The Housing Bubble

The Contra Costa Times reports from California. “Sales fell to a 20-year low in the Bay Area, but sales were hot for the foreclosure-ravaged East Bay, DataQuick reported today. While many were optimistic after a rise in sales between March and April, slow sales in high-end markets dragged down statistics. Across the nine-county region, 25.6 percent of the homes that resold had been foreclosed on at some point in the prior 12 months, up from 3.3 percent a year ago.”

“Solano County’s foreclosure resales were 57.6 percent of the resale market; in Contra Costa they were 43.3 percent and in Sonoma 26.6 percent.”

“In Bay Area neighborhoods that posted year-over-year gains in existing single-family house sales last month, more than two-thirds were in relatively affordable stretches of Contra Costa, Solano and Sonoma counties. On average, their median sale prices in May were down 24 percent from a year ago down 36 percent from their peaks. Analysis by DataQuick excluded Alameda County.”

“An average of nearly 50 percent of the resale transactions were foreclosure resales and on average, half sold for about 35 percent less than the prior sale taken from public records.”

“The median price paid for a Bay Area home was $517,000 last month, down a record 21.7 percent from $660,000 last year. The last time the median was lower than last month’s $517,000 was back in September 2004, when it was $510,000.”

The Press Democrat. “Continuing a spring surge, Sonoma County home sales rose in May and dented the supply of properties on the market for the first time since the onset of the housing slump three years ago. A turnaround could be months away, however, because the bulk of sales are in lower price ranges flooded by foreclosed homes, pulling down values in many areas.”

“‘If we didn’t have the foreclosure market, we wouldn’t have a market. We’ve got to work through at least another year of this,’ said Mike Kelly, an agent in Santa Rosa.”

“The county’s typical house sold in May for $425,000, down 26 percent from a year ago, according to The Press Democrat’s latest home sales report. Sellers of distressed properties are not moving up. Steep price cutting discourages those who would like to sell, but don’t have to, unless they have built up substantial equity.”

“That’s the tough part. It’s really narrowed the field for people who can sell their home,’ said Toni D’Angelo, an agent in Santa Rosa.”

“Rising interest rates also have diminished some of the boost expected after Congress created a new type of jumbo mortgage for Sonoma County and other high-priced areas. Interest rates on jumbo conforming loans — $417,000 to $662,500 — remain about a half-point above loans under that level.”

“‘The financing isn’t as attractive. Now someone has to really want to buy a house,’ said Maia Lomax, president of the Redwood Empire Mortgage Lenders Association.”

“The median has fallen 23 consecutive months, declining 31 percent from the market’s peak price of $619,000 three years ago.”

From Bloomberg. “The California housing market may be showing the first signs of a recovery after three years of declining sales and two years of rising foreclosures, the UCLA Anderson Forecast said today.”

“While a ‘normal’ housing market ‘is still a long way off,’ according to the report, the increase in home sales in some parts of the state is a positive sign. ‘This is the very dim flicker of the light at the end of the tunnel,’ said Ryan Ratcliff, an Anderson Forecast economist, wrote in the report.”

“In California, the ‘unprecedented speed of the price adjustment means that instead of several years of slow bleeding (like the 1990s), we have compressed the necessary adjustment into two years of intense housing pain,’ Ratcliff wrote. ‘Mom always said it’s better to just rip the Band-Aid off.’”

“The number of homes sold dropped in every California county DataQuick tracks except Riverside, where home sales increased 4.1 percent. Foreclosure sales accounted for 57 percent of Riverside’s May sales, the most of any Southern California county, DataQuick said.”

From ABC 7.com. “An economist with the (UCLA) study said while we still hear talk of a recession, California will not see the type of job loss that typically go with a national recession.”

“‘Indeed, for California this is primarily a housing-related adjustment to a very overheated speculative market. The carnage is palpable but contained,’ economist Jerry Nickelsburg of the UCLA Anderson Forecast wrote.”

“While the economic forecast remains gloomy, it will not spiral out of control, and jobs in the Southland that have been lost will be replaced, especially in areas like Orange County.”

