The Housing Bubble

The San Diego Reader reports from California. “What’s the difference between National City and Rancho Santa Fe? Well - er, uh - money comes to mind. Last year, median household income in National City was $44,130, according to figures provided by the San Diego Association of Governments. That was far under the county median of $68,388. Another difference is that 70 percent of the homes currently listed for sale in National City are in distress.”

“The county’s problems ‘are mostly where entry-level housing is,’ says Brian Yui, chief executive of a discount real estate broker. The deceptive mortgages ‘gave people the ability to get in with nothing down, with payments artificially lowered for the first 12 to 18 months,’ says Carlos Aguilar, president of AXIA Real Estate, who specializes in foreclosures. ‘It was a house of cards that fell apart like a Ponzi scheme the minute [home price] appreciation stopped.’”

“Lemon Grove median family incomes are a subpar $60,050. Prices have plummeted 33.6 percent in the last 12 months. Yui’s figures indicate 70 percent of Lemon Grove homes now listed for sale are short sales or foreclosures. Nearby Spring Valley has incomes around $70,000. Prices there have plunged 38.3 percent over the past year.”

“A bit over 40 percent of homes on the market are short sales or foreclosures, about double the county average.”

“In Chula Vista, the higher-income areas are hurting more,” says Zulema Maldonado of Prudential Real Estate in EastLake. ‘They purchased big homes and started with loans that were interest-only’ or some other type in which the interest rate adjusted upward. ‘Otay Ranch is hurting the most. In 2003, prices were $400,000. They went up to $800,000 and are now back to $500,000.’”

“In the first quarter of this year, three times the number of San Diego County homeowners failed to pay their mortgages as during the first quarter of 2007. According to DataQuick, 8975 homeowners defaulted on their home loans, up from 3931 last year.”

“Saint Claire is a small subdivision at Otay Lakes Road and Saint Claire Drive, adjacent to EastLake. In late April, 21 homes in Saint Claire were in the early stages of foreclosure or had already been taken back by the bank.”

“A heavyset man doesn’t want to give his name responds in a thick Iraqi accent to a question as to why so many houses are for sale in his neighborhood.”

“‘Too many people buy houses when they have no money. We’ve never had this problem before, but now it’s all over…Nobody is buying because of the economy, you know. People are scared to buy a house now. Like that house,’ he says as he points across the street to a house for sale. ‘He bought for $800,000. Now he sells for $500,000. How’s he going to pay to the bank?’”

“The Saint Claire subdivision was built in the mid-’90s. Homes range in size from 1758-square-foot three-bedroom houses to 3100-square-foot houses with five bedrooms. Houses that once sold for $700,000 are now going for $400,000.”

“‘A lot of people are in the shit here,’ says 23-year-old Ryan Swierk. His family rents a house on Chateau Court that’s currently for sale. ‘I know our house isn’t one of them [a foreclosure], but the owner is in trouble, just like a lot of the other people in this neighborhood. This guy across the street, his house has been on and off the market for months.’”

“Doug Leeper, a code enforcement manager for the City of Chula Vista, says that he can easily tell which houses are in foreclosure.”

“‘Some of these homes sit vacant for 7 months, at least a minimum of 4 months, and in some cases as long as 12 months of sitting vacant before the lender even takes them back. Grass dies, the lenders let it overgrow; the pool goes green, because the lenders say, ‘It’s not our property yet.’ We call it the lender’s black hole,’ he said.”

The Tribune. “Paso Robles’ recently robust economy has slumped with the rest of the state and nation but seems likely to make an expeditious recovery, according to forecasters.”

“‘Paso Robles saw 810 home sales in 2004. We expect that the city will see 328 home sales in 2008. That about says it all,’ summarizes the forecast report, prepared by the UCSB Economic Forecast Project.”

“Steve Lohr, VP of planning and development for J. Lohr wines, said he believes the weakened U. S. dollar can have positive effects on Paso Robles’ wine industry.”

“‘We’re in a recession, but the good thing is that in a recession people don’t necessarily drink less wine. They just become more choosy about what wine they drink,’ Lohr said.”

The Daily Bulletin. “Troubled home builders hit hard by a busted Inland Empire housing market are looking for enormous breaks - 1990s recession-type breaks. And because sales incentives aren’t doing much to move inventory and cauterize developers’ bleeding balance sheets, it’s going to take some good ol’ fashion lawmaking to get those breaks.”

“Legislation that would let builders delay payment of local impact fees until their housing inventory is sold off is being considered by state legislators and touted by the California Building Industry Association.”

