The Housing Bubble

The LA Times reports from California. “Buyers last week of a Spanish-style, 3,220-square-foot house on a cul-de-sac here got a bargain: $1 million for a hilltop home in Northern California’s wine country, with views to San Francisco in the distance. Two years ago, the same property sold for $1.4 million. But after the lender foreclosed on the property, the home was deeply discounted.”

“Real estate agent Michael Snider, who handled the sale, thinks more such sales are on the way. ‘It’s just beginning,’ Snider said.”

“Napa County saw 112 homes repossessed in the first quarter, up from 23 a year earlier, according to DataQuick. Most of those foreclosures have been in lower-priced areas, where new-home construction and sub-prime lending were widespread during the housing boom. But the top end is now starting to tumble.”

“The house Snider just sold is next to two other distressed properties. One property for sale a few doors down was abandoned by its developer before construction was complete.”

“Elsewhere in Napa, a 5,676-square-foot Mediterranean villa on a 35-acre lot was recently foreclosed on. It’s now on the market for $5.255 million.”

“Snider said he saw some of his well-to-do clients running out of time. ‘They’re just pushing aside their mortgage payments, holding default off,’ he said, even using credit cards to make mortgage payments.”

The Sacramento Bee. “Pressured by a faltering economy and often burdened by loans they took out during the housing boom, more Sacramento-area homeowners are looking to reverse mortgages for an escape route. But many are finding the road blocked by the falling values of their homes.”

“‘A lot of them aren’t qualifying now. With the falling values they don’t have as much equity,’ said Sylvia Williams, a Elk Grove loan specialist.”

“Loan officials say that reverse mortgages, which were developed and marketed 20 years ago as a tool to fund vacations or expensive leisure activities, are increasingly serving something more simple - basic living expenses.”

“‘We see more and more need lately,’ said Rich Young, executive VP at Sacramento-based California Reverse Mortgage Co.”

“Young said many older homeowners refinanced during the boom years, but often chose risky loans with lower payment plans that increased dramatically over time. Faced now with higher monthly payments, he said, many older homeowners are seeking a way to pay off their old loan.”

“Greg Hayes,VP for marketing with Sacramento-based Liberty Reverse Mortgage, one of the nation’s biggest reverse mortgage lenders, said those borrowers now dominate.”

“‘The No. 1 thing people are doing with reverses is paying off existing mortgage debt,’ he said.”

“For the housing market - and for many seeking reverse mortgages - the declines are another example of limited loan options at the moment when many people most need them.”

“‘We just didn’t have enough equity in the house,” said Leroy Martin, 83, of Stockton, who was turned down for a reverse mortgage earlier this year.”

“Martin, and his wife hoped to escape a risky loan they used to refinance their home. Their monthly payment was within months of doubling. Though Williams, the Elk Grove loan specialist, couldn’t get them a reverse mortgage, she finally helped save the couple from foreclosure by persuading their lender to modify the loan for five years.”

“‘We just bought them time,’ Williams said.”

The LA Daily News. “Foreclosures hit a record pace in April across the San Fernando Valley, soaring 201 percent from a year earlier and pounding down home prices. During April, 608 families lost a home to foreclosure, up from 202 a year earlier and 511 in March, according to the San Fernando Valley Economic Research Center.”

“Foreclosures are now on pace to break the quarterly record of 1,854 set in the third quarter of 1996 - the most recent time the housing market was in a slump, said Daniel Blake, director of the center at California State University, Northridge.”

“‘The signs are, it’s going to go up,’ Blake said of the foreclosure total. ‘We’re pushing on that record number.’”

“The glut of homes on the market pushed the price of a median single-family home down to $505,000, a loss of 21 percent, or $125,000, from the year-earlier price, the report said.”

“With notices of default - the first step in the foreclosure process - increasing from 663 in April 2007 to 1,560 a year later, there’s no indication the housing slump will end anytime soon, the center said.”

“‘There is no indication we’re through the worst of it, especially with (default notices) rising,’ said Andrew LaPage, an analyst at DataQuick.”

“During April, 964 new and previously owned houses and condos were sold, down 29 percent from a year earlier. It’s the lowest sales total for an April since DataQuick began tracking the market in 1988, Blake said.”

From Desert Television. “A buyer’s market has builders offering free incentives and special deals while many homeowners hold off on making a sale and hold on to their most valuable asset.”

“‘It’s terrible,’ said longtime Palm Springs resident Doreen Prudeaux who has had her house on the market for over a year. ‘You just have to look beyond the money.’”

