The Housing Bubble

The Used House Salespeople report from California. “The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to C.A.R.’s First-time Buyer Housing Affordability Index. The minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment.”

“At $67,830, the minimum qualifying income was 30 percent lower than a year earlier when households needed $96,500 to qualify for a loan on an entry-level home. The California…median household income was $50,700.”

The Press Democrat. “Bay Area home sales and prices continued to slump in April from year-ago levels. Sales of all new and resale houses and condominiums fell 15.3 percent in April, compared with a year ago. The median price for the nine-county region was $518,000, down 21 percent from a year ago, according to DataQuick.”

The Appeal Democrat. “Among the foreclosures and sinking home prices roiling the Yuba-Sutter area is a rare bright spot - for homeowners, if not for governments. Thousands of local residents will receive cuts to their property taxes this summer.”

“‘If someone bought a house in Plumas Lake for, say, $350,000, we’re listing it on the assessment rolls now for about $200,000, $210,000, $220,000,’” Yuba County Assessor David Brown said Monday.”

“Despite the pain of lost homes and falling revenue, Brown said, the housing shake-out carries at least one benefit - the chance to take in would-be home buyers once priced out of the Mid-Valley market.”

“‘Letting this artificial air out is a good thing,’ he said. ‘It leads to where people can put down a reasonable down payment and actually afford the payment, raise a family and make the payments long-term.’”

“‘It’s painful now, but it will stabilize and be sustainable in the long run - though it doesn’t help the folks that paid those higher prices,’ he said.”

The Sacramento Bee. “Months of plummeting prices and droves of discounted, bank-owned properties turned April into one of the Sacramento region’s best months for home sales in nearly a year, DataQuick reported. Prices have dropped as much as one-third in the past year and are still falling as banks aggressively price thousands of bank repos.”

“‘It was a terrible market,’ said Sacramentan Roy Amerine, who closed escrow in April on his Campus Commons residence, which had been on the market since January.”

“‘We started at about $360,000 or $380,000, and made several drops of either $10,000 or $20,000,’ he said, before selling for $310,000. ‘I was relieved, finally, to sell the property. It was just real stressful.’”

The Tribune. “Construction had the largest decline year-over-year in San Luis Obispo County, down by 9 percent - or 700 jobs. The drop directly relates to the sluggish housing market, said Dan Hamilton, director of economics for the UCSB Economic Forecast Project.”

“‘Developers need to take new homes off the market as fast as they can because it’s a bad time in the market,’ he added. ‘And one way to do that is not build anymore homes, or not put anymore in the pipeline, which takes away jobs.’”

The Ventura County Star. “There were 771 new and existing homes and condos sold last month in Ventura County, a 13.4 percent drop from 890 homes sold last year, DataQuick reported. The median price of homes sold declined 22.2 percent from $572,000 a year ago.”

“Areas slammed by foreclosures and deep discounting have shown the most gains in sales, as buyers rush to grab up deals, LePage said. In Ventura County, 30.7 percent of the homes sold last month were foreclosures.”

“‘There is a blue-light special taking effect,’ said Andrew LePage, a DataQuick analyst.”

From KGET.com. “New home sales for April were down more than 50 percent compared to a year ago. Bakersfield posted an all-time low for building permits pulled in a month, just 20 permits last month.”

“According to Gary Crabtree of Affiliated Appraisers, existing home sales for April were up nearly 80-percent over April of 2007. More than 70 percent of those sales were distressed, bank-owned, and heavily-discounted properties.”

“According to Crabtree, for every bank-owned home sold last month, there were nearly three new foreclosures.”

“Crabtree says lenders lost nearly $100 million in the last eight months selling off foreclosed homes in the Bakersfield market.”

From The Sun. “Sales of new and existing homes dropped 18 percent in San Bernardino County from April 2007, according to DataQuick. Riverside County saw almost 3,200 sales, and San Bernardino County just over 1,660.”

“The Perezes, like thousands of San Bernardino County residents, are fighting the financial forces that threaten to sweep them from their home. Raising six children in Fontana, the Perezes are on the brink because monthly payments for the home they bought in 2005 leapt from about $1,400 to more than $3,500, Rigoberto said.”