“‘The builders are trying to tie their impact to the payment of the impact service,’ said Barry Gross, president of an Irvine-based company hired by developers for financial evaluations.”

“Builders collectively shelled out millions of dollars into the framework behind these tentative maps during the real-estate rush. They’d lose almost every penny on their investments if the maps expire.”

“The death of either bill could force some home builders to go belly up, or at least bring them to their knees.”

The Press Enterprise. “Investors bought more foreclosed homes on the courthouse steps in California last month, reflecting a growing willingness of lenders to accept more deeply discounted bids, ForeclosureRadar reported Wednesday.”

“Despite more than 97 percent of the foreclosed properties being returned to the lender after auction, there was a 34.6 percent increase in properties purchased by third parties, which most likely were investors, the report said.”

“In Southern California, Riverside County saw the heftiest discounting, an average 27.5 percent, followed by San Bernardino County at 25 percent. Statewide, lenders discounted 86 percent of the foreclosed homes auctioned at an average 28 percent.”

“‘The increase in investor purchases at foreclosure auction is a welcome change,’ founder, Sean O’Toole said in a statement. ‘For too long, lenders were unrealistic about opening bids at auction. They finally seem to realize the magnitude of the problem and are beginning to discount accordingly.’”

‘Riverside County last month saw 3,564 foreclosed homes sold at auction, which was 269 percent more than in May 2007, while 2,648 homes were auctioned in San Bernardino County, up 322 percent from a year earlier.’

“In California, 25,523 foreclosed homes were auctioned in May, up 11.8 percent from April. Of those, 24,831 homes were retained by the lenders because they received no bid higher than the lender’s opening bid.”

The Modesto Bee Californian. “Finally there’s some good news on the foreclosure front: Northern San Joaquin Valley mortgage default rates seem to be stabilizing. During May, 3,333 mortgages went into default in the three counties, compared with 3,676 in April and 3,668 in March.”

“That would be welcome relief for the region’s depressed housing market, considering home values have plummeted more than 50 percent in some valley cities since 2005. New home construction has slowed to a trickle as foreclosed houses repossessed by banks have flooded the resale market.”

“‘It’s not just people with subprime loans losing their houses any more,’ said Martha Lucey, president of ByDesign Financial Solutions. Lucey said even homeowners with fixed-rate loans can face foreclosure if they encounter financial problems…because home values have declined so much they have no equity and can’t sell for what they owe.”

“Edward Parcaut, president of SourceOne Financial in Modesto, said many homeowners simply choose to walk away from their house, letting it fall into foreclosure.”

“‘They’re making a business decision. I’ve never seen so much detachment,’ Parcaut said about homeowners who accept foreclosure without shame. ‘The stigma is gone.’”

The San Mateo County Times. “The hotbeds for foreclosures statewide are the Central Valley and the Inland Empire in Southern California, but San Mateo County did not go unscathed.”

“Antonia Hernandez saw her monthly mortgage shoot up to $6,883 on a two-bedroom, one-bathroom house in Redwood City that she’s in danger of losing.”

“It went into foreclosure after the loan on the house reset. Hernandez, a housekeeper, and her husband, a refinery worker, originally paid $4,300 per month in mortgage payments when they purchased the house two years ago. Their combined monthly income is $5,400.”

“Hernandez and her husband live with six nephews in the house, and may have to walk away from it.”

“‘It was one of my biggest dreams to buy a house,’ said Hernandez. ‘It would be very hard to leave, but it makes me wake up at night thinking of the mortgage payment, and I don’t want to live in agony anymore.’”

“The family purchased the house for $775,000 with a subprime loan, and the interest rate adjusted upward. As of February, the Hernandezes stopped making payments because they could not afford them.”

“In San Mateo County, most of the foreclosures are in working-class neighborhoods in cities such as East Palo Alto, Daly City, South San Francisco and San Bruno. Parts of San Mateo, such as Shoreview, as well as portions of Redwood City and Menlo Park are also experiencing high rates of foreclosures.”

“Some 119 homes in San Mateo County were sold at foreclosure auctions in May. That was up from 35 in May 2007 and about the same as the 118 sold at auctions in April. Notices of default in the county climbed to 417 in May, up from 300 in April.”

“Around the Bay Area, Contra Costa County saw foreclosure auction sales jump fourfold, to 1,141. Santa Clara County foreclosure auction sales more than sixfold to 674, and auction sales tripled in Alameda County, to 754 in May.”

