The Housing Bubble

I realize this isn’t the end of the decade, but so many papers have articles like these, I decided to run with it. Tomorrow we’ll have a predictions thread, and this is a Thursday desk clearing post. “This was the year, finally, that promised relief, opening with foreclosure moratoriums and a highly touted Obama administration initiative to keep millions of desperate borrowers in their homes. But 2009 ends with the same old troubles. Woodland, Calif., borrower Jennifer Quigley made six months of trial modification payments to Wells Fargo, only to get a permanent modification offer that raised payments to 54 percent of her family’s gross monthly income, not the targeted 31 percent.”

“‘I said, ‘This isn’t our income.’ They said, ‘That’s what’s in our computer,’ said Quigley, laid off a year ago from UC Davis. ‘We’re right at the end of our sanity. Come January we’ve been doing this for a year with no resolution.’”

“A’Leah and Randall Knight, of Bend, built their 1,700-square-foot home practically themselves five years ago. An appraiser valued it at $350,000 just two years ago. The market was booming and investing in a second home made sense. Even worse, her husband recently had a severe pay cut, and their renter stopped paying rent. They sold the rental house. Now, trying to short-sell their home to help pay off their $300,000 debt, they have it on the market for $136,900.”

“”We bought a rental house, and then the market just crashed,’ Knight said.”

“First came foreclosure sales, then short sales. Now Central Florida is seeing more half-finished homes for sale: bare-stud, bare-yard houses abandoned by their builders and left to languish on the market. ‘If I had known three years ago that my business would be based on selling short sales, foreclosures and half-built houses, I would have told you you were smoking crack,’ said Kelly Price, a veteran real-estate broker based in Winter Park.”

“It’s been a wild and eventful past 10 years in the East Valley. Nothing defined the decade more than the area’s housing bubble. The double-digit appreciation rates during the first half of the decade had real estate agents driving investors through neighborhoods while they snapped up houses in hours or days. It was said agents for buyers and sellers were so hot to move on deals they were filling out the paperwork using car trunks as desks. Buyers didn’t think twice about the home’s condition, and sellers did dances over the amount of money they were getting.”

“Then the crash came. And house prices slid for most of the rest of the decade. Foreclosures led to blight in many neighborhoods. There are still about 50,000 homes on the market in the Valley.”

“Call it the end of the age of exceptionalism, Flagstaff-style. Entering 2009, Flagstaff appeared to cling to the notion that somehow the Great Recession was going to pass it by. It was only a matter of time before Flagstaff’s government- and tourist-dependent economy went on the ropes, too. The first signs early in the year came as housing values declined, making new home equity lines of credit harder to come by. That caused retail spending to plunge by double-digit percentages compared to the previous year. Flagstaff’s municipal budget went into a tailspin.”

“The idea that Flagstaff could somehow remain above the economic fray was wishful thinking that, in hindsight, might have cost the region valuable time in confronting and coping with the recession’s major impacts.”

“After decades of leading the nation in growth, Nevada may now be losing population. A new report from the state’s demographer estimates Nevada lost more than 27-thousand people in the year ending July First. ‘This is a new phenomenon for Nevada.’ says state Demographer Jeff Hardcastle . ‘We used to joke Nevada was the one state in the nation where a three percent growth rate was a recession.’”

“‘We peaked in about 2006 with construction employment,’ says Hardcastle, ‘and if you recall we got hit by the housing bubble in 2006, then got hit by the gas price surge in 2007 which deteriorated the tourism industry and then got hit by the Lehman Brothers and financial crisis nationally.’”

“I’ve come to visit a brand new housing development, just off the main street of a small town 17 miles from Dublin city centre. The signs at the entrance promise ‘The Best of Everything’. But there’s no one living here. It’s a scene replicated hundreds of times around the country. As the New Year approaches, the question is: What do we do now with these ghost estates?”

“First, you have to ask why we were mad enough to build all these surplus homes in the first place. Let’s go back to 2006 when the Central Statistics Office identified 266,000 empty residential properties — representing 15pc of all homes. It was obvious that supply already exceeded demand and yet, in that same year, property fever still gripped the nation, and people slept in their cars overnight to be first in a queue to buy within commuting distance of Dublin.”

“As the first decade of the 21st century draws to an end, many Northern San Joaquin Valley residents say: Good riddance. This decade has been so economically brutal that most can’t wait for it to be over. Lots and lots of homes were built. In Stanislaus County alone, about 25,000 homes and apartments were constructed. BATs — ‘Bay Area transplants’ — swooped in to buy those homes. Those newcomers inspired commercial developers to erect shopping centers throughout the region.”

“When the inflated housing bubble burst in 2006, the Northern San Joaquin Valley’s entire economy imploded. Since then, more than 51,000 homes in Stanislaus, San Joaquin and Merced counties have been lost to foreclosure, costing lenders more than $19 billion in unpaid mortgages. About one in eight homes in the region have been repossessed, the worst foreclosure rate in the nation.”

“We’re also worst when it comes to home value declines. From the price peak in December 2005 to this spring’s bottom of the market, homes lost about two-thirds of their value. Because of that, more than 81 percent of the region’s homeowners owe more on their mortgages than their houses are worth.”

“And unemployment during 2009 has been more than double what it was at the start of the decade. Stanislaus’ rate in November 2000 was just 7.7 percent, but it reached 17.2 percent last month.”

“A decade ago, people’s biggest fear was Y2K. Let’s hope something so trivial will dominate the news in the decade to come.”

“How did Fannie and Freddie help cause the crisis? In 1990, outstanding mortgage debt held was $3.805 trillion. Then, Fannie and Freddie weakened lending standards by handing out unsecured loans to unqualified borrowers. And, by the end of 2007 as the crisis was reaching its peak, total mortgage holdings had risen to $14.568 trillion, a staggering 383 percent jump.”

“Today, total mortgage holdings stand at $14.418 trillion. A full 75 percent of that—roughly the amount Fannie and Freddie are responsible for financing—is $10.8 trillion! Add to that the securities which were sold by the GSE’s, and it’s larger than the Gross Domestic Product. Taxpayers could never, ever possibly cover losses on that scale.”