The Daily Bulletin. “PFF Bancorp, the financial parent of PFF Bank & Trust, said in a statement Monday that it’s looking for cash to ’strengthen the company’s capital levels.’ The Rancho Cucamonga-based financial institution has been getting hammered with losses because it loaned money to housing developers who can’t repay what they borrowed.”

“‘The odds are probably good that they could raise capital by that date, but there’s never-ending uncertainty,’ said Joseph Gladue, a banking analyst with Los Angeles-based B. Riley & Company, Inc. ‘Somebody who was going to provide capital could change their mind. There’s always that possibility.’”

The North County Times. “It just became slightly more difficult for home buyers to find the perfect house because of technological glitches and a learning curve associated with a new listing service system, real estate agents said this week. The listing service, known as Sandicor, launched an update that agents said is plagued with bugs and takes time to learn.”

“‘The productivity drain is immense,’ said Dennis Smith, a real estate agent in Carlsbad. ‘It’s costing the Realtors and the real estate operations a lot of time and money to transfer over. That’s not going to translate into costs for the consumer, though. We can’t add a time surcharge like the airlines do, so we’re going to have to eat it.’”

“‘Guys like Ray Ewing at Sandicor don’t give a hoot about what is wanted and needed by the agents,’ said Jim Klinge, a real estate agent in Carlsbad. ‘I love change when the change is positive. The only positive that’ll come out of this boondoggle is that it’ll drive out a lot of Realtors who are just hanging on.’”

The Ventura County Star. “Almost two years after giving an affordable housing developer $400,000, the city of Santa Paula wants it back. ‘I see it as a loss of interest,’ said Councilmen Ray Luna. ‘The project did not get built…the money should be returned and Cabrillo should reapply.’”

The Modesto Bee. “Amid a tottering economy, rising inflation, increasing unemployment and a housing market meltdown, waiters, beauticians and pet groomers report that customers are growing tightfisted.”

“It is hard to determine just how much people are cutting back on tipping, but the stakes are huge.”

“Groomers at Sparky’s Pet Salon in Los Angeles also are seeing tips fall. Last year, about half of the people who brought their dogs to Sparky’s gave the groomers tips. But as gas and food prices have surged over the past six months, that’s dropped to about 30 percent, said Luigi Pruve, a groomer and manager at Sparky’s.”

“‘People who used to give us $10 give us $5. People who used to give us $5 give us just $2 or $3 or maybe nothing. We don’t ask why,’ Pruve said. ‘There’s not much we can do.’”

From Pacific Coast Business. “While this spring’s federal economic stimulus package is expected to help the tri-county economy, more needs to be done ‘to stop the bleeding’ caused by the mortgage crisis, said Rep. Lois Capps, D-Santa Barbara.”

“‘We have to get the families back on track,’ Capps said in defense of HR3915. ‘Some are just walking away from their homes in Santa Maria because they can’t pay the mortgage.’”

“While Capps sees foreclosure relief as key to prevent the already troubled economy from worsening, she said, ’some accountability is needed. If the [mortgage] industry isn’t going to control itself, then maybe we should … maybe with the [real estate] associations, too.’”

“‘We’ve had seven years with no oversight in the financial world,’ Capps said. ‘We heard that some [lenders] forgot how to do loan documents.’”

The Final Call. “More than 100 people filled the Inglewood High School auditorium in mid-May, hoping to leave Congresswoman Maxine Waters’ mortgage foreclosure town hall meeting with real plans to help them save their homes, or at least, with a better understanding of the foreclosure crisis.”

“‘A lot of people are suffering alone, not telling anybody what’s happening, and they’re just walking away from their homes. We’re trying to get them not to do that and to call us because when the community starts to recognize that there’s a scheme going on, mortgage brokers in the neighborhood trying to get people to refinance and sign, the whole community can come together behind that and put some of these people in jail,’ Rep. Waters told the Final Call.”

“In her 35th Congressional District, which includes South Los Angeles and Inglewood, there are 640 properties in pre-foreclosure, 301 in the auction process and 581 properties that are owned by the bank. In Inglewood alone there are 335 properties in some stage of the foreclosure process and worth over $95 million, Rep. Waters said.”

“‘These bills are forcing the Congress to have to deal with this problem … we’re trying to teach them that many people who got into these loans didn’t simply make bad decisions. They were tricked into these loans!’ the outspoken congresswoman declared.”

“‘Probably the most striking aspect of this in California is that a similar cycle occurred a little over a decade ago, and although certainly some people saw the signs of this one coming, many people disregarded the red flags in favor of believing that the housing prices would continue to rise in perpetuity even though those housing prices were becoming (too high) for most people,’ said Daren Blomquist, RealtyTrac Marketing communications manager.”

