The Housing Bubble

The North County Times reports from California. “San Diego County home prices took yet another beating in March, reaching the largest rate of decline yet, according to a report released Tuesday. Home prices in March were 20.5 percent below the same month a year earlier, the first time county home prices were more than 20 percent below price a year before, according to Standard & Poor’s Case-Shiller Home Price Index.”

“‘Almost all of the realized loss in the last year has occured in the last six months through March,’ said Maureen Maitland, VP of index and analysis for Standard & Poor’s. ‘So, no, we haven’t seen deceleration. If anything, we’ve seen an acceleration in price declines.’”

“Prices are 25.9 percent below a November 2005 peak.”

“San Diego County’s year-over-year decline puts it in the ‘Sun Belt’ club, a group of six cities that saw the largest appreciation during the housing boom and are now seeing the biggest drops, Maitland said.”

“The lower end saw a larger run-up during the housing boom, reaching a peak of almost triple 2000 levels, according to the report. Now, lower-end homes are less than double what they were in 2000.”

“Despite the heavy price drops over the last six months, the typical San Diego County home is priced 84 percent higher than in 2000 and currently at early 2004 levels, according to the data.”

The Voice of San Diego. “Here’s the tier breakdown: Lowest tier (Homes priced lower than $392,045): Prices fell 28.9 percent year-over-year and 33.9 percent from this tier’s peak in June 2006.”

“Middle tier (Homes priced between $392,045 and $588,222): Prices fell 21.5 percent compared to March 2007 and 27.8 percent from this tier’s peak in November 2005.”

“Highest tier (Over $588,222): Prices fell 13.3 percent year-over-year and 18 percent from this tier’s peak in June 2006. The index measures price changes on the same houses over the years. It doesn’t track condos or new homes.”

The Union Tribune. “The housing slump is downsizing San Diego County’s home-building industry, as many of the large firms that helped create suburban communities scale back or close local operations. Some of those that leave probably won’t return.”

“‘Centex, KB Home, K. Hovnanian, William Lyon, Richmond American, Pulte - all have closed local offices, and pretty much every other builder has reduced staff,’ said real estate analyst Peter Dennehy. ‘They don’t need the same number of staff as when the market was rockin’ and rollin.’”

“‘The industry is experiencing a paradigm shift,’ said Tryon, CEO of the Building Industry Association of San Diego County. ‘It really means we are seeing a shift to a smaller market with less greenfield (open land) development, an environment where large-scale development is difficult to achieve. That means a different kind of product in many cases.’”

“‘Banks have taken flight and left our industry,’ said Michael D. Pattinson, president of Carlsbad-based Barratt American. ‘The economics of housing in San Diego and California no longer work. The houses now that are selling are the foreclosures that have been taken back. We are selling assets to survive and doing what we can to keep our businesses going.’”

“Tony Pauker, former regional president of the Orange County-based Olson Co., lost his job when the firm closed its office here in January. ‘We went from a peak of 55 employees down to 20 and then to zero,’ Pauker said.”

“He recalls seeing a decline in traffic at new-home communities during summer 2004. By the end of 2005, some local builders were shedding staff. ‘The downsizing started as a trickle and became a flood,’ Pauker said.”

The LA Daily News. “Foreclosures have already pushed record numbers of homeowners into apartments, leaving a trail of brown lawns, overgrown hedges and cracked paint in suburbs from Palmdale to Pacoima.”

“Now, homeowners associations are feeling the pain of the bursting housing bubble, dealing with a huge spike in delinquent monthly fee payments.”

“And as operating budgets fall into deficit, associations across the nation are trimming fewer lawns and cutting more spending. ‘It’s the most serious challenge the boards have faced in a decade,’ said Glennon Gray, owner of Santa Clarita-based Euclid Management, which oversees 250 homeowners associations throughout Southern California.”

“Russ Hoffman, CEO of Santa Clarita-based Valencia Management Group…manages 32 homeowner associations in Southern California, including Valencia Summit, Bridgeport and Creekside in Santa Clarita.”

“It’s the newer developments built in the last six to seven years that are taking the hardest hit, Hoffman said. ‘It’s a tough situation for a certain group of people,’ he said. ‘It is all based on the timing when the loans were taken out.’”