The Press Enterprise. “California may be on the road to accomplishing a kind of economic quarantine, a report released Tuesday by a UCLA economist found.”

‘The slumping housing market is causing the state to lose construction and finance jobs. But the housing-related losses appear to be confined to housing, and that sector’s ailment is unlikely to spread to the state’s overall economy.”

“The long-term news is not good for workers who used to process mortgages and work in other financial jobs fueled by housing. Nickelsburg said these jobs, which were at the center of Orange County’s economy and had spilled over to Riverside and San Bernardino counties, are unlikely to return to their levels of two years ago.”

“Nickelsburg said it’s unlikely to see so many people working at these jobs ever again, and he wrote it might be five years before Orange County’s economy absorbs the thousands of people who no longer have jobs in mortgage offices.”

The Union Tribune. “‘The economic outlook through the end of 2009 is decidedly subprime,’ said David Shulman, a senior economist at the forecast.”

“Already, the decline in home prices has wiped out about $3 trillion in home equity nationwide and sparked at least $400 billion in foreclosure-related losses at financial firms, according to the report.”

“‘All indications seem to suggest that (the nationwide) peak-trough decline could be on the order of 25 to 30 percent,’ Shulman said. ‘Should house prices decline by 30 percent, most of the home equity of people who own homes subject to mortgages could be wiped out.’”

“‘Our home prices were just insanely high,’ said Stephen Ross, director of the Center for the Continuing Study of the California Economy in Palo Alto. ‘I absolutely agree that a 30 percent decline (from peak to trough) is quite possible. And some areas will get hit worse than others. San Diego’s already been hit pretty badly.’”

Todays Local News. “Rosita Cortizo, lead therapist in the counseling department at North County Health Services in San Marcos, is seeing an increasing number of patients who are losing jobs and homes to the faltering economy.”

“‘They see declines in internal resources,’ Cortizo said. ‘It leads to a lack of personal control. You try to restore their sense of self-control so they can move forward. But there isn’t a magic formula.’”

“Severe economic problems can ruin people, Cortizo said. It is critical to develop a plan to help people get control over their lives.”

“‘You have to identify what they need to do to get out of crisis,’ Cortizo said. ‘Losing a home isn’t going to change. So a lot of that is helping them get through the grieving process.’”

The Times Standard. “With economic factors like the housing slowdown and credit crunch taking a bite out of auto sales across the country, only the subcompact market showed growth statewide in the first quarter of 2008, according to the California New Car Dealers Association.”

“‘The magnitude and severity of the slump are eye-opening,’ the organization says on its Web site.”

“No region of the state has been hit harder than Northern California, where total new car sales are down nearly 20 percent.”

“Hiouchi resident Laura Stottrup strolled through the lines of pickup trucks at Mid-City Motorworld Tuesday afternoon. When asked if she was searching for a new car, she scoffed. ‘Shop for cars? Who can afford ‘em?’ she asked. ‘It costs $100 for half a tank of gas. I wouldn’t shop for anything right now.’”

“She was merely browsing the lot while her mother’s car — a hybrid — was being serviced inside.”

“‘People are trying to trade in their big vehicles, and dealers aren’t taking them anymore,’ said Mid-City Motor World Sales Manager John Dalton. ‘Big diesels and SUVs are coming in left and right, and we’ve had to turn people down.’”

The Daily Bulletin. “During a tightly controlled news conference Tuesday, Kevin McCarthy, CEO of PFF Bancorp, said he might be looking for a different job by year’s end.”

“McCarthy signed off on numerous loans to developers who can’t repay what they borrowed during the inflated housing-market frenzy that swept through the two-county region just a few years ago. Since then, PFF’s asset quality has deteriorated to the tune of millions of dollars.”

“‘The economy was exacerbated by subprime lending,’ McCarthy said at the Rancho Cucamonga news conference, explaining the hole PFF fell into.”

The LA Times. “When developer Empire Land sought protection in U.S. Bankruptcy Court in Riverside in April, its biggest debt by far, $5.1 million, was to PFF Bank & Trust.”