“‘We had no idea this would happen, we didn’t expect it,’ Rigoberto Perez said in Spanish.”

The Press Enterprise. “Riverside County last month saw the first year-over-year sales increase since 2006, as bargain hunters streamed into a market rife with foreclosures.”

“The median price of homes sold in Riverside County last month dropped almost 31 percent to $283,500 from April 2007, and 33 percent in San Bernardino County to $248,000.”

“Meli Van Natta, a real estate broker in Moreno Valley, said about 90 percent of the sales in her office are homes repossessed by lenders.”

“‘I call this a false dawn,’ said Chris Thornberg, an economist with Beacon Economics in Los Angeles. ‘Foreclosures are not a sign of a stable market. Prices are getting closer to affordability, but they still have some ways to go.’”

“The report shows that prices make a difference, said Leslie Appleton Young, chief economist for the California Association of Realtors. ‘It is just a little bit too early to call a bottom,’ she added.”

The Voice of San Diego. “The San Diego housing…sales total — about 2,800 new and resale houses and condos — was down about 18 percent compared to the total in April 2007.”

“More than one-third, 35.1 percent, of the homes that resold last month in the county had been foreclosed on in the prior 12 months.”

“‘We’re seeing some momentum — and I’m not talking price at all — in areas that have been heavily discounted from their peak,’ said DataQuick’s LePage. ‘Prices are 20 to 40 percent off their peaks in some places. That’s luring some buyers back into the market, getting what they perceive is a good deal.’”

“LePage cribbed the firm’s three Big Ifs we’ve been hearing for a few months: Are we in or headed for a recession? Will credit become un-crunched? What if foreclosure sales taper off?”

“There was more nuance where that came from. ‘What we don’t know is how deep the demand is, even at these prices,’ LePage said. ‘There are a lot of foreclosures that still haven’t sold and a lot more coming.’”

The LA Daily News. “In Los Angeles County, where sales fell an annual 30.6 percent, to 5,016 transactions, the median price declined 19.4 percent, to $435,000. For all of Southern California, the median price fell 24 percent, to $385,000.”

“And despite April ringing up the highest sales total since last August, it was still the second-lowest for the month on record.”

“Post-foreclosure homes are becoming a bigger part of the sales mix across the Southland. Of all the homes sold in April, 37.5 percent had been foreclosed on at some point in the prior 12 months, compared with 35.8 percent in March and 4.6 percent a year ago.”

“‘We heard several months ago that people were going into brokers’ offices and saying `Show us your REOs (foreclosures).’ They were looking for bargains,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. ‘People who were priced out of the Southern California real estate market are realizing that a door is opening and it’s going to stay open for quite some time.’”

“That’s because foreclosures, already at record levels in most areas, will continue increasing in the months ahead and further push down prices.”

“DataQuick said April’s sales increase was most pronounced for homes priced under $500,000 and accounted for 66 percent of the monthly gain. Most of that activity was in areas hard hit by foreclosures, most notably the Antelope Valley and Inland Empire.”

From KABC 7. “In Antelope Valley, 17 houses are about to hit the auction block. Starting bids are listed at less than half the original asking price. Opening bids on homes that are around $600,000 are starting at $125,000.”

The LA Times. “The rich may indeed be like the rest of us. Prices of their homes are now falling too. Data released Monday showed big drops in the region’s most exclusive neighborhoods.”

“Median sale prices fell by 13% in Beverly Hills in April, compared with the same month last year. Rancho Palos Verdes dropped 18% over the same period, while Newport Beach’s 92660 ZIP Code took a 34% hit, according to DataQuick.”

“Experts say these areas and others are catching up with price declines that struck first in outlying suburbs such as the Antelope Valley and the Inland Empire. ‘You can’t have one market hugely cheaper than another forever,’ said UC Berkeley professor Thomas Davidoff, who specializes in real estate.”

“The decline in the high-end market can be seen in both the Los Angeles and the San Francisco Bay Area markets, according to a study released Monday by First Republic Bank of San Francisco.”

“The weak economy suggests that prices will remain depressed for some time, said First Republic’s president, Katherine August-deWilde. ‘People worry about their jobs and incomes — even rich people,’ she said.”

