The Housing Bubble

The Union Tribune reports from California. “In a grim report on the weakened state of the housing industry, Harvard University says the United States is caught in a real estate market downturn ‘that is shaping up to be the worst in a generation.’ Nicolas Retsinas, director of the center, said formerly hot housing markets such as San Diego County saw prices rise to unsustainable levels in the first half of the decade.”

“In the San Diego region, the housing boom led to overbuilding. ‘At some point, the law of gravity had to come into play,’ Retsinas said.”

“Despite the report’s somber tone, some analysts said it might be understating the problem.”

“‘We have never had anything like this happen,’ said Christopher Thornberg, an economist with the Beacon Economics research firm in Los Angeles. ‘It’s a bloodbath. Prices are falling because they are too high. You would have to have prices in California fall 40 percent in order to get back to an historical level of affordability relative to incomes.’”

“Although the report predicts an eventual rebound of the housing market, Retsinas says he’s uncertain when that may occur.”

“‘It will vary place to place,’ he said. ‘You are more likely to see an earlier bottoming out in areas that didn’t see overbuilding, like the Northeast. It will probably be in 2009 there. In other places, like Southern California, I think you are looking at 2010.’”

The Chicago Tribune. “A San Diego real estate brokerage has seized the opportunity to market its services to same-sex clients getting hitched now that such weddings are legal in California: Wellsford Realty is offering to pay for a reception for domestic partners who marry and buy a home or condo (primary or vacation home) through the company.”

“Fine print: What the company is specifically offering, however, is to rebate one-third of its commission, ‘which can be used to celebrate their wedding day or plan that perfect honeymoon,’ according to a release.”

“The rebate could be substantial, though, considering that San Diego has been one of the nation’s pricier markets. But track the local data, and you might realize why this real estate company wants the business.”

“The San Diego Union-Tribune says the median home price in the area plummeted $15,000 between April and May, to $490,000, and from a high of $518,000 in November.”

“More fine print: It will offer its rebate to straight couples, too, according to spokesman Brian Yui. ‘We don’t want to reverse-discriminate,’ he said.”

“And one more thing: ‘I guess if you wanted the rebate in cash, that would be OK too,’ he said.”

The LA Daily News. “California’s real estate market is a three-act play. Sort of a greed tragedy full of surprises. That’s how the UCLA Anderson Forecast sees things.”

“Act 1 was great, for the most part. Act 2 was horrible and Act 3 is still playing itself out.”

“Ryan Ratcliff, who analyzed the market, noted that as late as 2004, California’s real estate juggernaut seemed unstoppable. ‘Anyone with a pulse could qualify for a $500,000 mortgage. But just three short years later, this unprecedented boom turned into an unprecedented bust,’ he wrote.”

“‘Phase two began with 2007’s explosion of foreclosure activity and the bottom dropped out of California’s housing market,’ Ratcliff noted. Ratcliff said the forecast’s economists and others always knew that lending excesses during the boom were foreclosures in waiting.”

“‘But neither we nor the financial wizards of the mortgage-backed securities market ever anticipated that foreclosure levels in California would surpass previous records without the kind of massive job losses last seen in the wake of the aerospace contraction in the early 1990s,’” he said.”

“When will the recovery start? That’s the big unknown. ‘It may be a little early to be celebrating the beginning of phase three - perhaps we’re better off thinking of this as phase 2.5,’ Ratcliff said.”

“Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said that this third phase depends on whether there was a building bubble where you live.”

“Not too much of one in the Los Angeles area but certainly in the Inland Empire and Central Valley.”

“‘It was almost like a heart attack,’ he said of the market collapse. ‘But after the heart attack, you have a long period of convalescence.’”

The Press Enterprise. “The whirlwind of foreclosures hitting Inland counties is ousting renters from their homes, often with little or no warning.”

“‘A lot of these people are just innocent bystanders in a tornado,’ said John Bouzane, a lawyer and owner of a San Bernardino law firm that represents lenders seeking to repossess and resell homes whose owners have stopped making mortgage payments.”