From Glamour. “In March 2005 Karla Hodges seemed to have her life impressively in order. Her nursing job paid $92,000 a year, and thanks to a liberal lending climate, her bank had preapproved her for a home mortgage of more than half a million dollars.”

“The then 32-year-old single mother, who’d struggled to put herself through school and raise a family in pricey Northern California, was feeling pretty good about things. She’d finally earned herself a piece of the American dream.”

“She settled on a 1924 Craftsman bungalow with a view of the water near the San Francisco Bay and a price tag of $432,000–a full $100,000 less than the amount she’d been approved for.”

“Along with the great view, Hodges says, the house also came with daunting monthly payments of $2,363, but she wasn’t worried. She’d been given the loan, she made a good living, her job was stable, and in the bubble economy of 2005, the common assumption was that all real estate investments were good ones. Moreover, her bank was making the purchase less onerous by allowing her to finance the entire house with no down payment required.”

“Two years later she had to tell her boys they were moving. “I called the lender and said, ‘This house is eating me alive. I want out,’ she says. Her credit was ruined and her savings account was empty. Her voice mail overflowed with messages from her mortgage lender, and she felt incredibly stressed and anxious.”

“Emotionally exhausted, Hodges let the bank take over the house.”

“Hodges found a rental that is far more luxuriously appointed than the house she owned. It has three bedrooms and a fireplace. And while she never was able to put her coveted swing set behind her old place, the rental house just happens to have a jungle gym on the fenced-in lawn.”

“‘This has always been my dream,’ says Hodges, standing in her kitchen and looking out into her backyard. ‘A sliding glass door leading out to a yard that my children could play in. I dreamed of opening the door and saying to the kids, ‘Why don’t you go outside for a little while?’ And look what I have here: a sliding glass door.’”

The Associated Press. “House Speaker Nancy Pelosi, asked Thursday about fellow California Democratic Rep. Laura Richardson’s multiple home defaults, said that ‘every member of Congress is responsible for living up to the highest ethical standards.’”

“Late last month reports emerged that Richardson, a former state Assemblywoman and member of the Long Beach City Council, had lost her Sacramento home to foreclosure and has two other homes in Southern California that have fallen into default six times.”

“Last week the Long Beach Press-Telegram reported that Richardson had also left car repair bills unpaid.”

“California Assembly Speaker Karen Bass also addressed the Richardson situation Thursday during a visit to Washington. Bass and other Assembly leaders had endorsed Richardson’s congressional bid but Bass told reporters she’d had no idea about Richardson’s financial issues.”

“‘Given the rapid pace of all of that I can understand the financial difficulties, but now more is coming out,’ Bass said.”

The Sacramento Union. “Rep. Richardson sees herself caught in the maws of voracious lenders and a cruel capitalistic system that have forced others like her out of their homes.”

“‘I think this is what many Americans are unfortunately facing right now,’ she told the Los Angeles area’s Daily Breeze. ‘…I can take what I have learned from this to help somebody else. Many people are one step away from issues that are life-changing moments. When a person moves across the country, that is a life-changing moment.’”

“Partly to blame, she says, is the measly salary she is forced to accept to serve there. Alas, $170,000 a year just does not go as far as it used to.”

“It did not go far enough, at least, to cover mortgage payments on three houses she held simultaneously. According to Richardson, that must have been someone else’s fault - probably yours and mine - for not seeing to it that she had an adequate salary. It must also have been someone else’s fault that she bought three houses instead of one.”

“The Daily Breeze reported that in March she had fallen behind by $12,400 on her San Pedro home payments and by $19,900 on her Long Beach home. She owed more than $570,000 on her Sacramento home when it went into foreclosure. She says she was unaware the house had been auctioned and contends that the sale was ‘improper.’”

“The truth is that the Congresswoman is a failed speculator. She flipped houses as the housing bubble was popping and her bets have come due. Now she wants some sympathy and, yes, a bailout.”

Some housing bubble news from Wall Street and Washington. Reuters, “Thornburg Mortgage Inc, a specialist in jumbo home loans that nearly went bankrupt in March, posted a $3.31 billion first-quarter loss on Thursday as the value of mortgages and other securities it owns plummeted. Results included a $1.54 billion write-down of the value of mortgage-backed securities and securitized loans Thornburg owns.”

“The company also realized a $651.6 million loss on the sale of some adjustable-rate mortgages, and had an unrealized $126.1 million loss on a separate adjustable-rate mortgage transaction.”

“Thornburg also took $949.1 million of charges related to the capital-raising, which heavily diluted existing shareholders.”