“Orange County’s more expensive neighborhoods are also seeing price declines, DataQuick figures show. ‘The market over $1 million has definitely changed,’ said Aliso Viejo broker Steven Thomas.”

“Foreclosures, which had been almost unheard of in high-end markets a year ago, now account for a substantial share of listings. In Coto de Caza, where the average listing price is $2 million, 17% of the 167 homes for sale are either foreclosures or “short sales,” in which the listing price is below the amount owed on the property, Thomas said.”

“In Mission Viejo and Laguna Hills, Thomas added, foreclosures and short sales make up more than 40% of the homes for sale.”

“With the passage of time, sellers who want to move but have been waiting for a market turnaround grow weary of waiting, Berkeley professor Davidoff said. ‘It’s like being in a teakettle. People eventually want to get out,’ he said.”

“The weakening overall economy will be another likely drag on prices at the high end, said John Burns, an Irvine real estate consultant. ‘Executives are now losing their jobs too,’ Burns noted.”

“Simon Lee, a commercial real estate investor who has been shopping for a house in Bel-Air, Pacific Palisades and Brentwood, said he believes that prices in those areas are still inflated in today’s market.”

“‘I think it needs a major adjustment, 25% or 30%,’ he said.”

From CNN. “Barbara Harvey climbs into the back of her small Honda sport utility vehicle and snuggles with her two golden retrievers. A former loan processor, the 67-year-old mother of three grown children said she never thought she’d spend her golden years sleeping in her car in a parking lot.”

“Harvey was forced into homelessness earlier this year after being laid off. She said that three-quarters of her income went to paying rent in Santa Barbara, where the median house in the scenic, oceanfront city costs more than $1 million. She lost her condo two months ago and had little savings as backup.”

“‘It went to hell in a handbasket,’ she said. ”I didn’t think this would happen to me. It’s just something that I don’t think that people think is going to happen to them is what it amounts to. It happens very quickly, too.’”

“John Quigley, an economics professor at the University of California-Berkeley, said the California housing crisis has left many middle-class families temporarily homeless or forced them to go to food banks to feed their families.”

“‘Part of the reason why it’s so painful in Santa Barbara is there’s so little in the way of alternative housing,’ Quigley said. ‘If there were alternative low and moderate housing and rental accommodations that were reasonably close by, you can imagine it wouldn’t have this desperate look to it as people living in their cars.’”

Some housing bubble news from Wall Street and Washington. Reuters, “The bond insurance arm of CIFG Holding Ltd, and two other units’ ratings were slashed to junk status by Moody’s Investors Service on Tuesday, due a ‘high likelihood’ the insurer will not meet its capital requirements. Two months ago the insurer had pristine ‘Aaa’ or ‘AAA’ ratings from the major rating firms.”

“The rating cuts ‘reflect the high likelihood that, absent material developments, the firm will fail minimum regulatory capital requirements,’ due to losses stemming from its debt and exposure to subprime mortgages, Moody’s said.”

“In March, Moody’s had estimated CIFG’s expected loss on asset-backed collateralized debt obligations at $433 million, and stress losses, consistent with a 21 percent cumulative loss on 2006 subprime mortgage first liens pools, at $1.3 billion.”

“‘The breach of such regulatory capital requirements would put the firm in a precarious position,’ Moody’s said in a statement, due to the company’s exposure to credit default swaps, Moody’s said.”

“Mitsubishi UFJ Financial Group, with a market value of about $113 billion, said losses related to subprime investments and other securitised products totalled 123 billion yen ($1.18 billion) in the year to March 31, and said it could lose $480 million this year.”

“‘Subprime had a very broad effect on us,’ MUFG CEO Nobuo Kuroyanagi told a news briefing.”

The Post Bulletin. “Something went wrong in the American Dreams of hundreds of thousands of homeowners during the past two years. They found they no longer could afford their mortgage payments. Many also found they could not sell their houses at prices high enough to pay off their mortgages.”

“The ’subprime’ mortgage crisis has spread far beyond some beleaguered neighborhoods and local courtrooms. How could one small corner of the housing market go so bad?”