“The California Apartment Association estimates that a fourth of foreclosed single-family homes are occupied by renters.”

“‘A great number of owners of property simply do not let their renters know they are in (default on their mortgages). They will continue to collect rent and also bring in new renters,’ said Darrell Moore, deputy director of Inland Counties Legal Services.”

“Some property managers like Bill Santoro in Moreno Valley, say in response to the tenants’ plight they are screening potential clients to avoid leasing houses headed to foreclosure. Still, Santoro said such checks are not foolproof because lenders generally don’t record a notice of default until a mortgage is at least three months delinquent.”

“Landlords in default on their mortgages tend to entice tenants with very low rents and sometimes advertise that they will accept applicants with poor credit, said Pete Nyiri, owner of Top Producers Realty in Corona.”

“Some tenants also are being scammed by people who take a deposit and first month’s rent on an empty house in foreclosure that they don’t even own, he added.”

“Nyiri advises tenants he removes from foreclosed homes to be careful when they rent again. He advises them to have a rental agency guarantee in writing that the house they are planning to lease is not in default and then to recheck the county records every two months.”

“Paula Schnurr said after the three-bedroom house her family rented in Corona was foreclosed on early this year, she learned that the owner never made a mortgage payment although they had been paying rent of $1,875 a month since June 2007.”

“She said after a struggle she got back her deposit and found another house to rent. But she said she worries that the ordeal could be repeated. ‘It is hard to trust people any more,’ she said.”

The Daily Press. “Construction jobs plummeted in December, and Hispanics took the hit the hardest studies show. ‘There are so few jobs here since December, lots of people are moving to find work somewhere else,’ said Jesus Chavoya, a Victorville resident who worked in concrete until last November. ‘Some people came from as far as Mexico to work here.’”

“Jorge Basaldua joined family members in Victorville in 2005 when there was plenty of construction work. ‘In 2005 people were using the money to buy cars, it was a good time,’ said Basaldua.”

“Workers like Basaldua still found new construction jobs in 2006, when construction wages started shrinking nationwide.”

“‘People paid us less but most workers here didn’t quit until 2007 when there was no more work,’ he said. ‘Moving away or staying in one place, construction was still good money.’”

“Hispanic laborers like Chavoya, lost nearly 250,000 jobs in 2007 because of the housing slump, but still look for construction work on Center Street Park. The housing market slump also meant fewer maintenance jobs for Hispanics to prepare houses for sale, said Fran Chevalier, sales agent with Frontier Homes.”

“‘A lot of Hispanic women are in the cleaning business,’ said Chevalier. ‘The drop in sales would mean less work for women. We also didn’t have to maintain as many new yards and 90 percent of landscapers working on Frontier Homes are Hispanic.’”

The Fresno Bee. “An adjustable-rate mortgage bubble is coming to the central San Joaquin Valley’s housing market, and the tens of thousands of homeowners who hold those mortgages should prepare for the rate increases to come.”

“That’s the word from mortgage counselors worried that the easy lending practices of the housing boom years are about to lead to a lot of pain for borrowers.”

“‘There’s a bubble coming through this fall, an ARM bubble that was originated about two to three years ago,’ said Martha Lucey, president of a nonprofit financial counseling group in Fresno.”

“In other words, she said, ‘there are a lot of people in Fresno in a whole lot of trouble.’”

“Between July and September, 9,847 adjustable-rate mortgages in Fresno County will experience some kind of reset, said Jennifer Shepherd, sales manager for Chicago Title in Fresno County.”

“Of those, 7,367 are owner-occupied, rather than investor-owned, she said. Of that number, 6,359 involve homeowners who owe 90% or more on the home, giving them ‘very little chance of refinancing,’ she said.”

“In dollar terms, about $4.3 billion in ARMs still await their first rate resets in Fresno and Madera counties, according to First American CoreLogic data. At the coming reset peak, in August, holders of $204 million in ARMs in the Fresno region will have to start paying more per month.”

“That could add to the rising number of foreclosures throughout the Valley, said David Mendoza, director of the Fresno Housing Resource Center.”