“The company said it made $548.7 million of loans in the first quarter. It said it has since made $239 million, but CEO Larry Goldstone said these were already in its pipeline, and that ‘we’re not really originating any of the new loans right this minute.’”

From MarketWatch. “‘The industry is suffering from a continued decline in housing prices, a mortgage securities market that cannot easily value mortgage-backed securities due to lack of trading activity, a banking sector that is lacking capital and deleveraging, and continued rating agency downgrades of mortgage-backed securities,’ Goldstone said.”

“As a result the credit storm and other factors, Thornburg saw a ’sudden downward spiral’ in prices on its triple-A-rated mortgage assets.”

“Thornburg shares have lost more than 90% of their value so far this year.”

The New York Times. “The struggling investment bank, Lehman Brothers, shook up its management on Thursday as it tries to win back the confidence of Wall Street. The bank said its chief operating officer and president, Joseph M. Gregory, and its chief financial officer, Erin Callan, had been removed from their posts.”

“‘Our credibility has eroded,’ the CEO, Richard S. Fuld Jr., wrote in an internal memorandum to employees about the change in executives.”

“Analyst Lauren Smith it would take time and another quarter of earnings for analysts and investors to become more comfortable that Lehman was actually marking its assets to reflect the downturn in the mortgage market and to see if business turns up.”

“While the firm took a smaller total, or gross, write-down in the second quarter - $4 billion, compared with $5.3 billion in the first quarter - its hedging, especially hedges on commercial mortgage related positions, failed. That meant Lehman wrote down $4.1 billion in the most recent period compared with $2.4 billion for the first quarter.”

“The developments mark a stark reversal of fortune for Lehman and for Mr. Fuld, its longtime chairman and chief executive. Mr. Fuld earned accolades - and more than $40 million in 2007 - for steering Lehman through tumultuous markets last year and, two months ago, he proclaimed that ‘the worst is over’ in the markets.”

“No one knows when the credit crisis will end. But when it does, U.S home prices may have lost a third of their value, high-yield bond valuations will hit levels close to those seen during the last recession, and what may amount to $1 trillion of Wall Street losses may translate into almost $4 trillion of lost access to capital.”

“That’s the view of top credit analysts, who say a U.S. housing decline, sparked last year by subprime mortgage debt defaults, will likely last another two years.”

“A senior Fitch Ratings analyst forecast more defaults and delinquencies for U.S. home mortgages, and said the highest default rates are coming from recent mortgages originating in the last few years.”

“‘There are a lot more mortgage defaults to come,’ said Glenn Costello, a Fitch Ratings managing director. ‘We see an ongoing high level of default.’”

From Bloomberg. “The U.S. Federal Bureau of Investigation, confronting a surge in mortgage fraud, has ordered more than two dozen of its field offices to stop probing some financial crimes so agents can focus on the subprime crisis. Kenneth Kaiser, chief of the bureau’s criminal investigative division, issued the directive late last week.”

“The FBI traditionally has moved investigators to address urgent needs, he said. About 150 agents were working on more than 1,300 mortgage cases before the change. ‘If you’re seeing a significant crime problem, you have to move resources,’ Carter said yesterday. ‘We’ve got a big problem with mortgage fraud.’”

The Daily Business Review. “Florida ranks first in the country for mortgage fraud and second in foreclosures. Combine that with understaffed and overworked law enforcement agencies, a real estate industry where money doesn’t change hands unless a deal closes and crafty crooks who know the system, and there’s no sign the fraud epidemic will abate soon.”

“It’s no surprise many people involved in all aspects of the real estate industry have stories of bogus sales perpetrated by fraudsters and enabled by lax lenders or appraisers. And the same insiders increasingly question what law enforcement is doing about it.”

“Former banker Suzanne Weiss, coordinator of the Broward County Foreclosure Task Force, said the Mortgage Bankers Association’s recent allocation of about $750,000 to fight fraud nationwide will come up short. ‘That’s nothing; that’s a bunch of file folders,’ she said.”

“A South Florida prosecutor who spoke on condition of anonymity said there is an overwhelming volume of fraud. ‘I think there is tons of small-bore fraud going on, and I’m shocked at how easy it is to get done,’ he said. ‘You’d have to have thousands and thousands of [investigators and prosecutors] to stop it.’”

“During the height of the real estate boom, ‘it behooved everybody to cooperate [in fraudulent deals] because everyone made money,’ he said. ‘And the fact that real estate prices kept going up washed away the sin. Fraud was easy to hide because the next sale would have an even higher sales price.’”