From The Hill. “Rep. Laura Richardson could face fines for leaving a heavily indebted mortgage off her financial disclosure statement, according to campaign finance experts.”

“A review of Richardson’s 2007 financial disclosure shows that she failed to report her Sacramento home mortgage as a liability even though she owed $40,000 more than she paid for the home, which was purchased in January of that year.”

“By the end of 2007, Richardson had accumulated $575,000 in total debt after failing to make payments on her original $535,000 mortgage, according to Sacramento County records.”

“‘On a plain reading of the law, it’s not clear why this mortgage would not be included on her financial disclosure statement, given the situation,’ said Meredith McGehee, the Campaign Legal Center’s policy director.”

“Lawrence Noble, former general counsel for the Federal Election Commission and a campaign finance, ethics and lobbying expert, agreed.”

“‘That is what the rule says,’ Noble said. ‘The reality is that at the end of the year, if she was indebted for more than what she paid for the house, then she was required to report it.’”

“The home went into foreclosure and was sold at auction last month. Richardson is disputing the sale.”

“Her office did not return repeated calls seeking comment for this story. It also has not responded to questions about how Richardson was able to loan her congressional campaign $77,500 while continuing to default on several properties.”

“Additional reports indicated Richardson has a long history of mortgage defaults that also covers homes in San Pedro and Long Beach. Richardson’s own financial statement, however, showed no indication that anything was amiss.”

“Under Schedule III of her 2007 Financial Disclosure Statement, filed on Feb. 22 of this year, the freshman lawmaker listed her liabilities as simply ‘N/A.’”

“Yet throughout 2007, as her Sacramento home was going from newly purchased to foreclosed on, Richardson also defaulted on her Long Beach home a third and again a fourth time, when she fell $15,101 behind on her payments.”

“In September of that year, Richardson also let her San Pedro home slip into default when she fell $12,410 behind on her payments.”

“In January 2008 Richardson defaulted on the San Pedro home a second time, and in April - with Richardson owing $367,436 on an original loan of $359,000 - Wells Fargo Bank issued a notice of trustee sale of the home. Records indicate that the home is still scheduled to be sold at a July 14 auction.”

“Richardson was able to rescind both of the default notices on her Long Beach home after catching up on her payments, which she did first in March and then again in October 2007.”

“Richardson’s fourth default notice, for $15,101, on her Long Beach home came in October 2007 - the same month she again caught up on her payments as well as repaid herself $8,000 from her campaign, her FEC records show.”

“Noble said that the entities that monitor financial disclosure statements - the House ethics committee and the Department of Justice - will likely issue a warning to Richardson to amend her reports.”

“‘In terms of what they would ultimately do about it, I think the question would be: Was this an attempt to cover up anything, or was it a mistake?’ Noble said.”

“‘Obviously this raises questions about disclosure and more information, I think, is needed to ensure that she has, indeed, abided by the statutory requirements,’ McGehee said. ‘The purpose of the financial disclosure is, first and foremost, to reveal conflicts of interest or potential conflicts of interest … and to ensure that if questions come up about positions, votes, other actions they take as a federal official, that there is transparency.’”

“Although Richardson missed the vote on the housing bill that passed the House in early May, she has said she only did so in the wake of her father’s sudden death.”

“Richardson last fall voted to help pass the Mortgage Forgiveness Debt Relief Act, which prevents the federal government from charging income tax on debt forgiven as a consequence of foreclosure.”

“Richardson told the Long Beach Report on May 24 that she thinks people ‘expect me to take what I’ve learned, what I see, not only for myself but what I see that they’re doing, and figure out how to fix it, and that’s what I intend upon doing.’”

“Over the weekend, two of Richardson’s opponents seized on the issue. Peter Mathews accused her of ‘a pattern of financial irresponsibility’ and wondered ‘how she can be responsible for a federal budget when she can’t balance [her] own budget,’ while Lee Davis said she was a ‘national embarrassment’ who has lost credibility.”

Some housing bubble news from Wall Street, Washington and the world. AP, “Red Bank, N.J.-based Hovnanian posted a fiscal second-quarter loss of $340.7 million. That compared with a loss of about $30.7 million in the same period a year earlier. Quarterly revenue fell 30 percent to $776 million from $1.1 billion in the same period last year. Hovnanian said its net contracts for the second quarter, excluding joint ventures, declined 29 percent.”