“One subprime borrower he is counseling started out with monthly payments of $800, but those rose to more than $1,200 a month at the end of the loan’s two-year ‘teaser’ period. Now, with the reset, that payment will rise to more than $1,600 a month.”

“And on the high end, ‘We have people coming in here who signed on for $2,400-a-month payments that are nearing $4,000 a month’ upon reset, Mendoza said. ‘These are estate properties purchased for between $350,000 and $500,000 that are now being lost.’”

“Holders of ‘option ARMs,’ that allow borrowers to choose how much they pay each month may see even steeper increases, said Lucey. Homeowners were actually increasing the total amount they owe, Lucey said.”

“‘You add that on top of an interest rate adjustment, and you can see an increase of over $1,500 a month’ upon rate reset, Lucey said. Such high resets are common among people her office is trying to help, she said.”

“Mendoza said he’s had trouble getting some lenders to consider loan modifications for borrowers who haven’t yet missed a payment — perhaps, he suggested, a sign of how busy most lenders are trying to deal with the flood of late payments, defaults and foreclosures.”

“Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said lenders are working hard to respond to every homeowner in trouble. However, he said many lenders are ‘just overwhelmed’ by the number of borrowers seeking help.”

“‘We’ve heard from counselors who’ve had difficulty sometimes working with lenders,’ Hobbs said. ‘Much of that has to do with the unprecedented volumes involved.’”

Some housing bubble news from Wall Street and Washington. MarketWatch, “The housing slump, already shaping up to be the worst in a generation, still hasn’t run its full course, according to Harvard University’s annual report on housing, released on Monday. And if job losses accelerate in coming months, it could take even longer for local markets to regain their footing, said Nicolas P. Retsinas, director of the university’s Joint Center for Housing Studies.”

“Real home equity (adjusted for inflation) fell 6.5% to $9.6 trillion in 2007. According to the report, the homeowner vacancy rate jumped to 2.8% in the last quarter of 2007, from 2.0% in the last quarter of 2005, as the number of vacant units rose by more than 600,000.”

“At the end of last year, the report estimates that the oversupply of vacant, for-sale units numbered about 800,000 — equal to 1% of the owner housing stock.”

“‘Builders overbuilt, lenders over-lent and borrowers over-borrowed — and we’re paying a price for that,’ Retsinas said.”

“In the meantime, maybe Americans need to redefine what a home is, he said. ‘After all, a home is to live in primarily, not for buying and selling,’ he said.”

From Reuters. “‘As investors demand a higher return for assumed risk and limit credit to riskier borrowers, costs are rising for all types of mortgage, consumer and corporate loans,’ the center said in a press release. ‘Many would-be borrowers are now finding it impossible to get loans at any price.’”

“‘Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability,’ Retsinas said. ‘It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets. The slump in housing markets has not yet run its full course.’”

“To get home affordability back to 2000 levels, before a five-year record home price and sales surge, ‘would take some combination of large price declines, interest rate reductions, rent deflation and unprecedented real income growth,’ it said.”

“‘If foreclosures really ramp up and they’re starting to,’ Retsinas tells John Wordock, ‘that can only add to the inventory and delay the recovery.’”

“‘But the most serious challenge would be in the jobs market.’ He says. ‘If the economy really turns sour and we start to lose lots of jobs, the worst may be yet to come.’”

From Bloomberg. “Citigroup Inc. may begin another round of job reductions as soon as this week under a plan drawn up in March to cut the trading and investment-banking workforce by 10 percent, said a person with knowledge of the matter.”

“The largest U.S. bank has eliminated about half of the 6,000 jobs targeted since then, said the person, who declined to be identified. Citigroup employs more than 300,000 people worldwide and has announced about 13,000 job reductions this year.”

“More than two dozen financial companies worldwide have announced plans to eliminate more than 83,000 jobs since last July, or about 3.3 percent of their employees. Following the dot- com bust in 2000, 17 percent of banking and securities in New York were wiped out, according to the Bureau of Labor Statistics.”