“All this financial turmoil means that associations won’t be able to put money into reserves for pricey projects such as redoing roofs and streets. Eventually that would likely mean increased monthly fees, special assessments or reduced services.”

“‘If it continues, it will have a dramatic effect on assessments,’ Euclid Management’s Gray said. ‘We have to adjust for our losses. We are used to everybody paying.’”

From The Sun. “Stumped by depressing sales numbers, the Inland Empire’s market for new homes is forcing certain builders to fast-track inventory straight to the auction block. Some are even doing it over the Internet to cut costs.”

“Developer Mark Gardner made the choice to send 25 of his never-lived-in homes to a virtual auction block. ‘We overbuilt for the current market conditions,’ said Gardner, who owns Redlands-based Gardner Construction.”

“Over the past decade, Gardner’s company has developed more than 600 homes across San Bernardino and Riverside counties. The last auction the company held was a ‘live auction’ in the mid-1990s, and he’s predicting he’ll have to hold more auctions in the future.”

“‘You’re going to find that builders will be looking at all avenues to get rid of their product,’ he said about the current real-estate market. ‘It’s trying to get the perception out to buyers that, ‘Hey, these are great deals.’”

“‘Our average builder auction has 30 to 40 homes, while a lender auction is 100, 200, or more,’ said Rhett Winchell, president of Beverly Hills-based Kennedy Wilson Auction & Sales Group. ‘You won’t see 80 homes at a builder auction. Offering 80 of the same thing at one time isn’t good.’”

The Press Enterprise. “Rialto has 778 bank-owned properties and another 970 in the pre-foreclosure stage. City leaders say that’s a recipe for suburban blight, and they hope to stem the tide.”

“Rialto is the latest Inland city to go after lenders and financial institutions as a tactic to force someone to be responsible for the upkeep of abandoned houses after distressed homeowners have packed up and moved away.”

“‘We probably started seeing a big spike in foreclosures starting about the third quarter of 2007,’ John Dutrey, the city’s housing program manager, said. ‘In Rialto, we had about 480 foreclosures in 2007. In 2008, the way things are going, we’re going to have over 1,000 foreclosures.’”

“The problem is pervasive, he said. ‘It’s happening in areas where new homes are being built. It’s happening in the older neighborhoods,’ Dutrey said. ‘It’s happening in the high-cost neighborhoods. It’s happening in the low-cost neighborhoods.’”

“In a written report to the City Council last month, Dutrey said 25 percent of Rialto’s vacant homes are poorly maintained.”

“‘The presence of vacant buildings … can lead to neighborhood decline, create attractive nuisances, contribute to lower property values and discourage buyers from purchasing properties adjacent to abandoned buildings,’ Dutrey said in his report. ‘Many of the homes are owned by lenders who fail to adequately maintain and secure these vacant buildings.’”

“‘Usually the foreclosure process takes about four of five months, from the time the notice is filed to the time the foreclosure sale takes place,’ Dutrey said.”

“Homeowners often move out before the sale.”

“‘The problem is: Who’s responsible for the house during this interim period?’ Dutrey said. ‘The homeowner is gone. You can’t find that person.’”

The Bakersfield Californian. “These days Louie Gregorio hears home hunters repeating the same question. ‘All of them go, ‘You’re going to show me foreclosures, right?’ said Gregorio, a broker and co-owner of Bakersfield Premier Realty.”

“Bank-owned and ’short sale’ properties account for roughly 50 percent of homes for sale on the Bakersfield MLS, according to the Bakersfield Association of Realtors.”

“Agent Victor Vazquez (estimated) foreclosures need cosmetic work about 75 percent of the time.”

“‘The bank hasn’t lived in the property,’ agent Jon Vaughn said. ‘So they’re not going to tell you, ‘Oh, we’ve got this problem with the air conditioner,’ because they don’t know there’s a problem with the air conditioner.’ A home inspection is critical, he said.”

“With foreclosures - where a previous owner was either unable or unwilling to make mortgage payments - minor fixes were sometimes deferred and allowed to morph into major problems, home inspector Butch Boynton said.”

“He’s discovered leaky plumbing that gave rise to mold. In a neighborhood with homes selling in the $400,000 range, Boynton came across a backyard concrete job that had sealed over the mechanism meant to drain moisture from stucco walls.”

“‘We’re seeing a lot of oddball things,’ Boynton said.”