“There are actually more losses on the way. Reported Business Week yesterday, ‘Foreclosure filings in 2009 will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac said Dec. 10. This year’s filings will surpass 2008’s total of 3.2 million.”

“The government shouldn’t reward liars. But that’s the effect of changes to the Obama administration’s failing program to help homeowners modify their mortgages. Until recently the rules were clear: if you grossly understated your income to qualify for the program, you had to restart the loan modification process. It made sense. After all, we got into this housing mess partly because too many people were dishonest about how much they made.”

“Fast forward to today. The federally funded Home Affordable Modification Program was aimed at getting banks to rework mortgages for homeowners in order to slow the pace of foreclosures. The program isn’t working like it’s supposed to. Since March, just 31,000 homeowners have won permanent relief. One big reason why is that lenders are doing what they should have been doing all along - requiring things like proof of income.”

“How’s the government responding? By letting homeowners who fudge their income numbers off the hook with little more than a wink and a nod. ‘This isn’t the kind of person the government should want to help,’ said Dean Baker, co-director of the Center for Economic and Policy Research.”

“Fitting that while the first decade of this century was dribbling away, the mendacious Eldrick “The Weasel” Woods (The Golfer Formerly Known as Tiger) was watching his marriage and his endorsement deals fall apart, the Heenes were preparing for jail, Bernie Madoff was already in jail and George W. Bush was as invisible as it is possible to be for a man who was president of the United States only 11 months ago.”

“Such is the unravelling of the Decade of Deception. Of fabrication, mendacity and untruth. Of Enron and Bernie Madoff, Earl Jones and Vincent Lacroix. Barry Bonds and Roger Clemens. And the filthy rich bankers of Wall St., who came up with a filthy lie – renamed toxic assets as ‘derivatives’ and very nearly brought the global economy to its knees.”

“At the beginning of this decade, I wondered aloud what we were going to call the first 10 years of the new millennium. The Aughts? Naughts? Zips? Nothings? After 10 years of systematic, percolating, corrosive lies, the appellation is simple. The only name that fits the past decade is the Zeros.”

“As the first decade of the 21st Century ends, a whopping 50 percent of Americans have a negative impression of the past 10 years, compared with 27 percent who hold a positive view. In a survey released this month, the Pew Research Center for the People & the Press found results ‘in stark contrast to the public’s recollection of other decades in the past half-century.’”

“The decade was speckled with both bubbles of prosperity and high-profile, high-dollar cases of white collar crime that wiped out consumers, investors and workers by the billions. The breadth and depth of discontent with the current decade is reflected in the words people use to describe it, Pew researchers found.”

“‘The single most common word or phrase used to characterize the past 10 years is downhill, and other bleak terms are common. Other, more neutral, words like ‘change,’ ‘fair’ and ‘interesting’ also come up, and while the word ‘good’ is near the top of the list, there are few other positive words mentioned with any frequency,’ the study said.”

“Wealth manager Paul Schatz said there were multiple bubbles and busts over the decade involving the so-called dot.com frenzy over Internet startup companies and technology stocks, housing prices, mortgage derivatives, over-leveraged investment banks and commodities. ‘My one word for the decade: bust,’ he said.”

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The Tribune reports from California. “The three men once considered among San Luis Obispo County’s most prolific builders remain mired in debt, and appear unlikely to repay their creditors or return to their former prominence in 2010. Paso Robles’ David Weyrich, San Luis Obispo’s Andy Fetyko and Atascadero’s Kelly Gearhart each gambled on the rising values of the real estate market. However, after its sharp and rapid collapse, they are in deep debt — Weyrich owes more than $60 million, Fetyko $76.5 million, and Gearhart more than $110 million.”

“Much of Weyrich’s prized North County real estate holdings are slated to be auctioned off in foreclosure proceedings, as early as January. Barney Ng, former principal of one of Weyrich’s key lenders, R.E. Loans, told The Tribune that Weyrich had begun to default on his loans more than a year ago. Weyrich had intended to repay his debts with the sale of his real estate subdivisions, Ng said. ‘Mr. Weyrich unfortunately bit off more than he could chew,’ Ng said.”

The LA Downtown News. “As the 222-unit Roosevelt Lofts remains embroiled in Chapter 11 bankruptcy, the project’s developer is looking to hold an auction to sell up to 75 residences as soon as possible. The development’s lender opposes the plan. The Roosevelt, a subsidiary of Milbank Real Estate, filed a motion in bankruptcy court on Christmas Eve requesting a hearing by Jan. 8 for the court to consider a proposal to sell 50-75 units in an auction, according to court documents.”

“In the Dec. 24 request, the Roosevelt attorneys argue that the expedited hearing is needed for the project to capitalize on current market conditions Downtown: ‘The Debtor and [Kennedy Wilson] believe that, while the number of luxury condominium units in downtown Los Angeles that are currently available for sale is low, that number will increase substantially in February or March 2010,’ said the filing.”

“As the Roosevelt ownership has tried to get out of bankruptcy, Bank of America has instead sought to dismiss the Chapter 11 process and foreclose on the property. Attorneys with the firm Buchalter Nemer, who are representing Bank of America and other creditors in the case, argue that the sale of a limited number of units at the Roosevelt would diminish the value of the entire property, in part because it would trigger additional costs for the building owner. As soon as one unit sells, the building owner would then have to fund homeowner association fees for all unsold units, they said in their Dec. 28 opposition filing.”

“‘The Debtor’s justification for rushing to auction is absurdly simplistic when compared to the myriad of market factors and alternatives to immediate individual unit sales that must be considered and analyzed to determine the best strategy for maximizing the value of the Building,’ said the lawyers for Bank of America in the filing.”

The Rancho Santa Fe Review. “Plans to construct The Lilian in Rancho Santa Fe Village are moving ahead ’slowly but surely,’ reported Joe Pinsonneault, owner of the property upon which the project will be built. The Lilian is a mixed-use residential and commercial project (which) includes five residential units occupying 9,492 square-feet, and 4,070 square-feet of commercial/retail space.”

“To help finance the project, Pinsonneault, on Sept. 3, put the commercial property up for sale at $13,950,000. The property, which Pinsonneault said is still on the market, is being offered as a whole, or fractionally, which allows investors to purchase specific parts of the property. A stipulation of the sale, Pinsonneault said, is that the investor must agree that the property be used for The Lilian and nothing else.”