“Citigroup’s $42 billion of credit losses and writedowns since last year account for about 10 percent of the global total, according to Bloomberg data. Citigroup has lost more than any company in the mortgage market rout and its shares tumbled 63 percent in the past year.”

“The economic slump that began in the U.S. housing market has spread to commercial real estate, Wachovia Corp. senior economist Mark Vitner wrote in a June 4 note. Retail vacancies in the first quarter were up 8 percent from a year earlier, he said.”

“Wall Street firms used commercial mortgage-backed securities, known as CMBS, to muscle into a market previously dominated by regional and commercial banks that often held the loans to maturity. Now the market has collapsed.”

“‘They didn’t have a good exit strategy,’ said David Hendler, an analyst at CreditSights Inc. in New York. ‘They felt there would be a market for the product they were producing, or they’d always come up with the next newfangled structured-finance instrument. Now they’re stuck holding the bag.’”

From The Star. “Amid the gloom and doom, it’s probably the best time to make a nice little killing as far as the property market in Britain is concerned. Bernard Tan, a Malaysian agent for Halifax - Britain’s largest mortgage lender - admitted it was a good time for Malaysians to enter the property market, especially if they’ve got the money.”

“‘In the long run, buying properties in Britain is a more steady way of investment as there are not enough houses to go around, particularly in London where no new ones are being built,’ he added. ‘How can prices drop a lot if there is a shortage?’”

The Evening Standard. “A new survey reveals that construction of new homes in London has ground to a virtual halt. Fewer than 1,000 new homes will be started in the capital over the next six months on top of the 11,300 built so far this year, according to London Residential Research.”

“This 2008 total - of 12,300 - is a dramatic 60 per cent below the 28,800 homes built in 2007.”

“Housing consultants London Development Research, which polled more than 200 developers, discovering a market on the brink of catastrophe, says: ‘If you have just put down a £2,000 deposit on an off-plan purchase, you ought to walk away - right now.’”

“Across Britain, house-builders are mothballing developments. It is the biggest crisis since the 1930s, says Roger Humber, from the Home Builders Federation, which is pleading with the Government to take action.”

“A veteran of housing crises stretching back to the early Seventies, Humber said: ‘We’ve not experienced anything like this post-war. It really is on a scale we’ve not seen before.’”

“There are plans to build more than 9,200 houses on the land semi-encircled by the Thames. Work has halted on a 22-acre site on the north-west rim of the peninsula. Here, a consortium has plans to build 3,000 new homes in a series of high-density blocks.”

“UK developer Quintain Estates and the Australian builder Lend Lease formed a joint venture last year to create the homes which - prophetically you might think - will have views across the river towards that other stalled development in Silvertown Quay.”

“But at a meeting earlier this month Quintain edged back from a commitment to build anytime soon. ‘We are preparing our premium product for the return of equilibrium in the markets… and will only develop and market this landmark development when propitious conditions return.’”

“Translation: ‘Whose crazy up-market idea was this! Shut the shop.’”

From Letting News. “New research by auction experts Essential Information Group and auctioneers Allsop, showed prices of new-builds in city centres had plummeted, with many sold for a fraction of their value.”

“It found that the value of the average new-build flat had plunged by 26 per cent. Only 20 of the 535 flats sold at auction, which were typically ‘distressed sales’ such as repossessions, were sold for a profit.”

“A three-bedroom flat in a Belle Vue Road development in Leeds was bought for £237,999 in March 2006 but recently sold for just £71,000 - a drop of 70.17 per cent.”

“In another case, a one-bedroom flat in Melbourne Street, Newcastle upon Tyne, was bought for £142,800 in May 2006 and sold at auction this month for £78,000 - just over half the original price.”

“David Sandeman, managing director of Essential Information Group, said there were hundreds of similar disasters happening across the country. ‘We are at a stage where there are now flats which are completely unsaleable. People believed all the hype and the marketing that they would be able to rent out their flat for £1,200 a month to a professional couple. But they could only actually get £800 a month renting it out to students who have trashed it.’”

“Mr Sandeman said the situation was likely to have worsened since February.”