“Now that the boom is over, the prosecutor said it’s likely there’s fraud in many of the South Florida foreclosures now in the pipeline. But the ‘dirty little secret’ about fraud investigations is that many investigators don’t know how to examine loan files, the prosecutor said.”

“The Securities and Exchange Commission voted Wednesday to propose tightening rules for credit-rating firms, calling for restrictions to attack conflicts of interest and expanded disclosure, including on ratings of structured finance products.”

“SEC Chairman Christopher Cox said the proposals were spurred by the subprime-mortgage crisis and a lack of understanding about the risks posed by mortgage-backed securities. He said the fact that ratings firms sometimes advised issuers of such securities on how to structure them was ‘a triple-A conflict of interest’ that added to the problem.”

“SEC investigators have found ‘ample evidence’ of rating firms consulting on securities they later rated, Cox told reporters.”

From Marketplace. “Kai Ryssdal: ‘Now that the subprime horse is gone, the Securities and Exchange Commission set about closing the barn door today. It took aim at the credit rating business with a series of proposed reforms that are supposed to prevent one of the things that got us into the credit crunch from ever happening again.’”

“‘Moody’s, Fitch and Standards & Poor’s handed out top ratings to bonds that were backed by subprime mortgages only to see those bonds collapse as mortgage defaults soared.’”

“Amy Scott: ‘Well, many of the reforms they proposed involved conflicts of interest and transparency. If the rules are approved, ratings agencies wouldn’t be allowed to help structure the bond deals that they rate…And analysts won’t be allowed to accept gifts from issuers worth more than $25 — there was kind of a cute discussion about whether coffee and danishes are allowed.’”

“Ryssdal: ‘Gotta love that after billions lost in the subprime squeeze, it comes down to coffee and donuts, right?’ Scott: ‘That’s right.’”

The International Herald Tribune. “The housing market is lousy, but television shows about housing are booming. The audiences for HGTV and TLC, the two U.S. networks with the most so-called property programming, have grown steadily over the past three years. The reason appears to be their shift in focus away from buying real estate as speculative sport to more educational and emotional shows.”

“Shows that were hallmarks of the bubble - like ‘Flip That House,’ on TLC, and “Flip This House,’ on A&E - are still around, but have been retooled with less-than-happy endings.”

“‘People loved comedies during the Depression, too,’ said R.J. Cutler, executive producer of ‘Flip That House.’”

“Even though housing might be a depressing subject to talk about, watching a show about it remains entertaining. Brant Pinvidic, who until recently oversaw TLC’s programming, recently finished building a new house near Los Angeles, but now he cannot sell his old house. So when Pinvidic describes the questions that TLC’s shows try to answer - ‘What would I do to sell my house? What could I do to pump up the value? How could I sell it quickly?’ - he finds that he wants the answers himself.”

“‘A few years ago, viewers were wondering ‘what’s my house worth’ with an exclamation point,’ he said. ‘Now they’re saying it with a question mark.’”

The Independent. “Lots of suggestions to add to our list of ‘bright spots of a recession’ which we went with last week.”

“To paraphrase the feedback, ‘No More @#/*-ing Property programmes on TV’ and ‘No more expensive government quangoes established to make sure we brush our teeth before bed’ are silver linings to cheer people up.”

“Readers born before 1975 will remember the ‘overseas jobs fairs’ phenomenon of pre-boom times. This was when foreign employers would come to Ireland and hundreds of dole bunnies would queue up hoping to get a ’start’ on building sites in Hamburg or the Isle of Dogs.”

“Well, we’ll never see that again will we ? ‘Fraid so. On Friday and Saturday, FAS are holding a ‘Construction Jobs in Europe’ fair at its offices in D’Olier Street.”

“The major difference this time around is that the State training and employment authority is presumably aiming to re-export some of the tens of thousands of overseas construction workers that landed here from Eastern Europe but now find their boots and hard hats gathering dust.”

“Earlier this month, David Hughes of Ernst & Young was appointed provisional liquidator of Denis Finn Limited, a construction firm specialising in high-end housing in the coastal areas of North County Dublin.”

“While, this occurrence has received little or no media coverage, the difficulties of Denis Finn Ltd are not just another case of a small builder being forced to the wall because of the residential slowdown.’

“The company has a strong reputation in the Howth and Sutton areas for building and selling top-of-the-range homes to affluent customers. A glance at the company’s website gives just some indication of the highly expensive inventory it is carrying and a frightening snapshot of how a successful upmarket developer can suddenly hit the skids.”