“Some banks will respond to offers within two days, while others drag their feet, said agent Susan Ferguson.”

“A slow response might not be so bad today. In this market, no one should feel rushed, Vaughn said. ‘Stick the offers out there,’ Vaughn said. ‘Stick to your guns.’”

“Southwest Bakersfield’s new high school wasn’t supposed to go up in the middle of nowhere. But dead and delayed development means Independence High School towers over a knee-high skyline of mostly row crops and empty lots instead of suburban tracts that surround it on paper.”

“Like the Kern High School District’s other new site opening this summer - Mira Monte High School in southeast Bakersfield - Independence was created as the city’s housing market roared in 2004 and 2005.”

“Both schools…show Kern’s dramatic real estate boom and bust is affecting more than homeowners, sellers and buyers. Large public projects that require years of planning are also nudged by unpredictable ripples of the fallout.”

“When the district asked voters to approve a $219 million bond measure in November 2004, they pointed to maps with tens of thousands of new homes choking planners’ desks in city and county offices.”

“Overcrowded schools would be swamped with an unprecedented enrollment surge, figures at the time showed.”

“Scott, the district’s assistant business superintendent, said the current bust is much like one that hit Kern after a previous boom. ‘It looks an awful lot like what happened in ‘93-’94 in this community,’ Scott said, when a dramatic slowdown hit after a growth spurt.”

The LA Times. “Although Malibu Colony may have been where everybody knew his name, ‘Cheers’ star Ted Danson is moving on, having sold his Cape Cod-style house for an undisclosed price, according to area real estate agents. It most recently had been listed at $16.75 million. It was originally listed at $18.5 million.”

“So much for celebrity cachet. Even Hollywood types with homes for sale are feeling the market’s slowdown and lowering their asking prices.”

“Real-estate-savvy Frankie Muniz, the Emmy-nominated star of the hit TV series ‘Malcolm in the Middle,’ has relisted his five-bedroom, four-bathroom Hollywood Hills home for $3,695,000, down from $3,875,000 last fall. Muniz purchased it in January 2006 for about $3.5 million.”

“Angela Bassett and her husband reduced the asking price on their Hancock Park mansion from $5,999,000 to $4.6 million.”

“Norm Waitt Jr., co-founder of Gateway computers, is selling his Montecito mansion in a sealed-bid auction. The house, his ex-wife’s pet project, had been listed for more than a year.”

“He even dropped the price from $24.8 million to an eventual $19.7 million, based on his agent’s advice that ‘below $20 million’ would attract a buyer. It didn’t.”

“A Beverly Hills house that actress Sharon Stone bought for just under $11 million in April 2006 and then promptly relisted at $12.5 million — to no takers — is now back on the market at $10 million.”

“Stone never moved in, and the 1991 gated estate, with seven bedrooms and eight bathrooms, was completely refurbished in 2004. The actress lives in another mansion not far from this one. So why’d she buy this house? Impulse, pure and simple, said the listing agent back in 2006.”

“And now, not unlike that Lycra minidress you bought because it just looked so dang adorable on the Size 2 mannequin, she probably wishes there were a more liberal return policy when it comes to Beverly Hills mansions.”

Some housing bubble news from Wall Street and Washington. Reuters, “Prices of single-family homes plunged a record 14.1 percent in the first quarter from a year earlier, marking a pace five times faster than the last housing recession, the Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas (showed). Housing markets that grew the most during the housing boom, such as Las Vegas, Nevada and Miami, Florida, are leading the decline, S&P said.”

“S&P said its composite index of 10 metropolitan areas declined 2.4 percent in March, for a record 15.3 percent year-over-year drop.”

“U.S. sales of newly constructed single-family homes rose 3.3 percent in April to a 526,000 annual rate but they were down 42 percent from a year ago, which was the largest year-over-year drop in nearly 27 years, Commerce Department data on Tuesday showed.”

The Boston Globe. “The median price of a single-family home in Massachusetts was $305,000 last month, down 12 percent from $346,750 in April 2007, said the Warren Group. That drop was the steepest decline since the Warren Group began recording prices in 1987, the firm said.”

“The number of single-family homes sold in the state during April declined 12 percent to 3,215, from 3,654 a year ago, the Warren Group said.”