“Some homebuilders are looking to Congress to help ease the housing doldrums. In a conference call with analysts, Toll Brothers CEO Robert Toll called on Congress to give would-be homebuyers a tax incentive to buy a new home, saying that should be a higher priority than addressing problem mortgages that are leading to rising foreclosures.”

“Chad Dreier, CEO of homebuilder Ryland Group Inc., is also looking for Congress to dole out some relief to the homebuilding industry. Believe me, we need some tail winds,’ Dreier said.”

“Asked when new home sales would bottom out, Dreier responded: ‘I don’t have a clue.’”

“The CEO of Toll Brothers Inc., the nation’s largest luxury-home builder, said Wednesday the housing industry is in a ‘depression’ and any recovery could be two or three years away.”

“In candid remarks at the JPMorgan Basics & Industrials Conference a day after reporting a second-quarter loss, Robert Toll said he’s not ready to call a bottom yet since the housing market could still get worse. ‘Can the market go down another 10 or 20 percent? Sure,’ said Toll.”

The Philly Burbs. “Toll said Congress should ‘jump-start demand’ by offering temporary tax incentives for homebuyers. …With a little motivation, the new-home market could turn around.’”

“Toll said Congress should concentrate on driving up the demand for — and prices of — homes, rather than shoring up people’s mortgages.”

“‘Going about it by trying to give money to [the Federal Housing Administration], we’re attacking it backwards,’ he said. ‘To try to attack the credit and mortgage problem first is the same as trying to get rid of strep throat with lozenges as opposed to antibiotics. The problem is the down price in homes. If home prices go down, it doesn’t matter if you’ve given the guy a new mortgage.’”

The St Louis Post Dispatch. “It took decades for Taylor-Morley Homes Inc. to become a perennial top 10 builder in the region, but less than two years for its downfall. The 56-year-old Creve Coeur-based homebuilder shut its doors Friday, becoming the latest - and one of the largest - local builders to fall prey to the turmoil in the housing industry.”

“CEO Bill Taylor blamed the market - and himself - for the reversal in the company’s fortunes. ‘About 70 percent of our problems were related to the market and 30 percent was because we were too slow to react,’ Taylor said. ‘We were too slow to see the downturn, and the six or eight extra months it took us to react, really hurt us.’”

“‘I couldn’t pay the banks, the staff, the rent and insurance and all that,’ he said. ‘We had too much land inventory and too much debt.’”

“Taylor said he has paid more than 95 percent of the money he owed to his subcontractors. While a few liens remain outstanding, some subcontractors say they never doubted they would be paid. ‘I had the option to simply close the company and walk away,’ he said. ‘But I wasn’t raised that way.’”

The Review Journal. “Are we there yet? Are we there yet? Are we there yet?”

“That’s not just an endless series of queries from road-weary kids on summer vacation. It’s also become the plaintive cry of local homeowners desperately seeking the bottom of a housing market that has shed more than 20 percent of its value in the last year. Las Vegas homeowners could have their answer soon.”

“A Monday report, plus a few springtime indicators thrown in for good measure, hints that the city’s housing market may be at or near its nadir.”

“‘I know what it costs to build a home, and these homes can’t be replaced at the prices they’re being sold for,’ said local home builder Tom McCormick. ‘We builders have been arguing for a long time that we can’t build homes at the prices they’re being sold for. By definition, (the decline) can’t go farther.’”

The Bunbury Mail from Australia. “Bunbury has the 20th worst postcode for missed mortgage payments in Western Australia and sits just below the national average.”

“REIWA Bunbury chairwoman Roslyn Ierace said she saw a house sold for almost $90,000 less than the price the owners had bought it for and valued another for close to $100,000 below what it cost to build.”

“Meanwhile, there are about 2,500 homes up for sale with some being sold for about $100,000 less than the price owners paid for them in the past two years.”

The Calgary Sun from Canada. “Over the past 10 years, the price for a Mount Royal condo has shot up by more than 363% to $555,833, while the price of a bungalow in Scarboro has risen by more than 271% to $595,000.”

“Condos in Edmonton’s Castledowns area hold the national record with a 633% increase over the past decade.”

“Such figures don’t surprise Ted Zaharko, owner of Royal LePage Foothills, who said most of the spectacular rise in prices over the past decade is due to price spikes in the past two years.”

“‘The city is very flush in many respects. The oilpatch has made it very flush. And so the activity that we’re getting on large-priced homes is tremendous,’ he said. ‘Those aren’t signs of people … nervous about the economy.’”

The Calgary Herald from Canada. “In 1998, single-family homes in the Calgary census metropolitan area averaged $167,555 while condos were $118,218, said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp.”