“‘We’re still on track,’ said Pinsonneault, who is currently in negations with several banks to finance the project. ‘We’re doing the best we can to make it all work.’ Noting that the real estate market is turning around, Pinsonneault said, ‘Pricing is in our favor right now.’”

“Architect Allard Jansen said his firm’s work on the project is ‘on hold’ pending financing or direction from Pinsonneault. ‘Right now, finding financing for residential projects is tough,’ Jansen said.”

The Porterville Recorder. “The Lindsay City Council and planning staff discussed the proposed residential development of a 35-acre swath of land in northwest Lindsay. The site, which abuts the City Park, was originally supposed to be high-end subdivision. Before the housing bubble burst, the site— formally referred to as ‘Mission Estates’ — was intended to be the city’s ‘crown jewel’ for expensive homes.”

“‘Lindsay had arrived, we were going to do some great things,’ City Planner Bill Zigler said.”

“Today, the area is vacant. ‘The homes simply weren’t going to sell,’ Zigler said.”

The Bakersfield Californian. “The city of Bakersfield’s months-old effort to speed sales of 15 empty homes in the downtown Parkview Cottages project has so far been slow going — but they’re going. The 74-unit affordable-housing tract was launched during the boom. The Petrinis paid the city $1 for the land in 2003 but soon became distracted by the lure of bigger prospects in the southwest. Completion dates came and went, work left unfinished, and bills eventually unpaid.”

“On top of the 15 empty units — which are in default and are being sold through short sales with no income restrictions — another 30 or so lots remain vacant and are likely to stay that way for years. Twenty-eight units were sold before the market collapse, but the rest have sat empty since February 2008. ‘It’s too bad,’ said Donna Kunz, the city’s economic development director, of the latest delay.”

The Tehachapi News. “As the year 2009 unwound, the Greater Tehachapi real estate market perked up. Bernie Connolly, co-owner and associate broker of Coldwell Banker Best in Tehachapi, said a third-quarter comparison in sales shows a big jump. ‘A lot of the sales were foreclosures and short sales,’ he said. ‘Most of the activity has been at the lower end of the market.’”

“The average sale price dropped in that same year-to-year comparison of third quarters, to $197,550 in 2009 from $240,100 in 2008 - a decrease in price of 17.7 percent. The lower prices mean opportunities for people who, until recently, would have been priced out of the market.”

“‘For years it was so heartbreaking. The children couldn’t buy,’ said Tammy Wallace, Realtor with Town and Country Realty. ‘Now they can.’”

The Record.net. “Sales of existing homes in San Joaquin County dipped in November, bucking state and national trends. County sales remained stagnant, industry professionals said, because of a lack of inventory. Keller Williams Realty agent Jack Mossman said the local slowdown is no surprise because of what industry professionals call a ’shadow inventory,’ meaning banks have not released all of their foreclosures onto the market as a way to keep prices from declining further.”

“‘Inventory is still low, at least until January, where we’ve gotten an indication from Bank of America that we’ll see more foreclosures,’ mortgage broker Jerry Abbott said. ‘We’re still in a market where there are buyers, but agents are flooded with offers.’”

From News 10. “As 2009 winds down, so are the hopes of millions of homeowners of holding on to their homes. As of the beginning of December, less than 32,000 home loan modifications had been approved nationwide in nine months. Analysts estimate that 1.7 million Americans will lose their homes to foreclosure in 2010.”

“Loan modification specialist Mitzi Robinson says there are some basic rules to speed up the process, starting with keeping weekly track of the application status. That means calling the lender and keeping a log of each and every conversation. Robinson said much of the success of modification rides on who you get on the phone.”

“‘One of the things I have a problem with and I have to do frequently is hang up, because I get somebody on the phone who doesn’t like me,’ said Robinson. ‘If you’re a borrower on the phone with, you know when you’re on the phone with someone who wants to help versus somebody who doesn’t want to help, hang up and call back. There’s no harm in that.’”

The North County Times. “To gauge the depth and breadth of the Great Recession and the austere holidays facing many area families, a visit to Daisy Street in Escondido offers an understanding that a sheaf of statistics cannot deliver. The drop in housing values, the implosion in banking and the retreat of consumers has combined to threaten the underpinnings of the nation’s economy —- the middle class.”

“Two years ago, houses sold for $400,000 and more on the street; now they are worth half that.”

“740 Daisy St. —- The woman who lived here fell behind in the mortgage payments, is in the process of moving and asked that her name not be used. Stitching together two part-time teaching jobs and collecting alimony from her former husband allowed her to make the payments on the house and support her children —- until the recession overturned her life.”

“She lost one of her jobs and her former husband lost his job, which ended the family’s medical coverage. ‘I went through all my savings,’ she said. She paid $460,000 for the house three years ago, taking out an interest-only first loan, and, a second loan. The combined monthly payment was $2,600.”

“She’s moving into a rented mobile home and has cut spending on everything except basic needs. ‘No more eating out, no movies, no new clothing,’ she said.”

The Redlands Daily Facts. “Industry insiders…say the recession has stripped revenue from those who make a living inducing customers to ‘make it rain’ money by tossing wads of dollars at exotic dancers in clubs across the Inland Empire and throughout the country.”

“‘This year there has been a rebound and it is still (down) around 10 to 30 percent,’ said Larry Kaplan, executive director for a trade association representing more than 3,800 adult nightclubs throughout the nation.”

“Anecdotal evidence of Kaplan’s estimates abounds at Inland Empire venues, where operators of clubs like Fantasy Topless in Colton, Bare N Legal Showgirls in Pomona and the Villa Theatre in Ontario said they have seen a drop in business compared to years past. ”

“Dissipating attendance has forced club owners to shift marketing strategies in order to survive. In the Bay Area, clubs have had to re-invent themselves because the crowds of white-collar, Silicon Valley customers with fat money rolls are no longer there. ‘Clubs are getting customers who are not spending (that kind of money),’ Kaplan said.”

