The Housing Bubble

22nd ?

Ben
This is not going to be about zip 90274.

Have buyers of THBB shirts send in photos of how shirt looks on them and have readers pick best two.
On a man and on a women size D through K works for me.

Are there any pictures of the Las Vegas meeting that people
went to ? Did everyone have a good time ? I couldn’t make it of course .

minor DC area report - I got a ride to the metro earlier this week from a woman who told me she is trying to sell her house in Chevy Chase Circle. Her frustration was palpable. She said it was “priced right” and a great location (Chevy Chase Circle is a great location) and it had been on the market for three weeks and no interest at all so far. I poked around a bit and the low end for single family houses in Chevy Chase is $700K.

So, this is where Florida and Las Vegas were in February of 2005, right? Our turn next?

This is a very nice lady, so all I offered was a hypothetical. Went through an analysis of “traditional” metrics and told her that if she was looking to sell a house for half a million dollars, she was looking to sell to people with $100K of down payment and $170K of solid yearly income and if those weren’t the people looking to buy her house, there was a mismatch under traditional affordability standards. The I said that I don’t think we are really back to requiring those standards yet.

Silence was deafening.

Only difference in that DC has much more recession proof jobs that pay decent wages. I dont know if you can compare a region tied to federal government jobs under Obama to regions where the economy is built on gambling and/or the new Walmart accepting applications. I tried to move back to the DC area, but I didn’t want to spend more than $500k on a place. I looked at what I could get for that in 2007 and gave up.

DEAN CALBREATH
California’s economy is not as awful as neighbors’
2:00 a.m. March 29, 2009
Photo of Dean Calbreath
Call Dean at 619-293-1891

Although California’s unemployment rate soared to 10.5 percent last month – and seems fated to continue on that upward track – there may be some cold comfort that we’re not alone in our misery.

The recent round of state-by-state employment data, released by the U.S. Bureau of Labor Statistics on Friday, should help lay to rest some myths that have grown up about California and how our economy compares with other states.

Even though our double-digit jobless rate puts us well above the national average of 8.1 percent, we’ve got plenty of company. The list of states with worse economies than ours – or that are performing nearly as badly – is rapidly growing.

It should come as no surprise that Michigan – ground zero for the troubled auto industry – leads the nation with its 12 percent unemployment rate. But Rhode Island, Oregon and the two Carolinas also have higher unemployment rates than California, and Nevada, Ohio and Florida are not far behind.

In percentage terms, California does not rank among the top 10 states that have lost jobs over the past year. True, the total number of payroll jobs in the state has declined by 4 percent, which is a pretty serious loss. But in comparison, neighboring Arizona lost 6.7 percent – the nation’s largest percentage of job losses – outstripping the 6.5 percent job loss in Michigan. Nevada, Florida, Oregon, the Carolinas, Georgia, Rhode Island and Ohio have also been shedding jobs at higher rates than California.

This is not meant to be an exercise in schadenfreude, taking pleasure in somebody else’s pain. But there is an irony in those numbers that Californians should take note of.

Buy now or be priced out forever!

They ended up buying a three-bedroom condo in Bellasol, a development in Fort Myers, where prices currently range from $39,000 to $170,000. “We paid 25% of the original selling price,” she says. “We feel that we got an extremely good deal.

The Gourleys are part of a new surge of buyer interest along Florida’s Gulf Coast, where real estate websites are seeing a dramatic increase in traffic and local brokers are experiencing an uptick in inquiries and sales.

via .http://finance.yahoo.com/real-estate/article/106815/Some-Real-Estate-Markets-Warming-Up;_ylt=AqkAZNNckvMf0mV2IATKlp9O7sMF

The logic in this article is so wacky it makes my head spin. Getting wrapped around the axle about so-called “low ball” appraisals misses the key determinant of market value, which has to do with what a willing buyer is willing to pay for a home and what a willing seller is willing to accept as payment. There is no essential role for an appraiser whatever in a market exchange between a willing buyer and a willing seller. Why is an appraisal even needed, except as a means of transferring more money from private parties to REIC servicer providers? A better solution would be to break the NAR’s death grip on real estate data; if recent sale prices were made publicly available, market participants could come to their own conclusions about what homes are worth.