“Southern California’s oldest bank, PFF; formerly Pomona First Federal, had doubled its loan portfolio to $4 billion over the last decade, in large part by financing residential developers and builders of affordable housing in the Inland Empire.”

“Home-mortgage specialists may have been the first lenders to suffer for their roles in financing the housing bubble. But, as foreclosures rise and home prices fall, many smaller banks and thrifts that backed residential developers and home builders are watching black ink turn red and are spending uncomfortable amounts of time with regulators.”

“The financial institutions also are enduring jabs from critics who say they tossed lending standards out the window.”

“‘In the Inland Empire, we’re hearing land is going for 20 or 30 cents on the dollar’ of its appraised value when the loans were made, said RBC Capital Markets analyst Joe Morford.”

The Orange County Register. “Last week, local rates climbed to the highest level this year. The average rate for a 30-year fixed loan up to the old conforming limit of $417,000 hit 6.035 percent with a one-point fee last week - the first time in three months the average rate was above 6 percent and the highest level since December 2007.”

“Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., which also monitors Orange County, said higher rates are coming just as housing sales are picking up as some buyers get deals on foreclosed properties.”

“The silver lining of record foreclosures, banks took possession of 1,131 homes last month, is that housing affordability has increased a bit in Orange County, Kyser said.”

“But if mortgage rates keep rising the affordability gains could be wiped out, he said. Home buyers looking for a place that they will live in for several years might want to take advantage of lower prices now, he said.”

“Housing prices will likely fall for the rest of the year, hurting investors looking to quickly sell, Kyser said. As for foreclosure investors, Kyser said, ‘Some will have their head handed to them on a platter.’”

The Uinta County Herald reports from Wyoming. “The concrete foundations poured and seemingly left for dead on Cheyenne Drive, and in Brook Hollow Subdivision Phase 4 are just the visible fragments of a big real estate investment and development plan that has crashed down in recent months. Leo Coleman of Utah, the 2003 Utah County Builder of the Year, and his partner, Dean Casutt,…purchased nearly every available building lot in town - 125 lots in at least four subdivisions, according to public record.”

“Investors were then invited to buy lots in order to provide Coleman Construction with capital. The plan, outlined in the prospectus and other documents, was that investors would buy the lots from Coleman; he would develop those lots, build houses on them and then find an end user - someone to buy and live in the house.”

“Kurrin Bickmore, a Utah-based investor, said all of this was to happen in less than a year. Most of the investors had no knowledge of Evanston, nor any intention of owning property here for any time over the 120 days. Few, if any, knew what they were buying.”

“Bickmore admitted that he didn’t investigate his properties and see what he owned until much later.”

“Coleman stopped making the agreed upon mortgage payments for the investors this spring. Still stuck with real estate in Evanston, now making payments, or facing foreclosure and the ruin of their credit, they started to worry and ask questions and investigate the situation.”

“Karen Field of Coldwell Banker facilitated Coleman’s initial purchase of the lots, and though unable to disclose details, adds that after he closed, ‘he got all different people to invest at astronomical prices;’ some for as much as $81,000.”

“‘We all lied. Everybody that has a lot - we signed and said we were making the down [payment] and making payments. Maybe we did it naively, but we did it,’ said Bickmore.”

“Though a picture was painted of numerous workers from the oil fields lining up to buy new homes, Georgia Harvey of Uinta Title said that the need was probably not inflated too much, actually.”

” Harvey calculated that homes could have been built and could have sold, even with the demand slowing - she estimated that at one time there was at least $5.2 million in Coleman’s hands. ‘But,’ she said, ‘the wheels fell off somewhere…something happened.’”

“As it is now, the investors have now found themselves owning pieces of Evanston, lots most likely worth less than $15,000, for which they paid highly inflated prices. Many of them are wishing, as Roger Harding said, that they had ‘done a little better due diligence.’”

“The investors, ‘not unsophisticated, first-time buyers,’ Harvey said, took too much at face value, with things going so well in real estate. ‘They all should have known better,’ is the general attitude floating around.”

From KPVI in Idaho. “The country as a whole has experienced problems when it comes to home loans. Here in Eastern Idaho, things might not seem as bad, but we definitely aren’t immune.”