“‘In the early 1990s - during the last big housing slump - prices fell in 42 of 48 months,’ CEO Timothy Warren Jr. said in a statement. ‘Since March 2006, when prices first started to fall in this current slump, there have been price declines in 20 of the 26 months. But the early ’90s price declines weren’t as dramatic as the drops we’re seeing now.’”

The Associated Press. “Federally regulated savings and loans set aside a record $7.6 billion to cover losses on problem loans in the first quarter as they felt the brunt of the housing market’s downturn…the Office of Thrift Supervision said Tuesday.”

“Thrifts set aside $5.5 billion for loan losses in the previous quarter and $1.2 billion in the first quarter of 2007.”

“The agency regulates major lenders, including Washington Mutual Inc., Sovereign Bancorp Inc. and Countrywide Bank, owned by Countrywide Financial Corp.”

“The amount set aside for problem loans soared in the first quarter to more than 2 percent of average assets, about six times from 0.33 percent a year earlier. Charge-offs, or loans written off as not being repaid, rose to 0.93 percent of average assets from 0.28 percent a year earlier.”

“Troubled assets, loans that are 90 or more days past due, continued to soar, rising to $31.1 billion in the first quarter, up from $11.9 billion in the same quarter last year. As a percentage of total assets, troubled assets rose to the highest level since the early 1990s.”

The Buffalo News. “M&T Bank Corp. said it expects to lose more money on its investment in a Florida-based commercial mortgage lender, and is closely monitoring the value of its securities portfolio to see if paper losses of more than $100 million turn real.”

“In its quarterly filing with the Securities and Exchange Commission, the Buffalo-based banking company said it ‘anticipates operating losses’ at Bayview Lending Group LLC in the second quarter, as the Miami-based lender terminates leases and pays severance.”

“Also in the filing, M&T disclosed that it had recorded $194 million in ‘net unrealized losses’ in the first quarter on its investment securities.”

“In the fourth quarter, M&T recorded a $127 million hit to earnings after reducing the value of three mortgage-backed investments by 96 percent, down to just $4.4 million. At that time, the bank had concluded that the damage to those investments’ value was likely to be permanent, prompting it to take the charge.”

“In contrast, as of March 31, executives still believed M&T would receive all the principal and interest payments from the other mortgage investments, and were not ready to declare the losses permament.”

“‘The ability to reasonably determine the fair value of certain assets in times like these is, at best, severely limited, because those that previously made markets in these assets are nowhere to be found,’ said spokesman Chet Bridger.”

From USA Today. “A modest housing tract, set amid pecan trees here in suburban Phoenix, faces big problems: About 40% of its homeowners aren’t paying their association fees. It’s a scenario being repeated across the country.”

“‘We’re looking at a very deep hole,’ says Kent Miller, president of the Los Arbolitos Homeowners Association in Avondale, Arizona. ‘I don’t know how we’re going to get out of it. We’ve put liens on all the (delinquent) properties, but it doesn’t do any good.’”

“‘It’s happening all over,’ says Frank Rathbun, a spokesman for the Virginia-based Community Associations Institute. ‘It’s a national problem.’”

“In Phoenix, Shawn Stone, a lawyer for homeowner associations and property managers, says the problem is most acute at new developments. Some homeowner boards, Stone says, have been able to collect assessments from only half their members. ‘It’s not going to be too long before we’ll see situations where associations are going bankrupt.’”

“In Florida, homeowner groups surveyed by the Community Association Leadership Lobby complained that even some banks are failing to pay association fees after foreclosing on homes.”

“‘The whole issue of foreclosures is dire and getting worse,’ says David Muller, a Sarasota lawyer who co-directed the survey. ‘It’s causing the rest of the owners, who aren’t delinquent, to pay even more money.’”

“The ’snowball effect’ began, Muller says, as buyers, many of them speculative investors, started snapping up homes using subprime loans. As housing values plunged and mortgage bills ballooned, some buyers owed more on their mortgages than the homes were worth. So they stopped paying community association fees, then walked away.”

“‘At one place in Florida we had seven (foreclosed) homes on one street,’ says Steven Brumfield, VP of operations at Wentworth Property Management, which serves 950 community associations in more than a dozen states. ‘The association could not even afford to cut the grass, there were so many of them. They ended up with a street full of homes that looked horrible and wouldn’t sell.’”