“‘Subprime mortgage borrowing nearly tripled during the housing boom years of 2004 and 2005,’ Federal Reserve Board chairman Ben Bernanke said in mid-2007 speech.”

“Late last year, Federal Reserve Governor Randall S. Kroszner said in a speech that 7.7 million mortgages, or about 14 percent of the mortgage market, were subprime. About two-thirds of those had variable or adjustable rates.”

“Subprime loans grew to $650 billion by 2005 from about $150 billion in 2003, says Tom Musil, director of the Shenehon Center for Real Estate at the University of St. Thomas in Minneapolis.”

“Some borrowers own houses that are worth thousands of dollars less than what they actually owe in mortgages. Legally, they are on the hook for the payments.”

“The decline in value also creates other problems. For example, ‘The buyer can’t refinance $200,000 when the house is only worth $150,000,’ Musil explains.”

“In extreme cases, some owners, especially those who purchased homes for business instead of a residence simply are refusing to pay and daring lenders to foreclose.”

The Saginaw News. “Victorious Believers Ministries Housing Counseling Agency in Buena Vista Township…aids those looking to buy their first homes and teaches financial literacy, (and) is an affiliate of Mission of Peace, a Housing and Urban Development-approved national housing counseling intermediary.”

“The group’s goal is to help homeowners keep their houses. They work with owners, their lenders and insurance companies to devise a strategy.”

“‘There are too many people walking away from their homes,’ said Evelyn Moten, a Bridgeport Township resident who leads the volunteer agency. ‘It’s happening across all walks of life.’”

“State Rep. Andy Coulouris, chairman of the House Banking and Financial Services Committee, said legislators are addressing the problem of predatory lending.”

“‘One of the problems we see is attempting to regulate the mortgage market in Michigan. Until we have a national solution, we create the risk that the secondary mortgage market will stop,’ he said. ‘If Michigan becomes a hotbed for litigation, Wall Street will stop buying up homes.’”

The New York Daily News. “Devon Honeyghan spent $25,000 renovating the kitchen of his Bronx house in preparation for selling it and moving to Georgia.”

“But two ‘For Sale’ signs and an abandoned house standing all in a row across the street have him doubting he will make any of his money back.”

“Honeyghan, who bought his new house in Georgia at the market’s peak, is so desperate to sell his Bronx home that he offered to buy the abandoned house across the street, which has become an eyesore and is filled with stray cats. He could not because it is locked in a divorce case.”

“‘I just don’t see myself getting my money back,’ he said. ‘I was going to spend $10,000 on the bathroom, but it’s not worth it.’”

“Statistics released this month…show the value of nearly 400,000 homes in the Bronx has dropped $4.9 billion because of surrounding foreclosed homes.”

“‘You see the signs up - ‘For Sale, For Sale, For Sale’ - on every street,’ said Carmen Rosa, district manager of Community Board 12.”

“‘At our board meetings, residents are very concerned about the impact the foreclosures will have on the value of their homes,’ she said, ‘but they are also concerned if someone walks away from their home that people will break in and they will have to become watchdogs.’”

“As for Honeyghan, the real estate industry’s fall has hit him even harder, because his wife is an agent. She has given up her job selling homes to baby-sit.”

“‘She can’t make no money,’ he said. ‘And I can’t carry two mortgages myself. This just doesn’t do any justice for the rest of us.’”

From Forbes. “There was a time in America when losing your home to the mortgage lender was about the worst financial calamity that could befall a person. Not only were you homeless, your dignity was trampled by the repossession of your property.”

“That was Norman Rockwell. This is now.”

“To the distress of many banks and investors, American borrowers are increasingly viewing voluntary foreclosure as a practical financial decision, stripped of its taboo. Perhaps a bigger problem is that banks don’t want to talk about the problem and they don’t appear to know what to do about it.”

“As long as it persists, there will be downward pressure on home prices, especially in overbuilt markets where the supply of housing already outstrips demand.”

“In March, according to RealtyTrac, foreclosures rose 54.0% year-over-year, but bank repossessions surged at double that rate, 129.0%. What accounts for the difference? Rick Sharga, VP of marketing at RealtyTrac, said most March repossessions likely involved walkaways.”