“Stacy Davis, Consumer Loan Manager: ‘Over the last year, year and a half, the housing market has slowed down. Idaho has been impacted by that somewhat. We are still behind the national average, but we are seeing the impact more recently in Idaho.’”

“Stacy says a big factor that goes into the lending decision is if the borrower is extending themselves financially. They say it’s easy for families to push it when it comes to what they can afford.”

“‘A lot of the problem has been people over-buying for their ability,’ Davis said. ‘As the market begins to lose value and there’s tightening up of guidelines, you will see less people qualifying for large homes. That seems to be the problem, when you are trying to buy more of a home than you can afford.’”

The Heraldnet from Washington. “Major cutbacks in the building industry in Snohomish County are blamed for a sharp increase in unemployment in May, the state Employment Security Department reported Tuesday. Local unemployment increased from 3.6 percent in April to 4.6 percent last month.”

“‘We dodged a bullet for quite a while,’ said Donna Thompson, a regional labor economist with the department. ‘But unfortunately, it’s catching up with us.’”

“Thompson was talking about the national housing crisis. Thompson said the local construction industry is doing poorly because of the slowdown in home sales. ‘There are a high number of homes that haven’t sold and are still in the market,’ she said.”

“Last month, the county lost 300 construction jobs. During the past year, it’s lost 3,300. ‘Construction workers are losing their jobs and it’s really having an effect,’ Thompson said.”

“She noted that many local homebuyers bought adjustable mortgages that could be increasing to much higher interest rates during the next four years. ‘We could be looking for another year of pain and then we should start coming out of it,’ Thompson said.”

The Seattle PI from Washington. “Bellevue resident Dane Gill graduated from the University of Washington in December, just as the national economic downturn was starting to hit here. He has been looking for work since being laid off in September.”

“‘I’ve applied to at least, I want to say, like, 50 places,’ he said. ‘I’ve had a couple of interviews and a couple of them, they told me afterwards that they stopped their search, so I guess they felt nervous about giving somebody a job.’”

“Gill’s job struggle is part of a larger problem in Washington state: It is producing workers faster than it can produce jobs.”

“Another problem facing Washington workers is underemployment, though the state does not collect statistics on that phenomenon because it’s a matter of opinion and hard to track. Gill, the recent college graduate, said that his counselor told him a humanities degree would be useful.”

“‘She said I could do a lot of stuff with it,’ he said. “I don’t feel like working at McDonald’s or Target would be good for me because I went to five years of college, graduated with honors, you know?’”

The Columbian from Washington. “A sharp downturn in Clark County home building this year is showing up in the local job profile. The construction industry has shed an estimated 700 jobs in the past 12 months.”

“Scott Bailey, a regional economist with the Washington Employment Security Department, said he expects the housing market to continue to have an negative influence on construction.”

“‘If we follow the national trend, the other sectors of construction (commercial and home remodeling) will start to turn down as well,’ he said.”

The Oregonian. “Paul West left his Idaho sawmill job in 2006 for Oregon’s promise of steady paychecks from a booming housing market. By last summer, he said, he was hammered with work. This summer, he’s working the carnival circuit.”

“West still puts in the odd day on the job with troubled builder Legend Homes. But with little construction work, West turned to an $8-an-hour job working games at the Rose Festival and Tigard balloon festival. Still, he hopes to get back to his $13-an-hour building job in a few weeks.”

“‘If that doesn’t pan out,’ West said, ‘I’ve got the Washington County Fair.’”

“Last week, Legend Homes, Oregon’s fifth-largest builder since 2000, filed for Chapter 11 bankruptcy protection from creditors.”

“‘The fundamentals that affects Legend Homes are the same fundamentals affecting everybody else in this industry,’ said Clyde Hamstreet, a Portland business consultant who’s advising Legend Homes. ‘Are there likely to be more bankruptcies? I’d be surprised if there weren’t. A lot of homebuilders are in tough situations right now.’”