The Miami Herald. “So how big was Miami’s downtown building boom? In the last six years, 22,737 units were built or are now under construction in Miami’s urban core — more than double the number built in the nearly 40 previous years, according to a new report.”

“‘The issue is, have we made this a more livable downtown and the answer is absolutely yes,’ said Jorge Perez, chairman of condo builder Related Group. ‘Will within a certain period of time 22,000 units be consumed? Yes.’”

“Perez, who is behind a dozen downtown condo towers, added that despite the current market pain, few observers deny Miami’s long-term prospects are bright. ‘If we are ever to have a viable, 24-hour downtown, this is a minimal amount of units,’ he said. ‘What is 22,000? It is nothing.’”

The Charleston Business Journal. “When it comes to architecture, Charleston is all about columns, dormer windows and crown moldings. Or at least it has been in the past.”

“Today there is a new contender in residential architecture popping up on city streets, laying claim to new construction as well as renovation projects. Loft living in the Lowcountry may still be new, but it has made friends quickly with both developers and home buyers looking for something with an urban edge in a historic setting.”

“‘A loft is more than a space,’ said Kristopher King, a project manager with Wecco of Charleston, a developer specializing in mixed-use projects. ‘You’re selling aesthetic, you’re selling a lifestyle. They’re sort of edgy. They’re urban.’”

“Wecco is building a 57-unit loft complex with a commercial component on the ground floor off upper Meeting Street on Cool Blow Street. The project, called One Cool Blow, has presold all but 10 units, with prices ranging from $240,000 for a 785-square-foot unit to $340,000 for a 1,125-square-foot-unit.”

“Katye Rhett is leaving her suburban James Island rental home for a 785-square-foot loft at One Cool Blow and plans to move in at the end of June.”

“‘It’s a lot bigger where I’m moving from, but that doesn’t matter to me,’ Rhett said. ‘I spend most of my time with friends downtown and I work downtown. I want to live where I work and play.’”

“‘In other markets, lofts have been there awhile and have done very well. In Charleston, sometimes things go a little slower, but it’s now hitting Charleston. I don’t want to use a cliché, but it’s kind of hip and open, an entertainment-type lifestyle,’ said John David Madison, whose investment company, Mad Investors, has fueled a number of residential and commercial projects in downtown Charleston.”

National Mortgage News. “Senators Chris Dodd and Kent Conrad…are still trying to explain how they were recipients of ‘Friends of Angelo’ loans and falling all over themselves in the process. As most mortgage industry veterans know, FOA loans are not new.”

“They’ve been around for years. I know of at least one other top 15 lender that had a ‘friends’ program.”

“Super jumbo lender Thornburg Mortgage is once again flirting with bankruptcy. The publicly traded REIT’s share price is down to 25 cents. It has offered to buy back its preferred stock for $5 a share. However, investors who bought the stock when it was first issued paid $25.”

“Many mortgage lenders REITs were taken public by Friedman Billings Ramsey and its CEO, Eric Billings…The Wall Street firm had this to say about the housing market in California: ‘We visited the Merced, Modesto, Stockton, and Sacramento MSAs and met with housing investors, realtors, and home builder representatives. The tour produced both good and bad surprises, but the degree of the price declines in these markets was our biggest takeaway.’”

“‘Sacramento is by far the worst hit of all the above mentioned markets, and unfortunately, it is also the largest market we visited. On a positive note, housing inventories are beginning to move across all the areas, and some houses are even getting multiple bids, but at prices 30% to 70% below FY05 peak price levels.’”

The St Petersburg Times reports from Florida. “Gov. Charlie Crist stood before hundreds of Realtors in Orlando last summer and predicted fantastic things about the property tax cuts on the January ballot. ‘Florida’s going to have a sonic boom when this happens,’ he said, using rhetoric he would repeat again and again over the next several months. ”You’re going to be busier than you’ve been in your life. Get ready, get your rest, make sure your license is up to date.”

“Five months after the vote, Florida is still waiting for the sonic boom.”