As to the notion that low ball appraisals depress prices, why would a seller willingly part with a home for less than it was worth? This makes no sense whatever.

NATION’S HOUSING | KENNETH HARNEY
Up in arms over fast and dirty appraisals
2:00 a.m. March 29, 2009

WASHINGTON – Are low-balled valuation estimates on short sales and bank-owned foreclosures artificially depressing property values in neighborhoods across the country?

Growing numbers of appraisers and consumer groups believe the answer is yes and are demanding that either Congress or state regulators crack down. Their complaints focus on what are called “broker price opinions,” or BPOs, that substitute for actual appraisals.

Unlike standard property valuations performed by licensed appraisers – which can run to hundreds of dollars – BPOs often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight. Realty agents defend BPOs, arguing that their extensive knowledge of local market trends equips them to render accurate estimates.

BPOs have become a booming business as foreclosures and short sales have risen sharply. When banks that own foreclosed houses need to put values on them for resale, increasingly they order BPOs that can be delivered quickly at rock-bottom fees.

Short sales – where a lender agrees to take less than the principal amount owed by a delinquent owner provided the property is sold to a new buyer – also frequently entail use of BPOs.

On the Internet, BPOs are hawked to realty agents as a route to quick profits in an economic downturn. “This is the easiest and fastest way to make big money in 2009,” says one Web site that promises agents “six figures or more” per year. The same site suggests that “bad times put you in the ideal spot” to rack up income by churning out BPOs for lenders.

One problem is that selling BPOs to value houses violates the law in 23 states, according to appraisal industry leaders. In other states, BPOs may not be prohibited but critics say they may be far off the mark in accuracy – typically coming in below appraised values. That’s partly because agents who perform the BPOs may set the value extra low to ensure quicker sales.

When BPO-valued houses are listed at fire-sale prices, they exert a downward pull on the values of other houses in the neighborhood because, under current lending industry underwriting guidelines, appraisers must consider recent listing prices as well as closed sale prices.

Banks gaming Geithner’s plan?

Appears Citi and Bofa are already front running Geithner’s plan by buying toxic assets in the secondary market in preparation for selling them at higher prices to bidders. http://tinyurl.com/c29v4k

How’s this for a conspiracy theory?

Per Geithner’s plan.

1. The private investor bids on the asset and chips in 7%.
2. The treasury chips in 7%.
3. The Fed chips in 86%.

Let’s say bank XYZ wants to unload an asset for 70+ cents on the dollar. However, if the asset was sold today it would only fetch 35 cents on the dollar.

Bank XYZ sets up a hedge fund. The bank’s hedge fund (e.g. private investor) bids the asset up to 75 cents on the dollar under Geithner’s plan. Bank XYZ receives 75 cents on the dollar. Let’s also assume the bank’s hedge fund, the treasury, and the Fed eventually takes a loss on the asset. The end result is bank XYZ received 75 cents on the dollar for the asset minus the 7% the hedge fund lost, netting bank XYZ 70+ cents on the dollar. The Fed, treasury and ultimately the tax payer would effectively over pay for the assets in the newly formed “bad bank”

Similar to how a bank shows up at the court house steps and wins the bidding on one of its foreclosures.

Just when you thought it was safe to venture out:

Rare sight: Homebuyers camp out in Anaheim

Fast, 30, and his girlfriend Michelle Ewing, 31, of Dana Point, were among more than 75 people who camped out Friday night into this morning for “The Event” – a marketing blitz to sell 60 of the 120 condos remaining inside the 390-unit Stadium Lofts complex on Katella Avenue, across from Angel Stadium.

http://www.ocregister.com/articles/night-sales-line-2348718-fast-stadium

I’ve noticed something odd here in SW Boise and wonder whether others have noticed the same thing….

Our subdivision has had a certain number of resales lately. Time on the market isn’t that long - say 6-8 weeks? However, ours is the last subdivision built in the last decade that was fully built-out: now only one vacant lot out of 400.

Homes in newer subs, especially those with fewer than 20% homes built on lots, aren’t selling at all.

I presume people don’t want to get stuck in an isolated home in a barren subdivision full of weeds and dust.