“In May, 95,500 Oregonians worked in construction, down 8.7 percent from May 2007. That’s the biggest job loss of any industry in Oregon, according a state reported issued Monday.”

“‘If you know anything about the construction industry, you know it’s gone down by many, many folds,’ said Phil Kartel, president of Salem Painting Co. in Tualatin. He’s cut his company in half from 120 to 60 employees because of slow home sales.”

“What’s worse, no one expects the home-building market to get better soon. Tom Potiowsky, Oregon’s state economist, said, ‘I think ‘08 is going to be a blood bath.’”

“Homebuilders, suppliers and subcontractors built up their business on the housing boom that helped power the Portland economy from 2004 to 2007. People with spotty credit, no down payment or meager incomes qualified in the new lending world.”

“‘It didn’t seem like the demand would dry up,’ Potiowsky said.”

The Bend Bulletin from Oregon. “Martin Montes, a Culver resident, didn’t see it coming. He bought a new home in 2007, when he had a good job and the economy was OK. But a year later a slew of events - a new baby, a reduction in his weekly hours at Bright Wood Corp., from 40 to 28, and a high-interest loan - made mortgage payments impossible to pay.”

“It’s a story that’s becoming increasingly familiar and like many. Montes decided his best option was to broker a short sale, which is when a property is sold for less than the amount owed to the lender. So, Montes will try and sell the home he bought for $190,000 for $169,000, which is the current market value, according to Selef Spragg, a bilingual homeowner specialist with NeighborImpact.”

“In the fourth quarter last year, 4,680 homes in Oregon were in foreclosure proceedings - an increase of 26 percent from the third quarter, according to the state Department of Consumer and Business Services.”

“Montes, who said it’s been a difficult road, offered some basic advice. ‘Don’t buy a house if you don’t have the money,’ he said.”

“The street was supposed to be the stuff of dreams. Along South Grasle Road outside Oregon City, six supersize Street of Dreams homes built in 2007 back up to ribbons of Doug fir and a glazed Mount Hood peak.”

“The builders came to attract future customers, and they were optimistic about selling the show houses that stretched to $3 million. Normally, two or three homes sell during the show and most are sold within a year. But nine months after the Street of Dreams show, none has sold.”

“The show opened just as the U.S. mortgage market tumbled, triggering the Portland region’s biggest home price decline in at least two decades.”

“One Street of Dreams builder tried unsuccessfully to auction his home. Two builders now own their homes and one of them lives in his. Subcontractors who worked on four homes have filed liens to get paid.”

“‘The timing was probably about the worst ever,’ said builder Ray Derby, a Street of Dreams veteran who is still trying to sell his $1.9 million home. ‘We just hit a bad market.’”

“Builder Sean Foushee has built custom homes across the Portland area for 15 years. ‘This is absolutely the toughest time I’ve ever seen,’ said Foushee.”

“Inside the house, Foushee’s voice bounces off the Glacier stone that lines the front room up to the vaulted ceilings. There’s a smoking room outfitted with thick drapes and a Robb Report magazine — the ‘Global Luxury Source.’ There’s a massage parlor and a shower the size of a small bedroom. Even the walk-in closet has a Mount Hood view.”

“And how many fireplaces? ‘I don’t know,’ Foushee said. ‘Seven or something.’”

“Without a buyer, upkeep falls on Foushee and his work crews. ‘It’s not fun,’ Foushee said.”

“Foushee mows the putting green out back. His crews drain the front-yard pond to sweep out algae. Walking next to the wine cellar, Foushee spots dust gathering on the walnut wood floor. The house is still outfitted with $460,000 worth of furniture from the show. ‘The couch alone,’ Foushee says, ‘was $38,000.’”

“He wouldn’t say exactly what his loan payment is, but Foushee said builders for homes in that price range typically must cover a $8,000 to $12,000 monthly payment.”

“Foushee first advertised the house for $3.2 million. He’s now listing it at $2.9 million, and he just wants to get the house off the books. ‘I’d take less than that,’ Foushee said. ‘I’ll take a loss, and it’s fine.’”

“Just as the 2007 show ended and the housing market started to slide, Greg Heinze learned he’d be the lead developer for the following year. By then, it was clear to anyone that the housing market was headed for trouble.”