“To fully benefit, however, homeowners need to be able to sell the home they are leaving. John and Melanie Scharch moved to Hernando County last year from the Keys. The couple carried $235,557 in accrued Save Our Homes benefit from their old home, reducing the assessed value of their new home to $93,336.”

“‘It’s great,’ said John Scharch. ‘But until I sell my other house, I’m not saving anything. I’ve had three people look at it and they really like it, but they say, ‘I have to sell my house first before I can buy yours.’”

“A steady trickle of potential buyers streamed through nine downtown developments Saturday as part of the Urban Tour of Homes. The price tags ranged from the $180 thousands to the millions.”

“‘Everything is down here right now except the people,’ LaQuinda Brewington said. When asked ‘which comes first, the residents or the retail?’ many people Saturday said they believe the retail will follow. And when it does, maybe they’ll have a prime piece of property, Brewington said.”

Steve Pralle of Hyde Park (is) considering buying property to rent out. He was weighing whether this is a good time to invest, and cautiously optimistic that in six to nine months the market will be back on the upswing.”

“‘And hopefully there will be quick appreciation,’ he added.”

The Herald Tribune. “Federal regulators are worried that some banks in Florida and across the nation may be ill-prepared to deal with their battered loan business. U.S. banks have set aside just 89 cents to cover every $1 in nonperforming loans, or loans that borrowers are no longer paying off, said Sheila Bair, chairman of the Federal Deposit Insurance Corp.”

“That is the lowest ‘coverage ratio’ in 15 years. In Florida, the coverage ratio is just 50 cents per $1 in bad loans.”

“Bank analyst Richard Bove of Lutz says the outlook is not good. ‘The impact on banks will be to drive loan losses to levels only experienced in a depression,’ Bove said. ‘The annualized first-quarter 2008 domestic loss numbers are higher than in any year than 1934 already.’”

The Miami Herald. “Las Olas Riverfront, the distressed retail and entertainment complex along downtown Fort Lauderdale’s New River, is slated to go on the auction block. A Boca Developers company bought the property for $31.9 million in 2005, intending to raze it. The developer earlier this year unveiled plans to build two condo towers, offices, shops and entertainment.”

“But Boca Developers’ vision unraveled after the company ran into financial troubles resulting from the turmoil in the real estate market. A New York concern called ACF Riverfront moved ahead with the foreclosure. ACF Riverfront is owed about $22 million.”

“‘There will be an investor who will buy the thing,’ said Michael Cannon, a Miami real estate analyst. ‘The question is what use the property will be put to.’”

From Marketplace. “U.S. mayors are working to resolve the housing crisis by using federal money. Rampant foreclosures are especially hurting cities by choking off property tax revenues that fund city services.”

“Frank Ortis is mayor of Pembroke Pines, a city near Miami. He says people getting kicked out of their homes are adding to urban blight. Ortis: ‘Some even poured concrete down toilets, put holes in walls. And then you have the over-growing of the grass. And you have pools, in Florida especially, turn green and become mosquito-infested.’”

The Sun Sentinel. “It’s a nice-sized house in a country club neighborhood in Delray Beach. The owner put it up for sale in December 2005. Despite having its price slashed more than 50 percent, the house has sat. And sat. Current days on the market: Nine hundred and twenty-six - and counting.”

“‘It’s been a tough one,’ admits real estate agent Louis Levy. ‘It was listed at $699,000 two years ago and now it’s $329,000.’”

“At least 1,058 have languished for more than two consecutive years in Broward, Palm Beach and Miami-Dade counties. Yet even that estimate is too low, ZipRealty said, because the numbers don’t count homes pulled off the market and put back on when sellers switch agents, make improvements, or let the listing expire and enter a new sales so the home does not look stale.”

“‘It’s very hard for people to adjust their mind to the new value of the property. They all have this mind-set, ‘I can afford to keep it for two years and sell it when the market recovers,’” said real estate agent Jackie Moore of Fort Lauderdale. ‘But in the ’70s, it took almost 14 years for real estate to rebound.’”

