago would have cost thousands extra.”

“In addition, some builders have put empty lots up for sale in hopes of recovering at least part of their investment.”

“‘We’re talking price declines of 30 and 40 percent at least,’ said Russ Long, director at a Birmingham-based financial firm that is acting as a bank-appointed receiver for financially troubled builders in Metro Detroit. ‘It’s a more acute drop with new properties than existing ones.’”

“‘This is stacking up as the most dramatic housing contraction in the post-World War II period,’ said David Seiders, chief economist for the National Association of Home Builders.”

“In some cases, even drastic price reductions and free upgrades haven’t helped to move some new homes.”

“Wake-Pratt Construction Co.’s Cedar Pines of Troy subdivision included plans to build 17 luxury single-family homes, some with price tags in excess of $650,000. But three years after Wake-Pratt broke ground on the project, only three home sites have sold, and the latest top listing price is right around $550,000, though there hasn’t yet been a sale this year.”

“Those prices include thousands of dollars’ worth of upgrades like granite counters, his-and-hers sinks in the bathrooms and upgraded fixtures. Just a couple of years ago, such extra amenities wouldn’t have been included.”

“Some companies, including Bloomfield Hills-based Pulte Homes Inc., have been aggressively selling excess land and speculative home inventories to boost their bottom lines.”

“‘Nobody is even talking about building homes unless they’re build-to-suit,’ said Long, the bank-appointed receiver. ‘There’s no money in empty lots.’”

From Post Dispatch. “For local house builders looking for an end to the housing market slump, April didn’t offer much hope. In the St. Louis region, the number of building permits sunk in many counties to levels not seen in at least six years.”

“The pace of sales is still not where most in the industry would like. Chris Jones, president of Columbia, Ill.-based CA Jones Inc., has experienced that first hand. Sales at his company are off about 40 percent from an average year, Jones said.”

“‘April is usually one of our hot months. We could sell five or six houses easily,’ he said. This year he sold three. But the month was still better than March, Jones said, when he sold just one house.”

“And the buyers in the market are bargain shopping, Jones said, because there is such a large supply of houses. ‘There have been weekends when we had one person visiting the display,’ Jones said. ‘It is very discouraging to the sales people.’”

The Gazette. “Amid an atmosphere of homes waiting months to sell and the number of foreclosures in the state having passed 11,000, one Prince George’s County builder is offering homebuyers the chance to rent before they buy.”

“‘It’s not something we usually see in the new home arena, even in this market,’ said Katie Maloney, executive VP of the Maryland State Builders Association.”

“Atkinson Properties & Builders’ homes are at least 3,000 square feet and brick-based, feature four to five bedrooms with ceiling fans, four or more bathrooms, whirlpool baths, gas fireplaces, in-law suites or sun rooms and fully finished basements.”

“Buyers pay Atkinson an initial nonrefundable down payment, usually $20,000, and then provide monthly rental payments until they are ready to purchase the home. Most Atkinson homes go for around $600,000, with renters paying about $3,700 each month; $1,000 of this goes toward the final purchase. Jean Atkinson, president, took in more than $309,000 in revenues last tax period but says she is closer to breaking even now.”

“‘I’ve had a tenant now that still hasn’t bought in almost five years. I’ve had to refinance her house; it was either that or ask her to leave,’ Atkinson said. ‘They have realized it’s cheaper to rent the house as long as they can without buying.’”

From ABC News. “In nearly every American metropolis, the housing downbeat goes on, and the numbers in some cities are staggering. At the bottom of the heap is Las Vegas. Once America’s fastest growing city, it has seen home prices tumble 26 percent since last year.”

“Not far behind is Miami, where the condo craze crumbled and overall housing prices are down almost 25 percent. The other big losers are in the West: Prices in Phoenix, Los Angeles, San Diego and San Francisco are each down more than 20 percent.”

“Homeowner Deborah Gorman and her husband decided to sell their home in Pittsburgh when they took new jobs working for an insurance company in New Mexico in 2005. But by the time they put their house on the market, the Pittsburgh metro area was already glutted with inventory.”

“‘We did lower the price significantly, dropped it by about $25,000; at this point, we really just want to be able to pay off the mortgage so that we can kind of move on and not have the stress of owning a house 1,700 miles away,’ Deborah said. ‘Once the house had been on the market for nine months, we were starting to get a little bit more than discouraged that it really wasn’t going to sell.’”

“Their original listing price was $150,000, but since then, the Gormans have dropped it $25,000. Her realtor recently told them that he has had clients in comparable situations sell their house for less than their mortgage.”

“‘It is really kind of disillusioning to realize that, after 20 years, you’re really going to walk away with not much,’ Deborah said.”

“She hoped to have a small gain from selling her house for a future home, but now that ‘hope has evaporated.’”