“‘It’s hard to imagine that prices were that cheap back then,’ he said.”

“By 2007, the average price for a single-family home was $451,034 and for condos it was $314,959.”

The Ottawa Citizen. “The price of Ottawa condominium housing has jumped faster than the national average in the last decade. A new study by Royal LePage Real Estate Services predicts that demand for condos in the urban core will continue to grow as a result of rising gas prices and the appeal of downtown living.”

“Royal LePage spokesman Pierre de Varennes said in a statement ‘with a high proportion of Ottawa’s workforce employed by the government, with offices in the downtown core, it’s not surprising that house prices in city’s urban neighbourhoods have appreciated as much as they have.’”

“He said that minimizing travel to work increases family time and lowers gas costs, making the urban choice attractive. ‘Many people view the higher cost of living in urban areas simply as the price tag for increased personal time.’”

The Toronto Star from Canada. “It’s no secret that Torontonians have flocked back to the downtown core for housing over the past decade. ‘Home prices in urban areas have gone up more than in suburban areas, but both have shown significant appreciation,’said senior VP of Royal LePage Gino Romanese. ‘But from a purely investment perspective you would have done well to put your money downtown.’”

“‘One reason for the spike in appreciation is maturing baby boomers looking to downsize their empty nests to something that requires less maintenance’ while staying in their neighbourhoods, says the study.”

“The top suburban location in Canada was a condo in Sherwood Park in Edmonton at 417 per cent, while a standard two-storey home in Warman in Saskatoon is up 305 per cent in the past 10 years.”

The Edmonton Sun. “House prices have taken a hit but the Realtors Association of Edmonton says there’s good news on the horizon. ‘Our view of the market is that it is stable and is slowly rising,’ said association spokesman Jon Hall.”

“Compared to May 2007, the average price of a single-family dwelling in Edmonton has dropped $42,861, from $426,028 to $383,167.”

“But the numbers show a massive increase in prices from two years ago, when the same house would have been worth $282,208. Prices began a sharp rise two years ago, hitting a peak late last spring before settling, said Hall.”

“‘It’s like overrunning first base. Prices kept climbing for a while, then they stopped and fell back to around the $380,000 range, generally, and they’re stable around that rate,’ he said.”

The Scotsman. “Scotland has seen a 20 per cent slump in the number of new home loans, according to the first in-depth report from the Council of Mortgage Lenders on the housing market north of the Border.”

“John Brown, director of DTZ in Scotland, has created a radical ten-point plan with which he plans to lobby the government and says would give the market a boost.”

“Mr Brown said: ‘We are in a cycle of property prices now. We have had a brilliant ten to 12 years. Everybody has got used to continued house-price growth, and that cannot continue. However, if the government put some of these measures in place, it would give the struggling market a boost.’”

The BBC News. “Residents in the picturesque seaside village of Llanrhystud in Ceredigion gave their impressions of the rural housing problem. Carer David Power said he was renting a privately-owned home because he could not afford a mortgage.”

“‘I’m renting because I can’t afford to buy,’ he said.”

“Bus driver Colin Evans and his hospital office manager partner Bethan Williams have a mortgage on a property they bought a couple of years ago in Llanrhystud. ‘Costs are going up and I can’t see how first time buyers are going to get on the property ladder,’ said Ms Williams.”

“Mr Evans said: ‘Even professional people who are earning high wages, like doctors, can’t afford mortgages. I have a property in Aberystwyth which I rent to a doctor who is in that position. If professional people can’t afford mortgages then how can a person on an average wage be expected to?’”

The Independent. “The idea that yesterday’s collapse in Irish banking shares comes as a shock to the markets is nonsense. Anyone with a basic knowledge of how economies work should understand that banks get hammered when housing markets go into reverse.”

“The banks, by lending recklessly in the boom, will now bear the brunt of the slump. During the boom, anyone who questioned the logic of betting the nation’s cash on the housing market was dismissed as a crank.”

“Now it is becoming apparent that the banks in Ireland ceased being banks some year ago and transformed themselves into leveraged gamblers on property.”

“This process ultimately turns into a Ponzi scheme, where the entire system is based on getting more and more people to borrow money so that the valuations can be sustained.”

“It’s the middle of the work day, but Iveta Vitkovska’s notary office in the heart of Riga’s Art Nouveau shopping district is dead calm.”

“Just a year ago, there was a waiting list at notaries throughout the city as Latvians hustled to seal promising real estate deals. But an economic malaise in the Baltics has put an end to that.”