“Heinze remains confident. He scans his half-built 6,400-square-foot Street of Dreams home on Mount Scott’s peak. Heinze said he did a few things differently to build his house at a lower cost this year.”

“During the 2006 housing boom, Heinze said he might have asked $2.25 million. Now, he’s thinking less than $2 million. ‘It’s primarily market driven,’ he said. ‘You’re absolutely insane to go over $3 million. You’re pretty crazy to go over $2 million.’”

A report from New Jersey Biz. “Homeowners in the state facing mortgage foreclosures are heading in droves to law firms, state agencies and nonprofits for advice on how to save their homes or buy time before they hand over their keys. Glenn Reiser, a partner in (a) law firm in Hackensack, says he is seeing ‘a tremendous increase’ in the number of distressed homeowners calling in for what his trade calls ‘foreclosure mitigation services.’”

“Reiser says the firm has been getting three to five such inquiries a week since March, compared with one or two a week in January and February.”

“Reiser says foreclosures are now hitting people across the income spectrum. ‘Typically, the average person facing a foreclosure is one who has a hard-luck story or somebody who has lost a job, got sick or has had a divorce,’ he says. ‘But the type of client coming to us now is one I have never seen before-a two-income family earning in excess of $100,000 annually and with an extremely high mortgage debt service.’”

“Reiser says his current clients include a Bergen County couple with a combined annual income of more than $120,000, and two mortgages totaling $443,000 on a home with a current market value of $400,000. He says they are nine months behind on monthly payments of more than $3,900, and are trying to sell their home.”

“Other attorneys have similar stories to tell. ‘This crunch has hit a far broader spectrum of the population than ever before in my 39 years’ as a lawyer, says James Aaron, a partner in (a) Ocean-based law firm.”

The New York Times on New Jersey. “In a state where the major burden of paying for government services falls to the property tax, New Jersey bears the unenviable distinction of having the highest property taxes in the country. Over the last five years, the average state property tax has increased 30 percent.”

“Since housing values have started to drop, some homeowners are balking that they are now paying too much - based on inflated property assessments made at the height of the real estate boom - and are now asking the assessor to come back for another look.”

“From 2003 to 2007, the average assessed price of a home in New Jersey rose by 50 percent: to $256,450 in 2007, up from $173,110 in 2003, according to data from the State Department of Treasury.”

“‘Was it criminal?’ asked Harold Frankel, speaking of the 2005 reassessment of Lakewood that resulted in a 60 percent increase in his property tax bill. ‘No. But it was unfair. I think it was stupid to do a reassessment at a time when half of the market was driven by speculation.’”

“Scott Alexander was elected mayor of Haddon Heights last fall, running on a platform that largely focused on the incompetence of the reassessment effort in his Camden County town. With its 2006-7 reassessment, three-quarters of the town’s 3,039 properties saw their assessed value go down, while one-quarter saw huge increases in their home’s assessed values, and, concurrently, property tax bills that were more than double the previous year.”

“‘Everyone thought the whole town’s values went up and therefore the tax rates were going to go down, but that wasn’t the case,’ Mr. Alexander said. ‘The results were all over the place.’”

“Now several hundred homeowners in Haddon Heights, including Mr. Alexander, are appealing their reassessments. The mayor said his house, at $525,000, has lost 20 percent of its value since the reassessment was completed last year and the real estate market has continued to soften.”

The Maryland Daily Record. “Along with many other small and midsize banks, Baltimore-based Provident Bankshares Corp. has suffered through the aftermath of the subprime mortgage crisis, because of a portfolio heavily weighted with housing-related loans. Provident shied away from offering subprime loans, but it has still felt the aftershocks of the mess.”

“‘Even though Provident didn’t invest or lend into subprime, when that tree fell, it took down a lot of prime trees in the vicinity of it,’ said Dennis Starlipper, chief financial officer of the bank. ‘None of us had any idea of the magnitude of the collapse,’ he said.”