“‘It’s disheartening when you think you’ve done everything right. You have a lovely home and it’s in a great area and it just won’t sell. You really are at the mercy of the market,’ she said.”

The Daily Business Review reports from Florida. “The owners of Villa Mare, a failed residential condo conversion project in Boca Raton, have seen the property’s debt balloon from about $50 million to more than $70 million since last year. The debt is growing at the rate of $21,000 per day because of interest charges. The development, which NRW purchased in 2006, has two five-story buildings, boat slips and ocean access.”

“It was expected to generate about $90 million in sales with units averaging more than $550,000.”

“In general, it’s not uncommon for the senior lender to opt for the foreclosure, said Jeff Bast, (an) attorney who represents NRW. He added that many condo developers with troubled projects are grappling with the issue of accumulating interest.”

“‘Default interest can accumulate very quickly and dramatically increase the amount of the debt obligation,’ he said.”

“But that only compounds the developer’s problems, he said. ‘If they are under water to begin with, in some situations it may not matter,’ he said.”

The Miami Herald. “Coldwell Banker might seem the least likely sort of business to take a page from the marketing manual of the car dealer’s factory blowout or a Memorial Day mattress sale. But for the prestigious real estate brokerage, desperate times call for desperate measures.”

“Last week, South Florida’s largest real estate firm started hyping its own version of a door-buster sale that starts Sunday. Prices on hundreds of homes, mostly in Miami-Dade and Broward counties, will be slashed by at least 10 percent.”

“Like most sales events, the discounts are good for a limited time only, in this case 10 days — or, presumably, while supplies last!”

“Gus Rubio, senior VP of Coldwell Banker for Southeast Florida, said the firm was simply offering the public a unique chance to ‘buy today at tomorrow’s prices.’ ‘Everybody that is analyzing the market is saying that prices have the possibility of [falling] further,’ Rubio said.”

“If a test sale hosted by the firm in Tampa a few months ago is any indication, buyers should respond positively. Rubio said of 847 participating sellers, 70 got their homes under contract.”

“To participate, sellers with homes listed at $750,000 or below must reduce their asking price by 10 percent; those with more expensive homes can start with 5 percent cuts. No short-sale deals or bank-owned properties are allowed because administrative obstacles make discounting them tricky.”

“‘For a lot of sellers, this was not a program for them because they were upside down,’ Rubio said.”

“With concerns of further price declines keeping many on the sidelines, the sale would seem to answer skepticism that the time to buy has not yet arrived — a difficult thing to do, said Doug DeWitt, a Miami real estate agent.”

“‘When we get to buy-one, get-one-free, then we’re really in trouble,’ he said.”

The Sun Sentinel. “Roughly 400 homes and condominiums in Palm Beach County are participating in the event that starts Sunday, with an average price reduction of 9.1 percent. In Broward County, there are about 300 properties participating at an average price drop of 9.5 percent.”

“‘For the buyer, it’s going to be a huge incentive,’ said Rubio.”

“Its success will depend on whether the asking prices were fair to begin with, said Miami-based housing analyst Lewis Goodkin. ‘If the prices were realistic, then buyers will respond,’ he said.”

“But competing real estate agents are skeptical. ‘It’s meaningless. It’s hype,’ said Bob Melzer of Prudential Florida WCI Realty in Boynton Beach. ‘No serious home buyer falls for that. He offers what he wants to offer.’”

“The median price in Broward fell 18 percent to $298,100 last month, the first time the county’s median has been below $300,000 since October 2004. The median in Palm Beach County in April was $314,000, down 17 percent from $376,300 a year ago.”

“With the city seeing more than 1,800 foreclosures this year alone, Coral Springs officials mulled over a law to accelerate the code enforcement process for vacant and abandoned properties.”

“‘Foreclosures are increasing by 10 percent every month. Lender owned properties have increased 40 percent this year,’ said Erdal Donmez, assistant city manager.”

“Vice Mayor Vince Boccard said the city should consider neighborhood house watch, which is along the same lines as neighborhood crime watch. ‘Abandoned houses can become clubhouses for neighboring kids,’ he said.”

From CBS 4.com. “CBS4 News encountered half a dozen people on a Ft. Lauderdale neighborhood trying to sell or rent their homes. Many are stuck, and everyone is left wondering how low things still have to go during this recession.”

“‘We don’t have the funds to pay the mortgage,’ said Nathan Cohen.”

“Cohen and his family are among dozens of South Floridians who attended a workshop Tuesday night to get help saving their home. It is another sign of a deeply troubled housing market. New numbers show Miami Dade and Broward home prices dropped by a quarter over this time last year.”

“For the Cohens, and so many others, it’s their personal disaster. ‘We don’t pay the credit cards. We pay the minimums if we can. Since my wife doesn’t work we try to survive on my salary,’ said Cohen.”