“Amongst many others, it has three 4,000 sq ft homes overlooking Howth Harbour for prices of between €2.9 - €3.2m.”

“It has two designer gaffs on Station road in Sutton for €1.3m apiece. It has two more similar new homes on Thormanby Road in Howth quoting €1.7m and it has a significant bank of €1m prized coastal sites.”

“Despite reducing prices by upwards of 20pc since last autumn, it seems that the hitherto bulletproof market for trophy coastal homes has fallen in a heap.”

From WSMV Nashville. “Property value for thousands of homeowners in middle Tennessee is sinking even lower than they may realize. One builder going bankrupt was a large part of the problem. Almost 200 Corinthian homes are either going into foreclosure or may end up there soon.”

“While the Orsburns moved to Riverwalk in Bellevue for friendly surroundings, Carla Orsburn said every time she looks around, she sees neglect. She is looking at the 24 unfinished homes and lots in Riverwalk that are going into foreclosure.”

“‘There’s nobody that takes care of that property,’ she said.”

“Due to the bankruptcy, dozens more homes from Brentwood to LaVergne are on the way to foreclosure. ‘We’ll be foreclosing on two complete subdivisions Friday the 13th,’ said Tom Lawless, who is representing one of the banks foreclosing on Corinthian properties.”

“Surrounding home values drop probably ‘25 to 30 percent,’ said Lawless.”

“Monticello said the real pain will come to people living nearby. ‘Banks aren’t going to go out there and pay top dollar for properties they’re foreclosing on,’ he said.”

“Mark Dersham of Keller Williams said the upside is that homebuyers can save tens of thousands on nice homes that may just need finishing. ‘Anywhere from 25 to 33 percent,’ he said.”

“Another possible negative for homeowners living near foreclosed properties is the possibility of rising homeowners’ association fees. When banks take possession of a home, they’re not responsible for paying those fees, so that cost may be passed on to homeowners.”

“One plus side to Corinthian’s foreclosures is that the banks will pay property taxes. Taxes for Corinthian properties went unpaid in 2006 and 2007.”

“‘It is frustrating,’ Orsburn said. But Orsburn is on the wrong side of the silver lining with her home losing value. She said summer plans to move are indefinitely shifted.”

“‘We didn’t have to move. We’re OK with staying where we are. We’ve been very lucky,’ she said.”

The Desplains Times reports from Illinois. “Last month Dan decided to stop paying his mortgage. It was hard for him. Dan, who is in his 20s and grew up in Chicago’s Edison Park community, paid all his bills, always on time, and is proud of it. Dan started looking for a place of his own with his girlfriend in 2004 and 2005. They fell in love with a 900-square-foot townhouse in Schaumburg. They settled on a final price of $179,000, a bit expensive but still reasonable, he thought.”

“‘Prices were rising, inventory was decreasing,’ Dan said. ‘I had this mentality that if I didn’t buy something now, I’d never be able to afford anything.’”

“To finance the purchase he obtained two mortgages, one for 80 percent of the purchase price and the other for 20 percent. Dan’s loan would be fixed for two years, an Adjustable Rate Mortgage.”

“‘I was so sure prices were going to go up,’ he said. ‘It was a ridiculous product. It had all these balloon payments.’”

“Then Dan, who had worked in downtown Chicago, lost his job. At the same time the adjustable mortgage was threatening to take his monthly payments from $1,475 to $1,720.”

“He moved with his girlfriend, who has since become his wife, to Jackson Hole, Wyo., where he got a job working as, ironically, a real-estate agent. They listed the Schaumburg townhouse for sale at $175,000 in November 2007 but received no offers even though it was less than the original purchase price of the property.”

“All the while because of the rules of the property association, Dan was barred from renting his townhouse even though he had moved out of state. ‘It’s extremely frustrating, everything I’m going through trying to hold on,’ he said. ‘I can’t spend every dollar I have paying the bank when I have a daughter on the way.’”

“Dan said when he first moved he thought the condo would sell within 90 days. ‘My condo’s been on market since November and the prices keep dropping,’ he said. ‘They go down by about $5,000 every month.’”

“Dan’s credit score has been reduced from 750 before he purchased his townhouse to about 600 now, but he’s philosophic; he believes he has to plan for the future now, with his wife and yet-to-be-born daughter.”

“‘I just think that people need to hear about this,’ Dan said. ‘If anyone can learn something from it then it’s worth it. The cycle could come around again in another 20 years and maybe some young guy will read this and think twice.’”