“Eric Glazer, a property management lawyer in Florida, says he’s had to deal with some banks that failed to pay association dues after taking over properties through foreclosure. ‘Just this morning, we found ourselves in court, and we got a default judgment against a bank,’ he said last week. ‘Words can’t describe how bad the problem is here.’”

“Karen Conlon, president of the California Association of Community Managers, estimates that her state’s delinquency rate soared 1,000% over the past year. Fees at her condo association were raised 18.5% to account for a shortfall.

“‘We’re seeing cutbacks,’ she says. ‘Instead of having flowers planted six times a year, it may be just two or three times.’”

The Washington Post. “For a while, the two-story house with the burgundy shutters in Manassas appeared to be growing wheat in the yard. In one especially thick stand of the suburban savannah was visible a hollowed-out den, where a large mammal was apparently bedding down for the night.”

“Carl Berry lives two doors down from the house, which he said was abandoned about six weeks ago by a family that used to keep the property tidy. Now there’s a real estate agent’s lockbox on the door, rain-sopped newspapers in the driveway and, until repeated complaints brought it down, uncut grass so unruly it was attracting other occupants.”

“‘I’d never seen a rat in this neighborhood until now, and I’ve lived here since 1988,’ he said. He and his wife have seen snakes in the reedy thicket, too.”

“No county in the region has been hit harder by the foreclosure wave than Prince William, where there are nearly 7,000 empty houses, said neighborhood services coordinator Michelle Casciato. Given recent census estimates, that means about one in 20 houses in the county are unoccupied.”

“And new residents aren’t filling up the empty houses fast enough. Although home sales in the county increased 14 percent from January through April compared with the same period last year, foreclosures in the county have gone up 211 percent in that time.”

“There were 645 foreclosures last month in Prince William, Manassas and Manassas Park, court records show.”

“‘We’re hopeful that the real estate community and banking community will do what they can with the property entrusted in their care,’ Casciato said. ‘For the ones where that is not the case, we’re calling on the community to help us locate those.’”

“These days, Manassas resident Jennifer Hansbrough sees the overgrown lawns in her neighborhood as a depressing economic barometer. It’s bad enough that she is seeing more ticks and mosquitoes this year, but the long grass also signifies the $100,000 drop she has seen in her home’s value.”

“‘It reminds me the economy is crappy,’ she said.”

National Mortgage News. “INNOCENT VICTIMS OF A BAD MARKET: (Edited, in part, by me) ‘What am I to do? Last week I had a contract on my house for $316,500 with a qualified buyer. The appraisal came in $36,500 less than the agreed upon sales price. So the sale fell through. I live in Lake County, Ill., just north of Chicago.’”

“‘There are a few homes in my neighborhood for sale but no foreclosures that I know of. Because of all the hype of doom and gloom buyers are sometimes making low offers and some sellers are grabbing on like it’s a lifesaver. A little over six months ago my neighbor took $287K for their home. It was the first offer after only three months on the market.’”

“‘I have the same floor plan but theirs required painting of the interior and new carpet and it didn’t have the upgrades that mine has. That was the main comp that was used even though they also showed others in the same neighborhood over $300K. Is my only alternative to come down to the $280K appraised value, hope for a cash buyer, or not sell?’”

“‘My buyer didn’t have cash to pay the difference. They were getting a 97% FHA loan. The value of something is the price an educated willing buyer is willing to pay. The lenders are going to drive the prices down even further because of a few scared or desperate sellers. I can only imagine what foreclosures do to a neighborhood when the lenders agree to fire sales to investors.’ — Debbie.”

“In last week’s column I mentioned what some former mortgage executives are doing to make a living. Jack Martin, a former wholesale official, writes, ‘I have a very large database of past and present broker clients. About 80% to 90% of my past customers have closed shop. That is, the majority of offices I have called on in Orange County are no longer in business.’”

“‘What I think has happened is they haven’t really gone out of business, but are now working out of their houses (low overhead)…I know of one LO who is selling Toyotas and making a living again. I tried selling Infiniti’s but got really bored due to little or no customer traffic. The recession has affected car purchases.’”

The Morning Call. “There is no doubt that the rules have changed for buying and selling a house in this market. Most importantly, sellers need to price their houses aggressively to compete with comparable homes. And buyers need to make sure their financial ‘house’ is in order.”