“Those who run businesses that send exotic dancers into private homes said the downward trend in clubs holds true for their trade too. ‘I’ve dropped about 30 to 35 percent,’ said Michael Stickler, who runs the Chino-based Risque Kitty.”

“It’s not only tough for business owners, but also for the dancers, who work as independent contractors and have been chased by a bruising economy from one battered industry to the next. Stickler said some dancers are former teachers, nurses and real estate agents.”

“Mitchell McDonald, a manger at Larry Flynt’s Hustler Club in Redlands, said an influx of new dancers there has helped business tick up about two percent, compared with this time last year. ‘It’s probably the best lineup of women I’ve had,’ he said. ‘New girls keep the customers coming in.’”

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The Post Cresent reports from Wisconsin. “Darek Flanigan is giving himself a big Christmas present this year — a new house. The 21-year-old from Black Creek is scheduled to close on his purchase today. Flanigan got a great deal, too — a 920-square-foot, three-bedroom ranch home with a full basement on Appleton’s east side for $75,000. The home was a foreclosed property. ‘I’m feeling pretty nervous about the whole thing,’ said Flanigan, who works as a telecommunications installer in Green Bay. ‘I had been thinking about renting an apartment, but after looking things over, I figured I’d be paying as much for a mortgage as I would for rent, so I decided I may as well go for it.’”

“Flanigan also was enticed into the housing market by the government’s $8,000 tax credit for first-time buyers, though he didn’t think he’d meet the original Nov. 30 deadline. That changed when Congress approved — and President Barack Obama signed — legislation extending the sales deadline to April 30, with closings to be completed by June 30.”

“Flanigan is one of many buyers who are keeping Realtors and lenders busy during the traditional downtime for the housing industry. The thought of the government handing out free money is enough incentive for buyers to see what’s available, said Candace Kriner, CEO of Century 21 First Realty in Grand Chute. ‘Some people don’t know that the credit was extended,’ she said. ‘We still get questions, but what it has done is get people off the fence about buying a home. If you’ve got a stable job and don’t own a home, why not look into it?’”

The Green Bay Press Gazette in Wisconsin. “This recession was the worst the country has seen in 25 years, said Kevin Quinn, associate professor of economics at St. Norbert College in De Pere. Unemployment in Brown, Oconto and Kewaunee counties rose slightly in November, as it did in five other Metropolitan Statistical Areas across the state.”

“People lost retirement savings invested in the stock market, and foreclosures and a dive in housing values hurt pocketbooks, too. ‘All of this has made it a really nasty recession,’ Quinn said. ‘People will feel the pain for years to come.’”

“Nancy Rein of Green Bay lost her job at the state Department of Motor Vehicles in November 2008. She worked briefly for the U.S. Census, but otherwise has been unemployed. Rein owns the home she shares with her mother, and she’s afraid she’ll lose her unemployment benefits in January and may not make mortgage payments if she doesn’t find work.”

“‘I will do anything to make that house payment,’ Rein said.”

The Capital Times in Wisconsin. “As Madison rang in 2009, still giddy from the election of President Barack Obama, there was optimism the city could somehow avoid the economic fallout from the great recession. After all, the government town had survived previous downturns virtually unscathed thanks to the twin pillars of the University of Wisconsin and state of Wisconsin. As the year went on, however, it became increasingly clear that this economic downturn would be deeper, longer-lasting and more painful than anything since the 1930s. ‘Madison had sort of skated past other recessions but not this one,’ says David Ward, president of a local economics consulting and research group.”

“One reason for the unemployment gender gap was the slowdown in building and construction. Most activity slowed to a crawl with the combination of economic uncertainty and the credit crunch from the banking crisis. Mike Vilstrup, president of the Madison Area Builders Association, said he is hopeful that building activity will pick up, but he is not ready to proclaim the crisis over. There were just 410 building permits issued in Dane County through October 2009 compared with the 10-year average of about 2,000 dating to 1999.”

“Vilstrup estimates Dane County communities lost a total of $1 billion in economic activity this year based on the 10-year average. ‘As we suffer, so does the greater community,’ says Vilstrup, noting the loss in tax revenue to government from both falling property values and unemployed workers.”

The Journal Sentinel in Wisconsin. “For years Central States Mortgage Co. - a cornerstone of the collapsed business empire of Richard Jungen - was viewed by many as a jewel in the Milwaukee business community. Today, court filings portray the Wauwatosa mortgage broker as unabashedly violating basic rules of lending, committing many of the sins that plagued the national mortgage industry in the years leading to the 2007 collapse of the home lending market.”

“Milwaukee attorney Michael Polsky, the court appointed receiver, has uncovered countless red flags in the remains of Central States. ‘There are significant issues raised with respect to nearly every loan that was initiated by CSMC,’ Polsky wrote about the loans that remained in Central State’s portfolio when the company closed.”

The Chicago Tribune in Illinois. “Apartments in the Roosevelt Collection in the South Loop are filling up and a new theater has opened, offering a glimpse of what the major mixed-use project will look like when the retail portion is finished a year or so from now. Windows in the plaza’s storefronts now are covered with colorful vinyl murals, but eventually, said Lisa Balis, senior vice president of retail leasing and marketing, 300,000 square feet worth of retail space will be occupied by a mix of local and national chains.”

“There are 342 one- and two-bedroom loft-style apartments in two buildings with 97 percent of the east building being leased after units became available in August, Balis said. Pre-leasing for the west building began in November, with about 30 of 174 units taken, said Nancy Blanks, general manager of the lofts. Monthly rent for the remaining units ranges from $1,500 to $2,500, she said.”

“‘As fast as we are building them, people are renting,’ she said, after the decision was made to make the units rentals rather than condominiums out of fear that many buyers would have been unable to close during the difficult lending climate.”

The Pioneer Press in Minnesota. “When you can’t sell a home that you’ve priced at $1, what’s your next step? Cut the price to 50 cents? Try paying someone to take the house for a buck?”

“St. Paul officials have learned some disappointing — but not surprising — lessons four months into a project to sell a cluster of city-owned homes at prices ranging from $50,000 all the way down to a buck. As the number of foreclosures has skyrocketed in recent years in the Twin Cities and across the country, cities like St. Paul have taken on the role of buying houses to address a sharp increase in vacant properties.”