“In mid-April, Chief Risk Officer Don Truslow of Wachovia acknowledged the troubling trend during a conference call. Even more disconcerting, Truslow added that the trend was ‘almost regardless’ of borrowers’ creditworthiness. Lender’s are beginning to report that loan-to-value ratios are better indicators of the likelihood of default than borrowers’ FICO scores.”

“Thomas Kerrigan, a real estate lawyer in New York, said that if a borrower has other assets besides the home, than there is a much greater likelihood that the lender will pursue the deficiency between the total mortgage and the depreciated home price.”

“However, if the lender believes there are no other assets, it will likely make a business decision that it isn’t worth trying to recoup the loss. ‘You can’t,’ Kerrigan noted, ‘get blood out of a stone.’”

“‘Destroyed credit is a still huge deterrent, but if someone is willing to throw their credit score away for seven years then walking away is an option,’ said Nancy Flint-Budde, a certified financial planner in Salem, New York.”

“Because many people ‘went in as investors,’ rather than homeowners, ‘they went in with a different mindset and might be willing to just walkway.’ Flint-Budde added, ‘This is why traditionally people had to put more money down when they borrowed money for a second home or investment property.’”

“Glen Costello, a structured finance officer at Fitch, said that walkaways are nothing new, but this cycle’s factors are. ‘One could understand that if someone had lost their job and all their savings, they were being forced to give up their home,’ said Costello.”

“Now, however, homeowners aren’t as much vulnerable to foreclosure as amenable. They just don’t want to pay high monthly costs for properties in which they do not have stakes.”

National Mortgage News. “A lot of ink has been spilled about lenders working diligently with homeowners who cannot make their payments but who want to keep the house. This tale is about ‘James,’ a loan broker who has a 2/28 mortgage with Countrywide.”

“His loan was a no-downpayment note with an original principal balance of $330,000. James and his wife are looking at new monthly payments of $3,599 compared to a start rate payment of $2,100. He, his wife and two kids live in Sun Valley, a suburb of Los Angeles. His house now has negative equity but they want to stay put.”

“Here’s the catch: his loan is not delinquent. It’s current. One of the chief reasons…his parents have been helping out with the payments. Nonetheless, he called Countrywide and asked to restructure the loan. Eventually, according to him, Countrywide agreed to renegotiate, promising to keep the mortgage at the original start rate.”

“Countrywide said it would send a letter confirming the details. When the letter never arrived, he called the servicer. He was told by a Countrywide rep that no such permission to keep the rate at 5.99% was granted. He said they described the permission as a ‘computer glitch.’”

“James is a self-employed loan broker, not a great business to be in right now. His wife just landed a new job with promise: on Monday she begins work at a collection agency. They hope to hang onto their house. But can they? Question: how many more James’ are out there, people who bought homes at the top of the market, like where they live but are sitting on negative equity and note adjustments?”

“In last week’s column…I asked for ‘post-mortgage career’ stories. Here’s one that caught my eye (edited a bit by me): ‘After 25 years in lending (mostly wholesale) I sent out no less than 50 resumes, responded to numerous job postings and found only scammers and insurance companies willing to talk to me. I never reaped the huge incomes that most of my peers did so I had nothing to fall back on…I have distanced myself from any association with lending because of the negative stigma attached to anybody in the lending business.’”

“‘Although the demise of lending is rooted with Wall Street, the lack of regulation played a big role resulting in the large number of ‘crooks’ and opportunists in the business. I have found that the insurance industry is a bureaucracy and heavily regulated and as such is considered at least an honorable career untainted by scandal.’ — Jack.”

The Boston Globe reports from Massachusetts. “Only about 64 percent of those born in Massachusetts still live in the state, according to a report by Northeastern University’s Center for Labor Market Studies. ‘The problem is that we just can’t get people to come to Massachusetts as much as they want to leave,’ said Andrew Sum, author of the report. ‘We need to start asking what we can do to make Massachusetts a more desirable place to live, why people don’t want to come here to live.’”

“Between 2000 and 2007, more than 300,000 residents - about 5 percent of the state’s population, left Massachusetts. Those who left Massachusetts say they are repelled by the cold, the high price of housing, the taxes - in essence, everything.”