“For almost 30 years, Realtor Joyce Carlos has been hanging up signs, holding open houses and selling real estate. The hard truth for sellers is that what they think their house is worth has no meaning to buyers. ‘The buyer looks at it from a different perspective – its current market value,’ Carlos warned.”

“‘You have to look at [the house] as someone else is looking at it,’ agreed Joyce Epstein of Joyce Epstein Realty in Manchester. ‘It’s not the place where you brought up your children. It’s a home for someone else. It’s a commodity.’”

“A sore spot for longtime homeowners is dealing with what they may consider insulting low-ball offers. Epstein recalled one prospective buyer who offered $98,000 below the listing price. ‘That’s the worst one I’ve got,’ she said.”

“But even low-ball offers can be a starting point in this market.”

“‘I had people come in at $70,000 below and we were able to negotiate it up and have a meeting of the minds at $29,000 below,’ she said.”

“To avoid excessively low offers, Epstein advises her clients to price their houses realistically. ‘There’s a big difference between what something’s worth and what someone will pay,’ she said. ‘The truth of the matter is the buyer is not going to pay you what you were going to get in 2004.’”

“News reports about the tough shape of the California and Florida real estate markets don’t apply to Connecticut, said Realtor Elizabeth Banco, in Simsbury. ‘But homebuyers can’t help but be affected by what they hear on the news or read all time. It starts to sink in subconsciously.’”

“Yet it’s true that today’s market is slower, with many buyers taking their time, Realtors said.”

“‘People are thinking prices will drop so they will get better deals,’ Banco said. ‘But if that happens, maybe interest rates go up and it will be a wash. Who knows what will happen? Most of us try to discourage that way of thinking.’”

The Bradenton Herald reports from Florida. “Christine Walker, some might say, should have known better. As a mortgage branch manager and then an account executive for wholesale mortgages for Bank of America, Walker had intimate knowledge of the mortgage process. But in 2005, when homes sales were so hot in Florida there were often bidding wars, Walker and her husband, John, thought they knew a good investment bet when they saw one.”

“When a friend backed out of a contract for a new four-bedroom, three-bath home to be built in Twin Rivers in Parrish, the Walkers decided to take it over. ‘It seemed like it was no risk at that time,’ she said. ‘I was trying to get ahead by putting my money in a sure thing.’”

“The Walkers, who had near perfect credit, even put 10 percent down on the $435,000 home. But they still ended up with a 8.45 percent subprime interest rate.”

“‘But I wasn’t worried because I knew we were going to turn around and sell it when it was finished,’ Walker said. They also owned their residence in Twin Rivers and another home out-of-state.”

“But when the home was finished in July 2006, the housing market had started to fall and home sales were stagnant. They put the home on the market and priced it in the low $500,000s, which was ‘on the low side in the neighborhood,’ she said.

“The couple still thought they had a chance to make some money on their investment. ‘It wasn’t so shockingly clear that it was going to be a total disaster,’ she said. ‘But then, every month things got worse and worse.’”

‘In November, they rented the home for $1,650, still leaving them to make up the difference in their $3,000-plus monthly mortgage payment. It was a rent-to-own situation, Walker said, but when the renter moved out in July 2007, the couple knew they were in a losing battle.”

“‘We looked at each other and said, ‘we can’t do this any more,’ she said. ‘We had spent every piece of money cash flow to not lose our credit.’”

“In October 2007, Walker lost her job when Bank of America did away with the commercial division she was working in. The couple lost all three houses through foreclosure and filed for bankruptcy. Today, they and their three children rent a house in their old neighborhood.”

“She gets tired of seeing everyone pointing the finger at the next guy and not taking responsibility for their actions ‘I take total responsibility for what happened,’ she said. ‘It was a risk. But I’ve moved on. It was much more stressful thinking about losing everything than accepting and moving on.’”

“And she won’t be buying real estate as an investment anytime soon. ‘Investing in real estate is for the rich,’ Walker said.”

“Real estate agent Joseph Kandel made lots of money buying and reselling residential properties in Southwest and Central Florida before and during the 2004-06 housing boom. During one 18-month period, he said, he made $440,000 flipping five properties.”