The Evanston Review from Illinois. “Median home prices in Evanston rose 60 percent between 2000 and 2006, pushing home ownership further beyond the grasp of many middle-income wage earners, according to a study presented Monday to the City Council’s Planning and Development Committee.”

“Using a standard rule that buyers can afford to spend three times annual income, a family earning the median income of $62,000 in 2006 could afford a home priced at $186,000, according to the study. But the median price for attached condominiums and townhomes that year was $276,500, and the median price for stand-alone homes was $550,000.”

“‘Many people who live in Evanston, work in Evanston and grew up in Evanston are finding themselves priced out of the market,’ said Housing Commission chair Susan Munro.”

“None of the new construction that has taken place in Evanston over the past two years has produced housing affordable to low- or moderate-income families. In 2007, the lowest sales price for a new condominium or townhome was $242,000 and the lowest sales price for a new detached home was $781,106, according to the report.”

“Keith Banks, director of the Evanston Community Development Association, spoke to the reasons why developers are forced to rehabilitate smaller condominium units.”

“‘It takes $250,000 to $300,000 just to purchase a ‘teardown’ in the 5th Ward and you are not even talking about knocking down a wall or renovation’ — which can add another $200,000 to the cost, Banks said. ‘Then you are talking about a half a million dollars and it’s already not affordable.’”

From WPSD TV in Illinois. “Sherri Wiegand is taking the first step to a new home. She can afford to be picky. If she doesn’t like even the most trivial thing about this home, she can look at another 30 in her price range.”

“The numbers tell the story. Sales are down by 84 homes in Williamson, Jackson, and Johnston counties in Illinois from January to June 10 this year, compared to last year.”

“These trends mean sellers are more willing to negotiate with buyers. ‘That $150,000 home last year may now be only available for $120,000 to $125,000,’ says the Broker and Owner for Century 21 House of Realty in Marion, Illinois.”

“Any good news for buyers is always bad news for sellers who’ve watched the value of their home drop. Wiegand is one of those people. She’s has a home she needs to sell, but the options are just to good for her to pass up.”

“It’s not all good news for buyers. Lenders are raising their standards. Buyers have to put more money down and have higher credit scores. ‘All the unique programs to bring people in and get them mortgages have disappeared. It’s back to the banker holding the key and having expectations of the buyer,’ said Davis.”

The Ann Arbor News from Michigan. “In what could be a sign that the local housing market is finally on the mend, numbers released by an Ann Arbor Realtors group Tuesday show Washtenaw County home and condo sales jumped 24 percent in May from a year ago.”

“Prices, however, aren’t doing so hot. Short sales, foreclosures and the aftermath of a previously bloated stock of inventory have pushed the average sale price of a home in Washtenaw County to 2000 levels.”

“Median home sale prices fell nearly 8 percent both in the month of May and year to date compared to last year to around $187,000. Year to date, the average home sale price sank to $216,882 from $239,028.”

“‘The biggest thing I am hearing is that the inventory is almost depleted,’ said Sharon Snyder, president of Prudential Snyder and Co. Realtors in Ann Arbor. ‘My agents are busy and they just wish there was more product on the market. So we’d like to invite sellers to put their house on the market.’”

“Part of the reason for the drop in inventory levels has to do with Pfizer, and part has to do with price. Last year at this time is when real estate agents say a load of homes owned by Pfizer employees came on the market. Last summer, Pfizer began to relocate and lay off employees in two-week waves as the drugmaker worked toward shutting down its Ann Arbor research site.”

“And as home prices have dropped, many potential sellers - especially those who bought in the past few years at higher prices - are waiting to sell until their home values appreciate.”

The Pioneer Press from Minnesota. “The large for-sale inventory dogging the Twin Cities housing market may finally be burning off. Total listings in the 13-county metro area dropped in May from a year ago - the first such decline in years.”

“Challenges remain. Closed sales declined more than 13.4 percent in the metro, and in Dakota County they fell by more than 22 percent. Sales still were down from last year, so the area now has a 10.4-month supply of homes on the market. That’s up a tad from the 10.2-month supply in May and is up 13 percent from 9.2 months a year ago.”

“Meanwhile, the area’s median sale price continues sliding. It fell 10 percent last month from May a year ago, to $205,000. From a buyer’s perspective, of course, those drops are great news.”

“‘Everybody’s gun-shy,’ said Tom Hamilton, a professor of real estate at the University of St. Thomas. ‘Nobody has faith in the credit-rating agencies. We’re in the hangover phase.’”

“The bigger threat now to housing, said Chris Galler, chief operating officer of Edina-based Minnesota Association of Realtors, is consumer anxiety about rising food and gas costs. ‘Uncertainty is the worst thing for our market,’ Galler said.”