“Better marketing would help the Fourth Street project, agreed Chuck Repke, executive director of the Northeast Neighborhoods Development Corp. But there have been other challenges. Many recent buyers of homes under $120,000 are investors looking to rent the properties or sell them following rehabilitation. The city wants to sell to buyers who will live in the properties.”

“Repke said he agreed with the city’s focus on owners who will be residents, but noted that those buyers constitute a much smaller group. Another challenge: Potential buyers are having trouble finding loans to finance the extensive rehab projects that are required to live in the Dayton’s Bluff homes.”

“‘I think you can stimulate people to buy St. Paul,’ Repke said. ‘Before all of the markets collapsed everywhere, we were finding people making that decision to come back to the urban core. … If the credit market changes on some of this stuff, I think there will be buyers.’”

The Indianapolis Star in Indiana. “By all accounts, this recession caught Indiana midstride, in slow transition to a high-tech New Economy, while the larger Old Economy endures as the only option for 298,000 laid-off men and women.”

“Tim Blaker once wheeled a shuttle bus filled with travelers around the parking lots of Indianapolis International Airport. But these days, on the mornings a $284-per-week unemployment check pops into his checking account, he wheels a shopping cart through the aisles of the grocery store.”

“A generation ago, Blaker could have followed in the footsteps of his late father, one of the 90,000 steelworkers laboring in Indiana’s Lake Michigan steel mills. Today, 80,000 of those steel jobs have vanished into what the professors call post-industrial America. ‘What gets me is the increasing disparity between the haves and the have-nots,’ Blaker said. ‘The middle class is getting ax-murdered. The opportunity to buy a house has just stopped.’”

The Indianapolis Business Journal. “It started with a bursting bubble and ended with a bursting bubble. In between, the decade witnessed a massive terrorist attack, two wars, and a building-and-buyout boom fueled by easy credit. The city skyline added an airport terminal, a football stadium, a library expansion, a massive downtown hotel, three shopping malls, four hospitals and myriad medical buildings, as well as countless condos and housing developments.”

“Homebuilders soared and then swooned when Wall Street’s bundling of subprime mortgages created a credit crisis throughout the world. C.P. Morgan and Davis Homes went the way of Bear Stearns and Lehman Brothers. A deluge of debt created a similar boom-bust cycle at local commercial developers Premier Properties (gone) and Lauth Property Group (bankrupt).”

“The new decade dawns on an economic downbeat: One in 10 Hoosiers is searching for work.”

The Livingston Daily in Michigan. “Livingston County’s economy started off stinking in 2009. The county saw longtime companies and a real estate publication close, watched its unemployment rate double from 2008, and continued to brace for declining property values. Empty buildings with ‘for lease’ and ‘for sale’ can easily be spotted along Grand River Avenue or in the downtowns of Brighton or Howell.”

“Michigan’s unemployment rate reached 17 percent in the early 1980s, and was last reported at 14.7 percent, about 5 percentage points higher than the national average. The main difference between the two eras is the recession between roughly 1980 and 1982 demonstrated a dip in the business cycle, and the current recession resulted from the loss of jobs every year since 2001, said Xuan Liu, SEMCOG’s data center manager, who compiled the report.”

“‘This one is not a normal down cycle of the businesses. It’s much more fundamental changes happening,’ Liu said. ‘What were facing is really historical. It’s really a structural change,’ he added.”

“SEMCOG anticipated a decline in the economy in 2007, but didn’t foresee the collapse of the housing market and banks that followed. ‘Nobody could have thought the recession could have been this bad,’ Liu said.”

“‘Today, if you need your bathtub caulked, I’m there.’ Longtime custom homebuilder Julie Fielek laughed when she said that, but she wasn’t completely joking. The Green Oak Township builder used to put up $400,000 to $1 million custom homes, but the last one she built in the county was 2006.”

“These days, the former president of the Michigan Association of Home Builders makes her living constructing new residences on the site of a former housing project in Detroit. How ironic is it that a local builder must look beyond a county once dubbed the fastest-growing in Michigan?”

“Five years ago, the county was teeming with builders, and palatial homes costing $500,000 to $1 million sold easily. Today, the number of builders has dwindled sharply as new home construction has slowed to a trickle. Instead of putting up large homes, builders are taking on projects they wouldn’t have dreamed of taking on in the past. They are grabbing whatever job they can get, such as small remodeling jobs, finishing basements and building garages, or doing general maintenance. Others have become real estate consultants.”

“‘A lot of my friends are out of the business,’ Fielek said. ‘They’ve gone bankrupt. Some of my friends have moved out of state.’”

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The News Journal reports from Delaware. “Milton Delgado put a down payment on his dream three years ago: a three-bedroom 1,715-square-foot condominium at The Promenade in Middletown. Delgado was one of dozens who laid out thousands of dollars after seeing glossy brochures showing a deluxe housing complex complemented by movie theaters and upscale shops. But Delgado has watched his dream fade, along with the prospect of recovering his money. He has been trying to get his $16,711 deposit back for more than a year.”

“‘Every day I was driving by, saying, ‘I can’t wait to see a hole. I can’t wait to see a hole,’ Delgado said. ‘And I never saw a hole. The only hole was in my wallet.’”

“Delgado recently obtained his Ph.D. in education from Wilmington University. ‘I didn’t just go in blindly and plop down money on a pretty little dollhouse,’ Delgado said. ‘I’m supposed to be educated, among the top of the people around, and I got pulled in just like everyone else.’”

The Virginian Pilot. “Dan Bassett lost more than $50,000 when he sold his Chesapeake home in August. The enlisted analyst had to move after the Air Force reassigned him to Florida, but he thought he would qualify for a new government program designed to help service members recoup losses from such home sales. His application was denied.”

“The database used by the Corps of Engineers to determine eligibility showed that few cities in Hampton Roads qualified - either because home values in the past three years had fallen less than 10 percent or in some cases had risen, said Don Chapman, who manages the Homeowners Assistance Program for the corps. That differs from figures tracked by the Virginia Beach-based multiple listing service, which shows median prices for existing homes in the region have declined about 10 percent since 2006.”