“The affects of a crumbling housing market made investors afraid of putting their money into a bank so tied to the industry, Starlipper said. Locally, shares of First Mariner Bancorp have fallen from a 52-week high of $14.20 to $3.85 Monday.”

“‘Investors in this sector have rotated out some time ago and are very leery of rotating back in until the environment of residential finance appears to stabilize,’ Starlipper said.”

“The turmoil in the housing market caused Provident to write down more than $90 million in mortgage-related securities in the 1st quarter.”

“‘If you look at their loan portfolio, they had a high amount of loans in the home equity and construction, and investors’ concerns are that the capital they’ve raised to navigate them through the entire credit cycle will not be adequate,’ said Damon DelMonte, an analyst who covers Provident.”

“Starlipper said nothing would indicate that the bank would see major write-downs in the second quarter, but it’s not out of the woods yet. ‘In no way could I ever say the write-downs are over,’ he said. ‘It is possible that we may have further write-downs in the future.’”

“The chief judge of Maryland’s highest court is calling on lawyers to lend a hand to people facing foreclosure. According to Court of Appeals Chief Judge Robert M. Bell, Maryland is one of the 10 states hardest hit by the foreclosure crisis, with 11,000 foreclosures anticipated for 2008.”

“‘Not every homeowner can save their home. Not every homeowner deserves to have their home saved,’ Bell said. ‘But, for those who do deserve to have their home saved … that’s what this profession is all about.’”

“Foreclosure ‘is no longer a subprime problem nor is it strictly an urban problem,’ Bell said; rather, it has ’spread to every corner of the state.’”

The Times Dispatch from Virginia. “Joan Peaslee, a top-selling agent at Prudential Slater James River, had never dealt with a short sale — until this year. ‘I didn’t even know what one was,’ said Peaslee, who has been selling real estate in the Richmond area for more than 20 years.”

“Requests for short sales have doubled from a year ago, said Jason Spooner, senior VP of defaults for SunTrust Mortgage Inc. in Richmond. ‘As a tool belt, short sales will be with us in 2008 and 2009,’ Spooner said. ‘I don’t think it’s a bad thing. At the end of the day, the last thing we want to do is foreclose.’”

“Todd Poole is trying to work out a short sale with his mortgage lender. He bought a big, beautiful Queen Anne Victorian in the Barton Heights neighborhood in North Richmond for $285,000 at the peak of the housing boom in April 2006.”

“Poole, an attorney, moved to Atlanta for a job and put his house on the market in January for $324,950. When the house didn’t sell, he lowered the price to $299,000. The house is on the market now for $224,950 — $100,000 less than the original asking price — and Poole still has no offers. His mortgage is for $285,000.”

“That doesn’t include the $30,000 he and his wife put into the house in new copper flashing and privacy fencing. ‘We put everything we had into that house. It’s our dream home. In a different neighborhood, it would be worth a lot more,’ he said.”

“Poole said he is trying to get approval for the short sale, but the process is tedious and involved. He said he will allow the house to go into foreclosure if the bank does not agree to the short sale and forgive the remaining debt.”

“‘I would like to work with the bank to reduce their loss and to reduce mine,’ he said.”

“His credit report will be harmed with a short sale but not as much as it would with a foreclosure, real estate experts say. Peaslee, the agent who relisted the house at the reduced price, said the short sale scared away one potential buyer.”

“‘The stars don’t align with a short sale,’ she said. ‘We don’t know what price the lender will take or how long it take to get an answer.’”

“A short sale can take as much as 90 days longer than a typical sale, said Lem Marshall, special counsel for the Virginia Association of Realtors. Even then, there is no guarantee it will go through.”

“Short sales were not done in general during the housing-related recession in the early 1990s because the downturn was shorter and less severe, he said. Marshall has been conducting courses on short sales for agents across the state since August. ‘There are so many out there,’ he said.”

“With so many houses on the market, why bother with the hassle of a short sale? ‘Buyers get a deal,’ Marshall said. Houses sold in a short sale can go for 60 percent to 75 percent of the value, he said.”