From NPR Morning Edition on Minnesota. ” As a crime prevention specialist for the Minneapolis Police Department, Tim Hammett knows firsthand the toll that the mortgage foreclosure crisis has taken on the city’s North Side. Sometimes it even follows him home.”

“One day not long ago, Hammett pulled up in front of his house to find a woman ripping the aluminum siding off the empty house across the street, which, like hundreds of North Minneapolis properties, was in foreclosure.”

“‘I walk up to her and I said, ‘What the heck do you think you’re doing?’ he recalls. ‘And she gives me a look that’s like, ‘This place is empty. Nobody’s living here. Who cares?’”

“When the real estate boom struck earlier this decade, investors began descending on the area, buying up houses to rent out. They liked the quiet, tree-lined streets close to downtown, and the huge supply of inexpensive old bungalows and Tudor-style houses.”

“As the boom continued, house prices soared, and many longtime residents drifted away, to be replaced by a tougher and less stable crowd of renters, says Joel Breggemann, a block club president on Dupont Avenue North.”

“‘We were seeing blatant drug dealing,’ Breggemann says. ‘We were seeing residents who spent their entire day out on the front step of the house drinking, from 8 in the morning to 2 o’clock in the morning, and would have their car parked out in front of the house with music blaring.’”

“Many of these houses ended up in foreclosure when interest rates reset and property values returned to earth.”

“The troubles have been greatly aggravated by an unusual amount of mortgage fraud, says Assistant U.S. Attorney Joseph Dixon. In one of the most notorious cases, a suburban real estate company, T.J. Waconia, bought numerous houses throughout North Minneapolis, using fraudulent appraisals, federal officials say.”

“The firm’s founders pleaded guilty to mail fraud this year, and 141 of its houses were placed in the hands of a court-appointed administrator. Those houses now sit empty, contributing to the huge glut of abandoned properties and compounding the crime problem.”

“If not sealed up adequately, many of these vacant properties get taken over by gangs, who use them for drug-dealing and prostitution, says Sgt. Richard Jackson of the Minneapolis Police Problem Properties Unit.’

“‘It brings a lot of the criminal element into the area,’ Jackson says.”

“‘Unfortunately, when America catches a cold, neighborhoods like North Minneapolis get pneumonia, and foreclosure hit much harder there than other parts of town,’ says Minneapolis Mayor R.T. Rybak. ‘We know these neighborhoods, which have very good housing stock, can attract good, solid homeowners. The problem is that we have been dealing on such a large scale, because we have so many of these foreclosures.’”

“But the collapse of real estate prices in North Minneapolis threatens to undermine the city’s efforts. Some foreclosed properties are now selling for a small fraction of their peak price, which is drawing a new generation of investors to the area.”

“City officials fear that an overwhelming number of these houses will end up as low-income rentals, making it that much tougher to bring the neighborhood back.”

The Star Tribune from Minnesota. “Wells Fargo Bank has hired a commercial real estate broker to sell about 300 residential lots in two distressed Twin Cities area developments, the latest sign of tough times for area home builders.”

“The Martin Farms property includes 150 vacant developed lots and 108 acres of residential land. The asking price is $10.2 million, according to a news release by the Twin Cities office of CB Richard Ellis, which is marketing the property.”

“That’s substantially lower than the original $75,000 to $110,000 asking prices for the lots, according to Charlie J. Pfeffer, a sales associate at Pfeffer Co. Inc., a Maple Grove land broker.”

“‘That’s a pretty big bite,’ Pfeffer said of the sizable acreage being put up for sale. He estimated that the property represents five to seven years of inventory for residential lots in the Otsego area.”

“Conceived in 2003, Martin Farms was of the most ambitious new housing projects in Wright County, with plans for up to 350 houses. The project’s investors spent $34 million on the land and infrastructure improvements.”

“Wells Fargo provided stagecoach rides at the project’s grand opening marketing event. On May 1, the lender took back the project as part of a workout agreement.”

“Only 50 of the lots at Martin Farms now have houses, and 10 of those are vacant.”

“‘This was a horse that was conceived when the market was going nowhere but up,’ said Jeff Schoenwetter, a manager of Insignia and an investor in both Martin Farms and Tullamore. ‘I have no regrets about how the decision was made. I only regret that we did it.’”

“‘I’ve never seen a market decline this abrupt,’ Schoenwetter said. ‘At the time these projects were conceived … they looked like relatively intelligent business decisions.’”

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