“‘Things have definitely slowed down in the last few months,’ said Vitkovska, reduced to organizing files in her office, located on a cobblestoned street where streetcars rumble past designer-name boutiques - dozens of which are now closing due to rampant rent increases and sluggish sales.”

“Over at Paus Konsults, a debt collection firm in the same neighborhood, business is booming. Director Marcis Katajs said Latvia’s banks submitted more than 6,500 new overdue debt cases in April, up 45 percent from February. There are about 200,000 such cases in the firm’s database, extraordinary for a country of 2.3 million people.”

“Little Latvia, along with its neighbors Estonia and Lithuania, is in an economic free-fall…after four years of thunderous expansion.”

“While the boom lasted, it was astonishing. From 2004 to 2007, Estonia’s economy ballooned 42 percent, and Latvia’s grew by an incredible 50 percent - by far the best results in the European Union.”

“Baltic consumers embarked on a borrow-and-spend binge by taking advantage of cheap, accessible loans. They bought new Toyotas, refurnished their apartments and vacationed on the Mediterranean. By the end of 2007, bank lending in Latvia skyrocketed to 93 percent of gross domestic product, up from 39 percent four years earlier.”

“Just as in the United States, rising housing prices created a feel-good environment of perpetual wealth, and Latvians returned to the banks to borrow more. Amazingly, many borrowed from several banks at once. Very few even thought of saving.”

“‘It is our common problem. The savings cushion for hard times is very small, if there is any at all,’ said Ainars Ozols, chairman of SEB Banka, Latvia’s second-largest bank. He said that only 10 percent of SEB Banka’s customers have savings.”

“But it was real estate that really fed the tigers as Latvians bought land, homes and apartments. The construction sector boomed - and property values were propelled skyward.”

“The price of a new apartment in suburban Riga tripled in four years, according to Ober-Haus Real Estate. And since capital gains on property deals in Latvia were not taxed, Latvians and foreigners alike jumped in on the action.”

“‘We have cab drivers who are real estate specialists,’ Katajs said.”

The Columbus Dispatch reports from Ohio. “The mortgage crisis has harmed virtually everyone, leaving a wake of foreclosures and falling property values that will ripple through neighborhoods for years to come. No longer is the problem confined to poor neighborhoods.”

“Rodney Young lives in a neighborhood on the city’s Far East Side, that contains several subdivisions where homes typically are valued at between $70,000 and $200,000. Young bought his home in 1997 for $74,500 and signed a fixed-rate mortgage that steadied his monthly house payment at about $700.”

“Like many other families, his was blitzed by advertisements from lenders to refinance. Young and his family had built up debt and decided to consolidate it into a refinanced loan. In 2006, Young signed a new loan with a beginning interest rate of 11.8 percent that could have climbed to nearly 18 percent.”

“They refinanced again in 2007. Now, their monthly payments could nearly double to $1,400. Young says he’s angry at mortgage lenders and himself. He’s angry for signing loans that may cause him to lose his home and eliminate any chance to move into a bigger one. ‘A lot of us were sold a dream,’ Young said, ‘and now we are living a nightmare.’”

“About three blocks from Young’s home, James Roy built his fiancee’s dream house, complete with vaulted ceilings, plush carpet and nearly every upgrade offered. The price: $178,000. Roy, however, had to pay only $1,000 out of pocket.”

“‘I figured the value was only going to get higher, so why not build the best house we could?’ Roy said. ‘It did seem a little too good to be true.’”

“Roy, who had a poor credit score at the time, soon learned that the two loans he signed to finance the home were anything but a dream. To avoid paying mortgage insurance, Roy received one loan that covered 80 percent of the borrowed amount, with an 8.5 percent adjustable interest rate that continued to climb to nearly 12 percent.”

“The second loan, covering 20 percent of what he borrowed, was fixed at an interest rate just above 11 percent. Roy’s monthly house payments rose from $1,400 to $1,600 after six months and were scheduled to climb higher.”

“He then looked to refinance late last year and was besieged by out-of-town lenders offering consolidation loans. One company appraised Roy’s home at $167,000. He eventually refinanced his loan with a fixed rate, but now Roy, who rolled other debt into the mortgage, has even bigger house payments on a home that has lost value.”

“‘I’ll take some of the blame for signing loans like that, but these companies are good at confusing people,’ Roy said. ‘They shouldn’t talk to people about ARMs and adjustable rates and all that. Just tell us the bottom line in dollars and cents. But they don’t do that, and now I’m stuck. A whole lot of us are stuck.’”

The Journal Sentinel from Wisconsin. “Foreclosures increased almost 45% in Milwaukee County during the first five months of the year compared with 2007, according to circuit court records. The entire seven-county Milwaukee area saw a nearly 40% year-to-date increase.”