“Lenders may forgive the debt and write it off as a loss. Or, they may require the seller to liquidate other assets to make up the balance of the loan. ‘Some lenders forgive debt, some don’t,’ Marshall said.”

“‘If the seller is driving a new $40,000 car, he will need to sell it and get a clunker and give the lender the difference. But usually the seller has been picked clean at this point,’ he said.”

“Nationwide, prices have fallen 20 percent from a year ago and continue to drift down. Although the decline in the Richmond area has been modest, Northern Virginia has seen a steep drop in prices.”

“‘This market is unique; we haven’t seen anything like it,’ Marshall said.”

The Virginia Pilot. “When Tom Edwards and Cyndi Culpepper put a house in Port Norfolk up for sale last summer, they thought it would easily bring $330,000. Edwards had bought the Victorian on Douglas Avenue in Portsmouth in rough shape for about $90,000 in 2004. He and his wife invested about $110,000 more to refurbish the place.”

“The house didn’t sell. In February, the couple hired a new real estate agent who convinced them to drop the price to $291,000. Culpepper said she was reluctant. The couple are like many Hampton Roads home sellers who have resisted lowering their prices as the local housing market slowed and values across the country dropped.”

“As sellers here have held out on price, the inventory of available homes has piled up.”

“The number of active listings across the region - including all Hampton Roads localities as well as outlying rural areas such as Western Tidewater, the Eastern Shore and northeastern North Carolina - climbed to 15,183 at the end of May, almost 11 percent higher than the same time last year, according to the regional MLS.”

“Current listings are almost five times the number in May 2004, when the local market headed toward its peak, said Vinod Agarwal, an economics professor at Old Dominion University, whose data includes a slightly smaller regional slice.”

“Listing prices for homes in Hampton Roads may be indicating more angst ahead for sellers. As of the end of May, the median price of active listings fell to $289,900, down more than 9 percent from $320,000 a year earlier.”

“‘In our thinking, resellers of homes will sooner or later realize that if they want to sell their homes, they’re going to have to lower their prices,’ Agarwal said.”

“Juliette Brown, a real estate agent, recently listed a home in the Olde Towne neighborhood of Portsmouth for $450,000. The owners bought it for $360,000 in September 2005, city assessor’s records show.”

“They made many upgrades to the historic house and now, with a growing family, hope to earn enough to put down on a larger place, Brown said. Like other sellers, they cannot give too much on their asking price ‘because of what they already owe the bank or because of what they need to buy their next house,’ she said.”

“No matter their financial needs, sellers must face the reality of today’s market if they want to move their properties, agents said. Many look back at a neighbor’s sale two or three years ago and want to cling to those prices.”

“Brown said she bought her house in the Greenbrier area of Chesapeake in 1998 for $125,000. Four years ago, a neighbor’s home sold for $375,000. A similar house nearby is listed now at $299,000, she said.”

“‘It’s hard for them to understand, to fathom, that it’s different from a couple of years ago,’ Brown said. They think, she continued, ‘My neighbor across the street made $100,000. I want to make $100,000 now.’”

“Keith Abernathy said prospective buyers in recent years couldn’t find an available townhouse in the Sandie Point development in Portsmouth. He bought his condominium there in 1998 for about $150,000 and put it on the market in February 2006.”

“Listed at $300,000, the three-bedroom condo’s appeal suffered when the housing bubble began to contract. Abernathy took it off the market for about six months over the winter 2007 holidays.”

“This spring, he relisted it at $279,000 and has since dropped it to $269,000. Now, Abernathy is offering other incentives: a home warranty, a year of paid condo fees and $5,000 in paid closing costs.”

“‘There comes a point where you don’t want to lower the price and bring the values down for your neighbors,’ Abernathy said, adding of Sandie Point: ‘It’s one of the best-kept secrets in Portsmouth.’”

“Back in Port Norfolk, Culpepper and Edwards recently told their agent that they would entertain offers as low as $250,000. The couple, who live across the street from their home on the market, has invested in a number of properties in Portsmouth.”

“‘We buy, we rehab, we sell - well, we try to sell,’ Culpepper said. ‘Lately, we haven’t been very lucky with the selling part.’”

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