“Bassett, 36, purchased his Western Branch home in June 2006 for $332,900. He put his home up for sale in May and eventually sold it for $299,610 - a loss of $33,290, not including the closing costs and fees, which added up to more than $20,000. Bassett began working with his real estate agent to compile home sales data from his neighborhood to show the corps that he shouldn’t be disqualified. Eventually, the corps relented and now won’t disqualify service members just because they live in Chesapeake. Other cities in Hampton Roads are now eligible as well.”

“‘You have to be persistent,’ Bassett said. ‘My beacon of hope was that the government would at least help me out with Realtor fees and closing costs.’”

The County Times in Pensylvania. “It’s been over a year since Madeline Gilford, the actress, pro­ducer, and unapologetic social activist, died suddenly at age 84, in April of 2008. Like so many Americans, Madeline borrowed against her home during the real estate boom, refinancing more than once, and now the foreclosed home is worth less than the mortgage that Washington Mutual (now JPMorgan Chase) holds.”

“Lisa Gilford lives in Denver now, but she tried to keep up the home in Bethlehem for a while after her mother died, paying the mortgage for a couple of months, she said, but she just couldn’t afford the extra expense long term. Ms. Gilford said she had hoped that the home would sell quickly in foreclosure, but the couple of people who were interested in proposing a ’short sale’ to WaMu got nowhere.”

“That the bank would not respond to inquiries about a short sale on the house makes Lisa Gilford’s blood boil. ‘Why would a mortgage company allow a place to blight like that in a neighborhood like that?’ she asked. ‘They absolutely shut us out. It may not be illegal, but it’s immoral,’ she added.”

The Worcester Business Journal in Massachusetts. “At least for many types of real estate, prices aren’t ready to rebound, according to real estate investor Russ Haims. But whether the lack of a rebound is a bad thing depends on where you’re standing. Haims said the federal tax credit for first time homebuyers, which has been extended through April 2010, has bumped up demand, but only temporarily.”

“‘I see more factors that indicate a downward trend than anything encouraging to bring it up,’ he said. It doesn’t help, Haims said, that foreclosures are continuing to stack up on the market. ‘The banks presently are overwhelmed with what they have already in their delinquency pipeline,’ he said. ‘There’s still going to be a lot of cheap inventory that banks are going to be looking to sell.’”

“Jeff Hall, president of the Worcester Regional Association of Realtors, says..right now, many short sales fall through as lenders take as much as eight months to consider an offer. He said he thinks more than half of short sales end up not going through because buyers get frustrated with the process and move on. Hall said the market is still facing an inflow of foreclosures, but lenders are making a conscious effort not to let them disrupt price levels. Many are trying to use loan modifications to keep people in their homes, or at least help owners stay in their homes in the short term to minimize the amount of property sitting empty.”

“‘It won’t be like a flood,’ Hall said. ‘They will space it out over time so there is just kind of a regular flow of foreclosures into the market.’”

The Boston Globe in Massachusetts. “Federal tax breaks, historically low mortgage rates, and an improving economy sparked a record surge in Massachusetts home sales last month. Michael LeBlanc…just bought a three-bedroom ranch in Sherborn, said he and his wife, Jane, had been thinking about buying a home for about two years. While they qualified for the tax credit, it wasn’t the main factor driving their decision. A low mortgage interest rate, 4.875 percent, and a sharp drop in the price, to $450,000 from $529,000, made the home affordable. They also have a 9-month-old daughter.”

“‘I really wanted to be smart about it, and what was important to me is that we bought our house when we were ready,’ said LeBlanc, 33, who works at EMC Corp. in Hopkinton. ‘We were waiting for the right opportunity. We feel lucky.’”

From Inside Jersey. “Home prices look as if they’ve reached their lowest points, and people are starting to take deep breaths and buy again. It’s beneficial, too, that the federal government has helped keep mortgage rates down, in the 5 percent range, and Congress extended and expanded tax credits so they reach almost all potential buyers — not just first-timers anymore. Together, this means houses remain more affordable than they were for decades.”

“Overbuilt Hudson County will continue to struggle. Manhattan’s weak market is sapping demand from Hudson County, and deep South Jersey is hurt by being far from major job centers — Philadelphia and New York — and by Atlantic City’s losing streak.”

“New home builders had it rough last year, selling a third of what had been moving. Sales of new homes have been slower to pick up pace than existing homes. ‘We don’t really have a lot of down to go,’ says Joseph Riggs, group president in charge of New Jersey and other areas for K. Hovnanian Homes. ‘We think we really only have one way to go, and that’s up.’”

The Press of Atlantic City. “Egg Harbor Township wants to see the seedy strip of motels…replaced by a more upscale array of hotels, restaurants, stores and homes. The idea of fixing West Atlantic City is not new. Egg Harbor Township politicians and other residents have been pushing to redevelop West Atlantic City for at least two decades. ”

“The peak time for developing may have already come and gone, according to James Hughes, the dean of Rutgers University’s Edward J. Bloustein School of Planning and Public Policy. Atlantic City’s economy was ‘hot’ during the late 1990s boom and there was less competition from other casinos, Hughes said. Furthermore, the low credit rates, lax lending standards and American consumer overspending created ‘a period of epic abnormality’ for building projects from 2000 to 2006.”

“‘We had an economic wild party, and economic wild parties are often followed by economic wild hangovers,’ Hughes said. ‘We’re probably not at the mid-stage of the hangover yet.’”

From Marketplace. “New York City’s construction boom went bust so fast some of the condominium buildings are standing unfinished. But proposals to turn them into affordable housing units have been a tough sell. Alisa Roth reports.”

“Roth: ‘Queensboro Plaza is a just a couple of stops out of Manhattan. I come through on my way to work. The tracks are elevated here, so the platform looks out over the landscape, which is covered with construction sites and new condo buildings. Places like these popped up all over the city when credit was cheap and real estate was expensive.’”

“‘When the economy fell apart, so did a lot of these projects. In some cases, the developers couldn’t afford to finish them. And in others, buyers just weren’t interested anymore.’”