“Kevin and Meg Buckingham wanted to raise their children near family and friends in Massachusetts, but they couldn’t afford to stay. Both had good jobs…but the house they wanted was out of reach.”

“Last year, the couple moved to Knightdale, N.C., where they built a 2,000 square foot, four-bedroom house for $171,000. ‘There was no way we could ever do that in Massachusetts; the only thing we could find with the same amenities and the same room was for more than $1 million in Newton,’ Meg Buckingham said.”

“Cindy Homer grew up in East Boston (and) went to Anna Maria College in Paxton. The 55-year-old mother of three now lives in a 2,500 square foot home in New Mexico for which she paid $160,000.”

“‘I love the people and the scenery and the seasons and the ocean, food, and cultural activities in Massachusetts,’ Homer said. ‘You have everything there that anyone could possibly want, but the cost of living is outrageous.’”

The Boston Herald from Massachusetts. “In a sign of the times, the owners of some grand Nantucket estates are knocking millions off their price tags in a bid to lure buyers.”

“Former Tyco International CEO Dennis Kozlowski’s seaside retreat, which was being marketed at one point for nearly $20 million, was recently put back on the market. The new price: $16.4 million. Kozlowski is now serving time in federal prison for fraud related to looting millions from Tyco.”

“‘That is a huge price reduction,’ said Mary Taaffe of Windwalker Real Estate. ‘Let’s put it this way: Two years ago, at that price, that property would have gone into a serious bidding war.’”

“The long-awaited redevelopment of the landmark Anthony’s Pier 4 site into waterfront condos, shops and offices has been placed on hold.

“Retail development king Stephen Karp contends the timing is still not right for launching construction of his Pier 4 redevelopment.”

“‘The market obviously isn’t there for high-end condos right now,’ Karp said. ‘You don’t want to outthink the economy.’”

“During the frenzied days of no-down-payment loans and cursory credit checks in the early 2000s, two out-of-state lenders gave more than $1 million in mortgages to a Dorchester woman who lives in public housing and barely speaks English, the Herald has learned.”

“The loans, originated by New Jersey-based Equity One Inc. and the now-defunct Meritage Mortgage Corp., foreclosed last year, making 243-245 Washington St. and 16 Dacia St. among the 233 foreclosures to hit Dorchester in 2007, city and land records show.”

“The foreclosures have also left the borrower, Angela M. Torres, who speaks only Spanish, in financial ruin. ‘I have nothing,’ Torres told the Herald in Spanish last week. ‘I don’t have a business. I don’t have a car. I don’t have a house. I don’t have anything.’”

The Taunton Daily Gazette from Massachusetts. “Mary Ellen Rochette, executive director of the non-profit Pro-Home Inc., says she and her staff of three are struggling to keep up with an influx of residential owners desperate to stave off the threat of foreclosure.”

“Foreclosure petitions from March to April on single-family homes in the Silver City jumped from 16 to 23. For condos, the number of recorded petitions went from three to six, and for multi-family homes (including both two and three-family units) petitions increased from 8 to 13, according to TWG.”

“Alan Pasnik, data analyst for The Warren Group, said the prognosis isn’t bright for a resolution to the housing market’s foreclosure crisis any time soon. ‘I think it will go at least into the middle of next year,’ Pasnik said. ‘We’re nowhere near the end of this. It’s not pretty.’”

“Rochette said her office has been getting many more calls, during the last six months especially, from people who bought multi-family homes as an investment and are now facing foreclosure proceedings.”

“Those buildings, not unlike single-family homes and condominiums, are worth less now than when they were bought four or five years ago. As a result, Rochette said, banks will often turn down an application for refinancing if an owner is ‘upside down,’ or owing more money than the building is worth.”

“Paradoxically, the downturn in the real estate market and lower prices are attracting more first-time home buyers looking for good deals, some of whom have likely availed themselves of Pro-Home’s free seminars.”

“And that, Rochette said, has led to an increase of tenant turnover and left landlords scrambling to fill vacancies. Another troubling aspect of multi-family foreclosure is that tenants will often find themselves caught in the middle and forced to look for new housing when a landlord surrenders an apartment house to a bank or mortgage company.”