“‘I’ll take it off the market and stick it out if I have to,’ said Charles Resta of Fort Lauderdale, whose Harbor Beach home has been for sale since November 2006, despite dropping the asking price from $1.9 million to about $1.4 million.”

“Steve Lee moved from Pompano Beach to Los Angeles but hasn’t been able to sell his three-bedroom condo, which he put on the market in April 2006, despite cutting the price from $224,900 to $99,000.”

“Part of the problem, he said, is the home was damaged after a water leak and sewer backup. The repairs are done, but he’s still tied up in lawsuits with his condo association. He’s begging the bank to foreclose so he can cut his losses.”

“‘I don’t want a penny, just take it,’ Lee said. ‘It’s absolutely destroyed me - mentally, physically and emotionally.’”

“A $1.7 million waterfront mansion in Fort Lauderdale’s South New River Isles (was) offered three years ago by developers before ground was broken. ‘We used to sell them before we finished them,’ said Ken Fernandez of Kenco Builders. ‘Now I’ve got it listed at a loss.’”

The Orlando Sentinel. “Countrywide, the nation’s No. 1 home lender and poster child for the mortgage crisis, is marketing 1,600 homes in Florida and more than 200 in Central Florida alone. Countrywide has slashed prices, with some houses listed at 40 percent less than what their owners paid at the height of the real-estate frenzy just two years ago.”

“In case you needed more proof of just how artificially inflated home prices were and how foolishly banks signed off on loans to pay for them, this is it.”

“George Philbeck, an agent in Orlando, has several listings for Countrywide-owned homes. On some, he said, he has received eight and nine offers. ‘About 90 percent of homes are getting very little traffic and not selling,’ he said.”

“That’s because they aren’t priced right. Many sellers aren’t willing to let go of the dollar amount they think they would have made on their house two or three years ago. Banks, unlike individual sellers, are often willing to hack the price.”

“‘The banks are interpreting value based on the amount of traffic and the competing market, and they’re making their pricing decisions and adjustments based on facts, not emotions,’ Philbeck said.”

“The home at 2067 Marsh Hawk Circle in the Hunter’s Creek area, for example, sold for $343,000 in 2006. It is now listed for 43 percent less — at $194,900, according to Countrywide’s web site. It’s been reduced at least three times, according to previous listings that show the bank at one time asking $259,900.”

The Atlanta Journal Constitution in Georgia. “Caleb Atkins gave himself a heckuva birthday present Sunday: a two-bedroom, two-bath condominium on the top floor of the Tribute Lofts building east of downtown Atlanta.’

“Tribute sold 26 units in an unusual one-hour auction Sunday at the Omni Hotel at CNN Center. The developers, Greg and Brian Wohl, decided to go the auction route because the condo market is so sluggish.”

“‘I’m about to go and celebrate pretty heavily,’ said Atkins, a Georgia Tech graduate who works in Suwanee and turns 25 on Friday. ‘I prefer to live where I play.’”

“Even before learning of the auction, Atkins was planning to buy a Tribute condo and say goodbye to his house sharing in Virginia-Highland. ‘But two days before I was to make that offer, the auction was announced,’ he said. ‘We freaked out. The two-bedroom unit that I couldn’t afford, I could afford now.’”

“Atkins is a homeowner for the first time. He paid $263,000 - the highest price at the auction - for the 1,306-square-foot unit. Atkins pointed out his winning bid was ‘30.77 percent’ less than the original asking price of $379,900.”

“Four more units were not offered for sale when the sellers ended the auction ended early; they feared prices might go too low as the crowd thinned. The project still has about 40 market-rate units left to sell, which will be reduced in price as a result of the auction, Wohl said.”

“The cheapest sale was $132,000 for a 795-square-foot one-bedroom unit that originally was priced at $183,900.”

“Paul Nichols, a 30-year-old Georgia Tech graduate, earned a round of applause as the first winning bidder. He paid $144,000 for his one-bedroom unit. Nichols said he plans to move there from Buckhead and enjoy the seventh-floor view while waiting for his new home to appreciate.”

“‘And if it doesn’t,’ he said, ‘America is in trouble.’”

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