“The spike in foreclosures ‘could be a signal that house prices started declining between six and 18 months ago,’ said Morris Davis, a professor of real estate and urban land economics at the University of Wisconsin-Madison.”

“He said there is a lag between when a person falls behind on mortgage payments and when a property is put into foreclosure by a lender. When people find they owe more on a house than it is worth, they are more likely to let a foreclosure proceed than to fight it, he said.”

“Mike Ruzicka, president of the Greater Milwaukee Association of Realtors in Wauwatosa, agrees that foreclosure activity probably will continue to increase into next year. That is because a number of adjustable rate mortgages are set to readjust this summer, which could make them less affordable to more people, he said.”

“He also said that with increasing foreclosures, it is becoming harder for agents to negotiate price concessions. When a buyer offers a bank less than the value of a loan for a property in foreclosure, the bank ‘wants to sell (the property), but they are being fairly stiff on bending on price concessions,’ he said.”

“It was much easier to get a price concession when banks were foreclosing on houses with loans of less than their value, he said.”

From Business North on Wisconsin. “Willard Ogren, president of Security State Bank in Iron River, said loan delinquencies are up from a year ago and banks’ net interest margins - the difference between the rates at which they lend money and have to pay for deposits - have been squeezed.”

“And that’s falling to their bottom lines. Financial results for many of the 49 community banks and largest credit unions in the region declined in 2007 from a year earlier.”

“Superior Choice Credit Union in Superior, one of the region’s largest with $144.9 million in loans and other assets at Dec. 31, is working its way through a far larger Florida participation loan pool that soured in the real estate bust.”

“Superior Choice took a $4.7 million charge for loan and lease losses during 2007 - up 10-fold from 2006.

“Gary Elliott, Superior Choice CEO, refused to discuss details of the 2007 losses and a pending lawsuit the credit union filed against a larger credit union in Fort Collins, CO. Norlarco Credit Union in Fort Collins arranged a construction loan pool for building upscale second homes in Florida in 2003 amid the real estate boom there.”

“The Norlarco saga has stoked new fuel on longstanding criticism commercial banks have aimed at credit unions that stray from the rationale for their state and federal income tax exemptions: providing credit and lower interest rates to people of modest means.”

“Kurt Bauer, CEO of the Wisconsin Bankers Association, said Superior Choice’s participation in risky, luxury home development in Florida, as well as small business lending on its home turf, stretches that mission to the breaking point.”

“‘This is a major loss for a $150 million institution,’ he said. ‘This is a credit union that engaged in suspect loans 1,500 miles from the shores of Lake Superior. What does that have to do with serving low to moderate income people?’”

The Star Tribune from Minnesota. “Drive west across the Ford Bridge and after a sweeping turn you’ll arrive at one of the gateways to Minneapolis. There’s a nice-looking luxury condo building at the first stoplight. But it exists only on a fabric advertising screen that’s attached to a tall chain-link fence.”

“The 46th & 46th Lofts project has been inactive since last year. Council Member Lisa Goodman, whose ward includes downtown, wants stiffer requirements for site maintenance before she’s willing to extend deadlines for any projects.”

“She’s irate over the condition of a half-dozen stalled sites downtown. The issue hits home for her because her condo building overlooks a site she describes as neglected.”

“One corner at S. 10th Street and Nicollet Mall draws particular ire from Goodman and others. The Nicollet, a 56-story condo tower, was to break ground there a year ago. A two-story building to be razed for the stalled project features windows that are broken or boarded, peeling window frames and graffiti.”

“‘The public asks me all the time, ‘Why isn’t the city doing something about this?’ Goodman said.”

“Back at the 46th & 46th Lofts, developer Don Gerberding said the project is the first of the firm’s numerous Minneapolis housing projects that has been so problematic. He said it’s the victim of a sour housing market, and that he understands neighborhood frustrations.”

“‘It’s unfortunate; I don’t have a magic wand. We’re faced with some economic times now where there aren’t some easy answers,’ he said.”

“Gerberding said he’s encouraged by neighborhood feedback not to cheapen the project in an effort to get it completed. And he said that despite prices of up to $650,000, the project reached 80 percent of the threshold set by lenders for pre-sold units before buyers began dropping out because they couldn’t sell their homes.”

“‘That’s a pretty good indication that the project has legs and will go,’ he said.”

“In large swaths of the Twin Cities and across the state, 40 percent of more than 50,000 subprime loans will jump to higher payments this year. Another 22 percent will reset after this year.”