“Rafael Cestero (is) the commissioner of housing preservation and development in New York. He’s worried that these kinds of open construction sites and empty buildings could bring blight back to New York. Cestero: ‘We don’t want vacant buildings, buildings that are unable to sell, unable to rent up. We don’t want those buildings and the fact that they are vacant to further destabilize the markets in those neighborhoods.’”

From Reuters. “Boutique investment bank Westwood Capital, veteran apartment building owner and manager Gerald Guterman, and appraiser Jonathan Miller plan to buy $1 billion worth of new condominium buildings from struggling banks and convert them into rental apartments.”

“The boom of the past decade grew out of low interest rates that made loans easy to get. Abundant low-interest loans boosted condominium prices to the tune of an average of $1.5 million to $2 million for a New York condominium. ‘If you look at the window of the expansion of condominium development, it correlates with the credit boom, and now we’re past that,’ Miller said.”

“There is no shortage of inventory. In Manhattan alone, about 6,500 condo units completed or near completion but have not been listed for sale. Add to that new listings on the market, and that figure jumps to 8,500. In New York City there are about 22,000 condos completed or near completion, but not listed for sale. That’s more than 26,000, counting new units on the market.”

The Richmond Times Dispatch. “This month, Virginia saw its first bank go belly up since the financial markets turned upside down a year ago — and more failures are likely. Greater Atlantic Bank, a federally chartered thrift institution in Reston, was taken over by regulators Dec. 4 because of rising losses on commercial real estate loans, a scenario that could be replayed over and over this coming year.”

“‘It’s a tough time for all banks, some more than others,’ said Frank Bell III, CEO of Bank of Virginia. ‘At the end of the day, big or small, we all have the same objective and that is to maintain a sound banking system. In this environment, it sometimes feels like nailing Jell-O to the wall.’”

“T. Gaylon Layfield III, CEO of Xenith Corp. in Richmond (said) ‘Banking might seem to the average person like looking into a black box, but a sound and stable banking system is the bedrock of our economy, of our free-enterprise system.’”

“Bruce T. Whitehurst, CEO and president of the Virginia Bankers Association, said it remains to be seen how much damage will be caused by commercial real estate loans. ‘There has been an awful lot of speculation,’ he said.”

The Associated Press. “Hocking the house for quick cash is a lot harder than it used to be, and it’s causing headaches for homeowners, banks and the economy. Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home equity loans because they owe more on their mortgage than what the house is worth. Those who have equity in their homes are finding banks far more stingy. Many with home-equity loans are seeing their credit limits reduced dramatically.”

“At the peak of the housing boom in 2006, banks made $430 billion in home equity loans and lines of credit, according to the trade publication Inside Mortgage Finance. From 2002 to 2006, such lending was equal to 2.8 percent of the nation’s economic activity, according to a study by finance professors Atif Mian and Amir Sufi of the University of Chicago. For the first nine months of 2009, only $40 billion in new home equity loans were made. The impact on the economy: close to zero.”

“Holly Scribner, 34, and her husband took out a $20,000 home equity loan in mid-2007 — just as the housing market began its swoon. They used the money to replace sinks and faucets, paint, buy a snow blower and make other improvements to their home in Nashua, N.H.”

“The $200 monthly payment was easy until property taxes jumped $200 a month…and the family ran into other financial difficulties as the recession took hold. Their home’s value fell from $279,000 to $180,000. They could no longer afford to make payments on either their first $200,000 mortgage or the home equity loan. Scribner, who is a stay-at-home mom with three children, avoided foreclosure by striking a deal with the first mortgage lender, HSBC, which agreed to modify their loan and reduce payments from $1,900 a month to $1,100 a month. The home equity lender, Ditech, refused to negotiate. Scribner’s husband, Scott, works at an auto loan financing company but is looking for a second job to supplement the family’s income.”

“The family is still having trouble making regular payments on the home-equity loan. The latest was for $100 in November. ‘It was a huge mess. I ruined my credit,’ Holly Scribner says. ‘We did everything right, we thought, and we ended up in a bad situation.”’

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It’s Friday desk clearing time for this blogger. “They won’t be home for Christmas, but a Roslindale family who lost their house to foreclosure, just miles from where Bank of America’s CEO lives, still hopes to have a happy new year. ‘If we can do anything to get our home back, we’re willing to work with (the bank),’ said Joseph Coyne, who attempted to resume living in his former home on Wednesday ahead of Christmas.”

“Coyne and activists from the group City Life entered the vacant home and were working to get the utilities back on when police arrived and asked them to leave. They complied, but hope to convince Bank of America to let Coyne, his wife and seven children return and rent or repurchase the house at current market prices.”

“The Coynes admit they cashed out some $200,000 during the housing boom, but claim a slick mortgage broker pushed them to refinance over and over again. The couple says most of the money went to paying parochial school tuitions for their kids, who range in age from 4 to 19. ‘Even though we signed the papers, we had no idea - no idea - that things would go like this,’ Margaret Coyne said. ‘It took five minutes to sign our lives away and not realize what we had done.’”

“Like many middle-class Americans, Greg Staffa of Farmington quickly spiraled from joblessness into foreclosure. This Christmas, home will be a late-model Ford. One of the last Minnesotans to lose his home in what has been a tough year for foreclosures, Staffa drove away from his Farmington townhouse at daybreak Saturday, joining more than 26,000 others closing the door behind them for the last time.”

“Job loss, a bad economy, foreclosure, impending bankruptcy — all of this year’s headlines seem to have converged on Staffa, a formerly homeless man who thought he was doing everything right in 2005 when he worked a $20-an-hour job and bought a modest townhouse on a cul-de-sac.”

“It cost him $154,000 — well within his means at the time. ‘I didn’t buy more than I could afford,’ he said.”

“The real estate woes of Virginia Beach developer L.M. Sandler & Sons Inc. have strangled any hope – at least for now – that two of its projects near North Carolina’s coast will be built out with the lavish features that were promised. Building at the Sandlers’ San Rio Ocean & River Club in Shallotte, has come to a standstill as bankers and lawyers bicker. At issue are who will be responsible for the project moving forward and whether the owners of more than 60 sold lots have any recourse in recouping their investments.”

“Until 2008, when the housing crisis was reaching its peak, it seemed that any project touched by brothers Art Sandler and Steve Sandler turned to gold. They made millions of dollars developing master-planned communities in Florida, North Carolina, Virginia and elsewhere along the East Coast.”