“He used those proceeds to qualify for subprime, adjustable-rate loans to buy more houses. Then the sizzling local housing market fizzled, much to his surprise. ‘I know nothing lasts forever, but I didn’t see it coming,’ he said. ‘All I knew was I was making cash and making it big.’”

“His income, which had been in six figures, dropped to $17,000 last year - far less than his mortgage payments, which totaled $19,600 a month.”

“He managed to sell one property in Orlando for more than what he owed, but lost a Sarasota condominium to foreclosure earlier this month. He’s facing the same prospect on three Manatee County properties he still owns - the house and a condominium in Lakewood Ranch, and a house in University Park.”

“Kandel’s now hoping to sell them through short sales. But none have sold so far, and Kandel blames lenders instead of himself.”

“‘They lost $12,500 because of their stupidity,’ Kandel said. ‘That’s the problem with lenders right now: They don’t have an exit strategy.’”

“Kandel expects to lose his remaining properties to foreclosure later this year but said he is losing little sleep over it. ‘Why? My credit’s shot already,’ he said.”

“Despite the damage, he still plans to get back into investing in real estate.”

“Subprime lenders targeted Manatee County blacks, Hispanics and minority neighborhoods during the housing boom. Mario Garcia, a Mexican national…was making $12.50 an hour at a Bradenton lumber company when he bought a Ruskin mobile home for $279,000 in 2005.”

“Washington Mutual’s subprime arm, Long Beach Mortgage, gave him two loans, one for 80 percent of the purchase price and the other for 20 percent. To qualify Garcia for the loans, the mortgage broker listed his annual income at $60,000.”

“Garcia said when he asked about the figures at closing, he was told not to worry. ‘I said, ‘I can’t read it,’ he said through an interpreter. ‘And they said everything was fine.’”

“It was a costly mistake. With the loans’ high interest rates - 10.269 and 11.538 percent, respectively - he would have paid more than $1 million through the 30-year life of the loans.”

“He lasted just five months. With his income nowhere near the $2,350 monthly mortgage, he exhausted his savings before moving out.”

“Mike Rahn, production manager with CNL Bank in Sarasota, blames Wall Street and the way rating agencies.”

“‘If Wall Street and the bond-rating companies had not rated this subprime paper as triple A-type bonds, no one would have bought it, so there would have never been a market for it,’ Rahn says. ‘I lay a lot of this blame at the foot of Standard & Poor’s, Fitch and Moody’s. These ratings agencies should have never been allowed to rate this kind of paper. But again, they’re in bed with the investment banks.’”

“More than 4,000 foreclosure suits have been filed in Manatee County since January 2007, according to court records. That has left the county saddled with thousands of vacant homes - many neglected in the absence of their former owners.”

“Soaring foreclosures, coupled with the real estate downturn, means even ordinary homeowners trying to sell their properties are taking a hit.”

“‘Even though it’s not a foreclosure sale, it’s a distressed market,’ said said Bill Kersey, director of appraisal services for Manatee County. ‘If you want to sell it, you’re going to get a lot less for it than you did two years ago. And what this does is drive all the values in the neighborhood down. I have neighborhoods that are down as much as 30 percent, 32 percent.’”

“Gemma Henderson owns two homes in Covered Bridge Estates in Ellenton - one she lives in, the other she rents out. Her community ranks No. 4 in terms of foreclosure suits in Manatee County, with 31 actions filed during 2007. Nearly half of those - 13 homes - have already been foreclosed on.”

“Some investors looking to avoid foreclosure have turned to leasing their properties, and many of the same maintenance issues plague the rental homes. ‘People are desperate to have people come in and rent the houses they are trying to sell,’ Henderson said. ‘It’s put a big damper on where we are.’”

“‘Even the contractors have crashed so they can’t even finish what they started,’ Henderson said. ‘I think everybody is fighting to sell their home and it’s driving down everyone’s property values. They knew this day would come, but they were living in the moment like any other business would have.’”

The Herald Tribune. “Jeffrey J. Lauro was another of those energetic builder-developer deal makers who appeared to have the knack for making millions during Southwest Florida’s real estate boom. But when the real estate market soured, Lauro not only defaulted on millions of dollars in loans to banks and investors, but he has been charged by the Charlotte County Sheriff’s Office with stealing nearly $200,000 through a construction loan scheme.”