One really nasty case is Kingsbridge.

http://www.kingsbridgeidaho.com/

Kingsbridge was roughed out in 2006, right at the peak of the bubble. The sign at the entrance stated “From the $400,000s”. About a year later the sign was changed to “From the $300,000s”. And still there’s no action. Only a handful of model homes have been built, and they are way too fancy for the neighborhood. A bunch of speculators apparently bought up some lots there, and are now trying to bail out. A drive through shows about 70% of the lots still have the developer’s sign on them, and the rest are advertised by realtors.

I’ve noticed something odd here in SW Boise and wonder whether others have noticed the same thing….

Our subdivision has had a certain number of resales lately. Time on the market isn’t that long - say 6-8 weeks? However, ours is the last subdivision built in the last decade that was fully built-out: now only one vacant lot out of 400.

Homes in newer subs, especially those with fewer than 20% homes built on lots, aren’t selling at all.

I presume people don’t want to get stuck in an isolated home in a barren subdivision full of weeds and dust.

One really nasty case is Kingsbridge.

http://www.kingsbridgeidaho.com

Kingsbridge was roughed out in 2006, right at the peak of the bubble. The sign at the entrance stated “From the $400,000s”. About a year later the sign was changed to “From the $300,000s”. And still there’s no action. Only a handful of model homes have been built, and they are way too fancy for the neighborhood. A bunch of speculators apparently bought up some lots there, and are now trying to bail out. A drive through shows about 70% of the lots still have the developer’s sign on them, and the rest are advertised by realtors.

Car sales anecdotes, part 2

About two weeks ago I mentioned my experiences working with a few new car dealers and their refusal to budge on price and the disconnect between their saying ‘cars are selling’ in spite of my seeing no one in the showrooms while I was there and dusty windshields and many cars visited by the birds - and these were the NEW cars.

A local used car dealer has been having a very unadvertised program where cars are only kept on the lot 6-8 weeks. Prices are lowered every few weeks, but if they don’t sell they are auctioned off the lot to another dealer. My opinion is this creates the impression cars are actually selling when they are just moving from dealer to dealer. Much like houses, there is a lot of phantom inventory but it can be difficult to track as the car is moved from lot to lot.

Within the first minute of the test drive, the sales person volunteers this particular car has been on the lot for almost six weeks already so is about to be cut in price by $600-$800. What really floored me is this is the local “no haggle” place where as recently as four years ago it was almost impossible to get even $200 off the price of the current MadMobile.

Apparently not all policy makers agree that blowing yet another bubble is the best antidote for the collapse of the previous one.

Financial Times
Merkel warns on further stimulus
By Bertrand Benoit, Quentin Peel and Chris Bryant in Berlin
Published: March 27 2009 23:30 | Last updated: March 27 2009 23:30

Angela Merkel, the German chancellor, will warn leaders of the world’s largest economies next week against pumping too much money into reviving global growth, saying that such action would create an unsustainable recovery.

In a forthright interview with the Financial Times before attending the Group of 20 nations summit in London, she rejected renewed calls to spend more public money in Germany as part of a co-ordinated stimulus across the world economy. Ms Merkel said China, in particular, had much more room for expanding domestic demand.

She said it was essential not only to revive the world economy but also ensure that no such crisis occurred again.

“This crisis did not come about because we issued too little money but because we created economic growth with too much money, and it was not sustainable growth,” said Ms Merkel. “If we want to learn from that, the answer is not to repeat the mistakes of the past.”

“It’s better to sell cars and lose a little money than have them sit on the lot and not make any,”……..

Of course!!! Especially when taxpayers are funding it.

http://www.detnews.com/article/20090329/AUTO01/903290312/Chrysler+sales+incentives+criticized+amid+federal+aid

Financial Times
Spain’s finance minister shuns new stimulus
By Victor Mallet in Madrid
Published: March 27 2009 18:46 | Last updated: March 27 2009 18:46

Pedro Solbes, Spain’s finance minister, said on Friday that there was no room for new fiscal stimulus plans in Spain or the rest of the eurozone, a cautious assessment that puts him in direct contradiction with José Luis Rodríguez Zapatero, his prime minister.