“In 2007, Wakefield turned its eye toward the coast by opening a division to develop projects there. ‘They promised all these great big, wonderful things and never followed through,’ says Bruce Kertcher of Calabash, who was among the first lot buyers at San Rio. He and his wife, Sandra, paid $199,000 for Lot 3 in the first phase of San Rio in June 2007 after being treated to helicopter rides to view the property, a tour of Holden Beach, where they would have access to a beach clubhouse, and a stack of glossy marketing materials.”

“The Kertchers had retired to Calabash in 2006 and investigated several coastal projects before buying the lot in San Rio. They planned to build a home where family could gather or that they could later sell or rent. ‘We still have a piece of property, but it’s not marketable or ‘buildable’ right now,’ Kertcher says.”

“Kertcher is one of 25 lot owners in San Rio who have filed a lawsuit against the owners of San Rio alleging breach of contract, misrepresentation, fraud and deceptive trade practices.”

“The best thing to say about 2009 is that it’s almost over. And here’s hoping that 2010 brings better days to the Dallas-Fort Worth real estate business. A few years ago, flocks of building cranes roosted on almost every corner of the Dallas skyline. Now the credit crunch and national recession have pushed this noble bird to the brink of extinction. But for a few public sector projects, almost all the cranes have flown the coop.”

“If you build it, they may not come. That’s what developers of Dallas’ Victory Park project learned the hard way. The ambitious project tried to light up the northwest side of downtown with new shops, restaurants, residences and offices. But the stalled economy and credit woes were too much for parts of the development to overcome. In July, Victory Park’s developer, Hillwood, handed over its ownership in the buildings to the German banking groups that financed the deals.”

“A map inside the sales office of KB Home’s Riverbend development in north Stockton is marked by magnets indicating which lots have been sold, which are built on, and which are still available. An indication of how times have changed for home builders, only a quarter of the lot spaces on the map are filled.”

“There has been a 180-degree spin for the housing construction industry, which blew into a massive bubble at the beginning of the decade but eventually popped, creating financial turmoil that may take years to clean up. The beginning of the housing boom in San Joaquin County was a result of supply and demand, University of the Pacific Business Forecasting Center Director Jeffrey Michael said.”

“‘You have to go back to the late 1990s and the (tech industry) boom in the Silicon Valley spilling over across the (Altamont) pass,’ Michael said. ‘Population growth really picked up in this area after what was a pretty weak decade for new housing in the ’90s.’”

‘Thousands of building permits were issued each year in the early 2000s in the county’s largest growing cities - Lathrop, Manteca, Stockton and Tracy. Pockets of new home developments sprouted in each location, luring buyers by offering more and more luxurious amenities. By 2005, San Joaquin County’s median home prices hit an all-time high of $400,000, despite only 11 percent of county residents able to afford such a mortgage, according to the California Association of Realtors.”

“It was not uncommon to see new homes advertised at $500,000 or more. Some neighborhoods would sell at triple the county’s current $170,000 median sales price. As housing prices increased, so did consumer confidence. The early 2000s was a period of low unemployment, fast and easy credit, and a strong stock market that helped fatten many portfolios.”

“‘And people have a lot of confidence in buying real estate in a growing region,’ Michael said. ‘Banks were confident, buyers were confident, and when you could get a loan with little or no money down, the risks just were not there.’”

“One indication of the state of the economy was revealed when Wells Fargo held its annual Economic Outlook not in an expensive resort convention center, but instead via teleconference. Four economists with Wells Fargo Securities generally shared one point of view — the economy will rebound, but will take years to return to levels seen a few years ago.”

“Foreign investments helped drive the economic boom in the early half of the decade, but have declined significantly. ‘The U.S. is not alone with the credit bubble,’ said Jay Bryson, global economist. There is little worry that China will see a credit crisis similar to the one in this country, however. ‘It’s not something that keeps me up at night.’”

“Real estate foreclosures, which have been prevalent among mortgages secured with no documentation or other marginal means, are now rising in the traditional lending market, said Mark Vitner, senior economist. Often even modified loans do not work out. More than 75 percent of modified loans are delinquent again after 90 days, he said.”

“‘It doesn’t matter if they are restructured if the homeowner doesn’t have the available income,’ he said.”

“There is a fine balance between what is good for consumers and what is good for banks, said John Silvia, chief economist and moderator of the discussion, with 75 percent of the economy based on consumer spending. ‘They want everything but can’t afford anything,’ he said. ‘If credit is extended and they can’t sustain the payments, the fundamental challenge is in (servicing the debt). How many do we expect to own houses. How many do we expect to own fancy automobiles. How many do we expect to own big-screen TVs.’”

“Since the phrase ‘A Diamond is Forever’ first appeared in advertisements in the late 1940s, the retail diamond industry has maintained a long, happy partnership with fairy-tale romance. The bridal business continues to be the lifeline for many Southwest Florida jewelers, even if other sales decline. For example, buying jewelry as fashionable gifts declined during the recent recession.”

“It may seem that diamonds have always been one of America’s most popular symbols of love. But it was not always so. De Beers and its subsidiary, the world’s largest diamond mining and selling operation, leveraged the timeless human emotion after sales fell off during The Great Depression. The company hired an ad agency to combine romantic images with the nowubiquitous catchphrase, and the twinkly gem captivated a starry-eyed public.”

“For many hopeful husbands, spending two or three months’ income on a diamond engagement ring became par for the course.”

“In Southwest Florida, the recession created a glut of diamonds that drove down prices on the street, even though diamonds have held their long-term value well. The market was flooded with people trying to get rid of their old diamonds. ‘People are selling diamonds to try to pay their mortgage or medical bills,’ said Mark Loren (of) Mark Loren Designs in Fort Myers,. ‘The supply is much greater than demand at the moment. It’s kind of like the housing market. You’re starting to see the best deals disappear quickly.’”

“‘What we are (also) seeing is people who took money out of real estate or other markets and put it into a big diamond, because it’s going to hold its value. We’ve had some clients that purchased big stones from us when things were really busy in the construction industry. And we’ve now helped them resell those big stones.’”

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