“‘He came to me to buy building lots,’ said Tom Welchman, a Port Charlotte real estate agent. ‘I loaned him $280,000. He bought and sold the lots within 40 days and never paid me back.’”

“‘He owes me about $3 million from putting together projects for him in Deep Creek and Burnt Store Lakes,’ said John Kingston, a Charlotte county mortgage broker and landowner. ‘He never paid and now the land is tied up in bankruptcy.’”

“Messages left for Lauro at a family residence in California and with his criminal attorney, Jason Goldman, were not returned.”

“‘I’m sure there are hundreds of real estate investors, as well as other local professionals dependent on the real estate market, that have had their livelihoods and personal finances turned upside down by the horrible turn of events due to volatile local real estate values,’ Goldman said.”

The St Petersburg Times. “Millions of dollars in debt and sued by dozens of disgruntled customers, the developers of the Clearwater Cay Club are liquidating some of their property to try to stay afloat.”

“During the real estate boom, Cay Club partners Dave Clark and Dave Schwarz made millions selling condo-hotel units. In Clearwater, the pair promised to convert apartment buildings into luxury condominiums on Old Tampa Bay. Investors from across the country sued, saying Cay Club violated securities laws by luring them into contracts with promises of quick appreciation and easy rental income.”

“Instead, many units are worth only half of what buyers paid for them. Cay Club also reneged on promises to rebate part of the purchase price through a ‘lease back’ program that put units in a rental pool.”

“At the auction, 10 of the condos and 10 of the boat slips will go to the highest bidder without a reserve price.”

The Orlando Sentinel. “Mitchell Harlee recently became a first-time homeowner in Orange County, fulfilling a lifelong dream despite some past bill-payment problems. ‘I had credit issues,’ he said.”

“A single father raising two daughters, Harlee improved his credit score by working closely with an east Orlando real-estate agent, Michele Guzman, who specializes in first-time buyers. Harlee attended Guzman’s free seminars and followed her advice for about a year — and finally was able to buy a spacious, four-bedroom, two-bath home in Pine Hills for $150,000.”

“He got a 30-year, fixed-rate mortgage with an interest rate of 5.9 percent. Better still, ‘I didn’t have to put a penny down,” he said, because he qualified for an Orange County down-payment-assistance program that Guzman told him about. ‘I couldn’t have done it without the help,’ Harlee said.”

“Single-family home construction in the Orlando area has stopped its downward spiral, according to a first-quarter survey by Charles Wayne Consulting Inc. of Maitland.”

“But the reason for that, said Jim Lewis, president of the real-estate research and consulting company, is because ‘they can’t go much lower.’”

“Only 916 new homes were started in subdivisions in the Orange, Seminole, Osceola, Lake and northeast Polk area during the three months that ended March 31.”

“Lewis found that only about 20 subdivisions out of the 376 ‘active’ subdivisions in the region accounted for more than 200 of the housing starts. That means, he said, that most of the subdivisions in Central Florida ‘weren’t [active] at all,’ with builders sitting on a combined 24,500 vacant lots.”

“And those are only the lots that are ‘fully developed and immediately buildable,’ Lewis said — his inventory count doesn’t include the thousands of other, unimproved lots in future development plans.”

The Palm Beach Post. “With no signs of a real-estate rebound in sight, a slew of buyers are trying to get out of their luxury condo contracts at Boca Raton-based Altman Development Corp.’s waterfront project in Stuart.”

“They’re taking the approach du jour when it comes to backing out of condo contracts around Florida: claiming Altman subsidiary Harborage Cottages-Stuart LLLP violated the Interstate Land Sales Full Disclosure Act.”

“The act, a 40-year-old law designed to protect land buyers or renters against fraud, requires, among other things, that developers of subdivisions of 100 or more nonexempt lots provide each buyer with a detailed property report.”

“The Harborage buyers say their contracts are null because they never received such a report.”

“In one of the lawsuits, filed May 15, Palm City residents R. Scott and Patricia Stone also claim the quality of construction on their $430,000 Harborage condo was not as good as the developer promised.”

“But Altman denies construction was sub-par and claims it is exempt from providing the property reports. The buyers are just trying to wriggle out of the contracts because real estate values have dropped, said Tony DiTocco, financial and legal consultant to Altman.”

“‘It’s all economic,’ he said. ‘It’s all a function of the marketplace.’”

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