“Despite that fact, Rochette said there is not yet a shortage of available apartments in the city.”

The Telegram from Massachusettes. “At the end of April, some 4,000 renters in the city received postcards depicting a classroom blackboard with the phrase, ‘I will never rent again,’ repeated line after line, as in an antiquated schoolhouse form of discipline.”

“Those cards kicked off the initial marketing for the School House Lofts, a condominium project that renovated the former Adams Street School into 28 units.”

“And while the charm and character of exposed wood and brick, large windows and competitive prices have brought steady sales to places like Kettle Brook Lofts and Fremont Lofts, not all have fared as well.”

“The highly anticipated renovation of the former Crompton & Knowles building at 21 Illinois St. into 37 loft-style units garnered only eight buyers. Information provided by The Warren Group shows that in the first quarter of 2008, some 70 condominium units were sold. That is down nearly 50 percent from the 137 sold in the same quarter of 2007.”

“But that trend hasn’t kept developers from pushing ahead with condo projects.”

“The ballooning inventory is one part of the challenge for sellers. That could be compounded by the dropping price of single-family homes, which could siphon off some prospective buyers who could not afford a house a year ago.”

“Timothy M. Warren Jr., CEO of The Warren Group, said the median price for a single family home is inching closer to that of a condominium.”

“‘They may be looking for that maintenance-free and problem-free existence. But it must be worrisome to developers who are trying to make some decisions on how marketable they are. The danger is that they could sit on the market for a while and get stale,’ Warren said.”

The Star Ledger from New Jersey. “In the past two years, as Newark’s housing bubble experienced a messy burst, 11 of the 57 houses on the block have gone into foreclosure. This block is the hardest hit in the county, according to preliminary data from the Rutgers University Edward J. Bloustein School of Planning and Public Policy, which is in the midst of a detailed study of Essex County foreclosures.

The Star-Ledger spent a month studying Norwood Street, examining public records on the 11 foreclosures, analyzing eight years worth of real estate transactions and interviewing dozens of the people involved. What it found on this short, one-way block in Newark’s Vailsburg section is characteristic of what happened across urban New Jersey and the nation.”

“Two of the foreclosures were the result of alleged flipping schemes, where houses were bought at low prices and then quickly resold without significant improvements for nearly twice their original value to unwitting buyers; another foreclosure came from a high-pressure predatory loan operation.”

“But mostly there was greed: In a housing market overheated by the easy availability of subprime loans, where home prices were increasing nearly 50 percent a year, inexperienced and fiscally naive investors — many of whom were depending on rental income to pay their mortgages — jumped at a chance to make easy money.”

“One of the houses caught fire twice in March, set aflame by squatters shortly after the tenants were evicted. Another has become a drug house, with junkies freely wandering through an open back door. Several others have been stripped by scrap-metal scavengers, making them uninhabitable without rehabilitation.”

“‘I don’t care where you go in this city, we’re all crying the same cry,’ said Ewart Howell, a Norwood Street resident whose bank recently told him his house has lost $100,000 in value because of vacancies on the street. ‘The homeowners who have been here for a while, we didn’t create this problem. But we’re the ones who are feeling it.’”

“Before the bottom fell out, this part of Norwood Street was a real estate boomtown. From 2000 to 2007, there were 36 home sales that involved market-rate conditions.”

“In those cases, the average home was increasing in value by $76,000 a year. Expressed as a percentage, home values were increasing 47.5 percent a year — in other words, doubling every 25 months.”

“‘It’s crazy, what some of these houses were going for,’ said Leonard Wright, 49, who still lives on the first floor of his boyhood home on Norwood Street. ‘I was a paperboy, so I know all the houses on this street. Some of them were going for 300, 400 grand. And I can tell you, they just ain’t worth it.’”

“No.25, the green-sided house, and No.44, the prematurely aging duplex with the boards on the doors and windows, were caught up in what appear to be flipping schemes: They were bought for low prices by local real estate companies, then sold a few months later for nearly double their original price — even though no significant improvements were made — to naive investors.”