The News Journal. “Neighbors say an oceanfront timeshare condominium damaged by hurricanes in 2004 continues to be an eyesore but the city’s code board has ended its case against the Ocean Palms Beach Club.”

“‘I live just to the south of this disaster. I’ve been looking at this thing for four solid years,’ said Hill Street resident William Hoffmeister. ‘The city just keeps putting it off. Nothing is being done. (Ocean Palms is) doing the minimal amount of work there that can be done.’”

“‘Everybody’s ticked off because it’s taken so long to fix,’ said Attorney Edward Beazley, representing Ocean Palms. ‘We’ve explained why it’s taken so long to fix. It was a timeshare and everybody walked away.’”

The Herald Tribune. “Sales of new homes showed some life in April, but it was life at one of the lowest levels of activity in nearly two decades.”

“There have been indications of improvement in Southwest Florida real estate…but calling a bottom is problematic with the huge overhang in inventory that built up during the recent housing boom.”

“Some home builders are seeing a spike in sales - albeit at deep discounts - but others complain that they are still competing largely with the overhanging inventory. Just in the Sarasota MLS there are 12,000 homes and condominiums for sale compared with a pre-boom level in the 2,500 range.”

“Overshadowing everything is the question of where prices stand, builders say. ‘A lot of people were waiting to see if prices were going to go any lower,’ said Lee Wetherington of Lakewood Ranch-based Lee Wetherington Homes.”

“For Pat Neal, president of Lakewood Ranch-based Neal Communities, the answer to the bottom question was February. That is not to say the sales that he has made since then - sometimes at very low prices - are generating a profit.”

“The deals out there - Neal is selling homes for as low as $146,900 - will not last long, as demand increases along with the prices of fuel, wood and other items needed to build a house, he said.”

“‘I’m currently giving away some houses to move the land, but eventually prices will go up and I’m going to put some profit in there,’ said Neal, who has built more than 7,300 homes in Sarasota and Manatee counties since 1970.”

The Naples News. “It was a surprise when Robert Toll, CEO of Toll Brothers, recently gave Naples an ‘A’ rating in his financial update. He had previously given Southwest Florida failing grades in new-home sales.”

“Toll regularly grades the markets in which the company invests. Here are some of the grades he gave: Florida Central - F-plus, Florida East - F-minus, Florida North - F.”

“When asked to elaborate on his optimistic grade for Southwest Florida, Toll said, ‘It’s just one market; it’s not a huge market. But it gave us some happy times, especially considering that Naples was one of the worst markets that we had. A year ago, you couldn’t give a house away in Naples… And so we practically did give some homes away, I guess, in order to get rid of our specs.’”

From Law Jobs.com. ” In another sign of the hard times facing the legal industry, particularly in real estate-heavy south Florida, two law firms — Holland & Knight and Shutts & Bowen — have laid off nonlawyer staffers.”

“On a day that could be dubbed ‘Black Friday’ in south Florida legal circles, Holland & Knight, one of Florida’s largest and most venerable firms with 1,150 lawyers, laid off 70 staffers on May 16, including legal secretaries, information technology and accounting staff.”

“No lawyers were laid off.”

“The news comes on the heels of a decision announced internally on May 16 by Fort Lauderdale, Fla.-based Becker & Poliakoff to temporarily and immediately cut all lawyer salaries by 12 percent. The firm, which is heavy in condo and real estate representation, said it was forced to take the action since clients are delaying payment in the lean economic environment.”

“Carl Schuster, managing partner of Fort Lauderdale-based Ruden McClosky, acknowledged his 175-lawyer firm is experiencing ‘a slowdown.’”

“‘Because we do a lot of real estate work, we do have a slowdown,’ he said. ‘Fortunately, we do so much work in other areas, including workouts, bankruptcy and litigation. Like Becker & Poliakoff, we are having trouble getting some of our developer clients to pay. But they’ve been good to us, so we try to be good to them.’”

From US News and World Report. “No matter what you think about the controversial housing legislation moving through Congress, at least we can all agree there just hasn’t been enough TV coverage of the nation’s foreclosure epidemic.”

“So, for all of you begging for a closer look at a process that’s now shattering communities, gutting home values, and threatening to drag the entire country into a recession, meet real estate agent Tom Bruzzesi, the star of The Foreclosure Shoppe-a new realty/reality TV show focusing on Florida’s treacherous real estate market.”

“From the press release: In each episode of ‘The Foreclosure Shoppe,’ camera crews follow Tom on a typical wild and crazy day at the office. Tom (affectionately nicknamed ‘The Maniac’ by his peers) confesses that he is a master at frustrating people.”

“‘I know how to get underneath their skin and throw off their bidding strategies,’ Tom admits. From irritating bidders at the courthouse, to walking through his purchased properties for the first time, to evicting tenants that won’t leave, to picking up his large paychecks, viewers get an inside pass to witness Tom navigating through the messy foreclosure process.’”

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