“In Twin Cities suburbs, where home construction once boomed, hundreds of square miles are dotted with the homes of tens of thousands of subprime borrowers who will skid into higher monthly payments in 2008. Seventy-seven percent of such loans were taken out after 2004.”

“The figures include an estimated 70 percent of all Minnesota subprime mortgages and 95 percent of ‘Alt-A’ mortgages — home loans that didn’t require proof of income, demanded little or no money down or were otherwise unconventional.”

“In the universe of subprime loans, only about 59 percent of subprime loans were current, as of October 2007, the Fed study found. Almost 87 percent of Alt-A loans were current.”

“”Sharon Young, a homeowner on the East Side of St. Paul, and her husband were renters until they bought their first house three years ago. They bought an adjustable-rate mortgage that started with payments of $1,679 a month. In March 2007, the monthly payment was reset to $2,218.”

“The couple, with a combined gross income of $77,000, couldn’t manage the $539 monthly increase. ‘Our mortgage company refused to negotiate,’ she said.”

“Sharon said she quit making payments a year ago and expects to lose her home to foreclosure this summer or fall. Paying for food, utilities and other expenses demanded much of the extra $539 a month the mortgage lender demanded.”

“‘We rob Peter and Paul doesn’t get paid,’ she said.”

“Refinancing is out of the question. Young and her husband bought the house for $250,000. A recent appraisal put its value at $170,000. Young’s assessment of home ownership: ‘It was a disaster.’”

The Buffalo Reflex from Missouri. “If you’re looking for culprits in the current U.S. housing crisis, they aren’t hard to find because they encompass every segment of the subprime lending industry, according to Bill Monday, president of the O’Bannon Banking Co.”

“Speaking at the May 28 meeting of the Buffalo Rotary Club, Monday said companies gave housing loans to people who couldn’t afford them, and many consumers fraudulently misrepresented their stated incomes.”

“‘Many people received loans for more money than their houses were worth,’ he said.”

“‘It all started with greed on the part of lenders, builders, developers and others,’ Monday said. ‘This included the forgery of fraudulent documents, appraisal fraud and in some cases title companies just keeping the money instead of paying off the mortgage company. A lot of mortgage lenders’ underwriting practices became lax.’”

“Many lots were never built on and many houses were never completed. Foreclosures in April were up 65 percent over last April, Monday said.”

“Monday stressed that the southwest Missouri economy never reaches the extreme highs and lows that other parts of the country do, and this was the case with the housing crisis. Still, there has been a record number of foreclosures in Greene County in recent months, and property appraisals in Christian County are 33 percent lower than they were previously.”

“He said he foresees it taking several years to recover from the housing downturn - possibly longer than 2010. When high gas and food prices are added to the mix, ‘we are in a crisis like we haven’t seen before.’”

“Congress and the Bush administration are working on some possible solutions, which could include a possible bailout by taxpayers. He said this would be unfair to those who have done a good job of keeping up with their house payments over the years.”

“‘But if the government lets it crash, it could be a total disaster,’ he said.”

The St Charles Journal from Missouri. “A May 13 housing analysis by the St. Charles County Community Development Department shows foreclosures skyrocketed in 2007 across the country, affecting 875 properties.”

“That’s twice the number of properties affected by foreclosures in 2006, and nearly three times the number of properties affected by foreclosure in 2004 and 2005.”

“Citing the county housing report, Gary Podhorsky, community planning manager for St. Charles County, said while there were 634 foreclosure actions in the county in 2007, 875 properties were affected.”

“The discrepancy in number of properties and foreclosure actions is accounted for by multiple properties owned by a single person, most often a home builder, who loses multiple properties at a time.”

“Sales, too, have taken a hit in St. Charles County. Mark Stallmann, CEO of the St. Charles County Association of Realtors, said existing home sales were down in April to 405 from 485 over the same period a year ago.”

“From March 2007 to March of this year, a MarketGraphics report shows there were 2,770 closings on new single and multifamily homes, compared to 4,104 between July 2004 and July 2005, when the housing market was at its strongest.”

“Don Rogers, an agent in St. Charles and last year’s president of the Realtors association, says many folks are simply looking for a deal that is too good to pass up, recalling a property he showed last week in the $60,000 range that the buyers wanted for even cheaper.”

“‘We can always find something negative in everything we do,’ Rogers said of the rough appraisal the housing market has been receiving. However, he still says the market needs more absorption.”

“St. Charles Association of Realtors President Keith McCulloh said that he tries to remind people that with the big rises in the housing market in years past, ‘once we get to the top, we need to come down a little bit.’”

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