“Now they sit empty as they progress toward sheriff’s sale, where they will likely be turned over to banks that already have more foreclosed houses than they know what to do with. Neighbors say the houses have been ransacked, their pipes and wiring stripped.”

“No.41, a small, two-family home, (is) owned by Vanessa Parker, a Newark resident who was making a first stab at real estate investment when she jumped into a hot market in 2006 and bought the property for $300,000.”

“To pay for it, she got an adjustable rate subprime mortgage with an initial rate of 9.35 percent. Parker, who worked at a bank, knew it was a lousy rate, but figured she could refinance after six months of on-time payments.”

“Then she lost her job and was out of work for three months. Then she said her credit report got an erroneous blemish on it, which further delayed refinancing. Then the house needed repairs, which decimated her already thin savings.”

“Within less than a year, she had defaulted. She is now trying to sell the house to avoid foreclosure. ‘Everything went the total opposite of how I wanted it to go,’ Parker said. ‘It’s just been a total disaster.’”

The Intelligencer Journal from Pennsylvania. “Jim Gillespie, CEO of Coldwell Banker, faults the national media’s focus on foreclosures and the subprime mortgage crisis for keeping home buyers on the sidelines these days.”

“‘This is the absolute best time in my 33 years in real estate to buy a home,’ he said last week during a visit to Lancaster.”

“Gillespie, who oversees a brand with 117,000 agents and brokers worldwide, said he had come to town ‘to support our new affiliate’ and to help in its efforts to recruit more agents.”

“Lancaster County reflected the national trend - but to a lesser extent - with sales of both new and existing homes dropping from 6,453 in 2005, also a record year locally, to 5,735 in 2007, an 11 percent decline over two years, according to figures from the Lancaster County Association of Realtors.”

“That decline steepened in the first quarter of this year when home sales in Lancaster County dropped 29.5 percent, compared with the first quarter of 2007.”

“Most real estate booms last about five years, Gillespie said, followed by a two-year ‘correction.’ But the boom that ended in 2005 had gone on for 10 years and the current correction is in its 34th month, he said.”

“When will the downturn end? Gillespie said he has no idea, but that doesn’t change his advice to potential buyers. ‘You should not try to time the market,’ he said. ‘People who try to time the market get burned.’”

“Home purchases are important investments, regardless of the state of the market, Gillespie said. They usually increase in value between 1 percent and 2 percent above the rate of inflation and offer significant tax write-offs.”

“‘We’re three years into this thing. If people wait too long, prices will go back up and inflation may kick in with higher interest rates,’ he said.”

The Courier Times from Pennsylvania. “If anyone seemed safe from defaulting on home loans, it was her. The Morristown single mother of three is a full-time real estate paralegal.”

“Extra money from after-hours work preparing home-sale documents for attorneys paid for her kids’ drum lessons, karate classes and academic tutoring for her developmentally disabled twins. It also allowed her to purchase investment properties.”

“But, as lenders backed away from extending loans even to qualified homebuyers, her part-time work dried up. Three missed mortgage payments later, she was scrambling.”

“‘The work is nonexistent,’ said the woman, who wished to remain anonymous. ‘They were very apologetic, but it’s affecting everyone. Their real estate business has really fallen off, and they have to do other things as well.’”

“Paul Auerbach, an associate broker in Upper Southampton, has been working almost exclusively with homeowners facing foreclosure for more than 30 years. This, he said, is the worst he’s ever seen.”

“In 2006, a total of 133 properties sold at sheriff’s sale in Bucks County; last year, the number rose to 275, and through May of this year 169 were sold, county numbers show. And they’re not just lower-priced properties, Auerbach said. He’s worked with clients who have million-dollar homes - which are now worth much less.”

“‘I haven’t ever had as much in the upper price range,’ he said.”

“The Morrisville mother of three’s mortgage company basically said: ‘Get more income.’”

“She’s waiting to hear back from her lender to see if the company will transfer three missed payments to the backend of her loan, lessen the monthly payments for a while and put off adjusting her interest rate.”

“‘If I pay everything on time for a year then maybe I would be able to refinance,’ she said.”

“In the meantime, she is looking for work cleaning homes or in the medical field as a patient observer. Even working at McDonald’s isn’t looking so bad, she said.”

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