… Mr Solbes – who moved the Spanish budget into surplus from 2005 only to see the global economic crisis and Mr Zapatero’s spending plans plunge it back into deficit last year – has persistently called for fiscal prudence.

Both he and Mr Zapatero say Spain’s 2009 deficit will be “clearly” above the EU’s limit of 3 per cent of GDP, and independent economists expect it to reach 7 per cent of GDP.

“In these conditions, I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” Mr Solbes said yesterday after a cabinet meeting in Madrid.

Freddie Mac loan contractor, Ocwen Financial, has spotty record

By ALEXANDRA ANDREWS

Sunday, March 29, 2009

Last month, Freddie Mac introduced a pilot program designed to guide 5,000 homeowners with high-risk mortgages through the loan-modification process, but it outsourced the job to a subprime loan servicer with a history of customer dissatisfaction and run-ins with the federal government.

The West Palm Beach-based company, Ocwen Financial Corp., is a publicly traded financial services company specializing in subprime loan servicing. When asked why it tapped Ocwen for the job, Freddie Mac spokesman Brad German pointed to recent coverage in the New York Times and Time about “the good job that [Ocwen is] doing on the job we’re looking for them to do for us.” He declined to say whether there had been a bidding process or how much the contract was worth, citing the information as “propriety” and referring further questions to the Federal Housing Finance Authority, which acts as Freddie Mac’s conservator.

An FHFA spokeswoman declined to give ProPublica the contract details. She said that Freddie Mac, which was seized by the federal government in September, is still run as a private-sector firm and not subject to federal procurement rules. Freddie Mac will decide later this year whether to expand the program, and it may hire additional servicers for the job.

Ocwen has, in fact, had an impressive success rate with its recent loan modifications; it said in December that its delinquency rate for borrowers with modified loans was 25 percent, far below the national average of 53 percent. But its business practices have also drawn a wide array of criticism from customers, consumer advocates and the federal government itself.

Trouble With the Feds

Ocwen got a lucrative contract in 2003 to manage and sell thousands of foreclosed properties owned by the Department of Veterans Affairs, but a report [8] from the Government Accountability Office in 2007 panned Ocwen’s performance and said the “VA also has not been satisfied with Ocwen’s performance”: Ocwen racked up $1.3 million in penalties from the VA in the last three quarters of 2005 (at the height of the housing boom) for failing to meet sales targets.

There were other problems too: Ocwen charged the VA for home-upkeep repairs that were never made, the GAO reported. Houses fell into disrepair and were covered in “trash and debris,” which the GAO suspects might have lowered property values.

Chairman of House Veterans Affairs Committee Bob Filner, D-Calif. 0 told The Palm Beach Post last January that he would recommend the VA not renew Ocwen’s contract. “They obviously didn’t do the job,” he said. The VA transferred the job to Countrywide when Ocwen’s contract expired last year.

Did OBwan declare war on Megabank, Inc without the press picking up the story?

And what do the managers of Megabank, Inc have to do with entrepreneurship? If anything, large near-monopolies stand in the way of innovation driven by smaller, leaner, more competitive firms. However, small banks don’t qualify for the generous subsidies embodied in the free too-big-to-fail insurance program, and hence are put at a competitive disadvantage to members of the Megabank, Inc cartel.

Financial Times
Bank chiefs hold peace talks with Obama
By Andrew Ward and Tom Braithwaite in Washington and Francesco Guerrera in New York
Published: March 27 2009 17:58 | Last updated: March 27 2009 17:58

Top bank chief executives held peace talks with President Barack Obama at the White House on Friday as the administration sought to soothe tensions over lavish Wall Street bonus payments.

The meeting came at the end of a week in which in which Mr Obama pushed back against efforts by Congress to slap hefty tax penalties on bonuses and warned people not to “demonise” investors and entrepreneurs.

I just found a house that shows the first solid evidence (that I have seen) of a price decline in central Ark among houses of which I care about (some of the really huge 500-600k+ have already shown evidence, but I don’t care so much about those).

~2500 sq ft, on 3.5 acres sold in 2006 for 270k. They are asking 240 now (on the mkt for 138 days, originally listed at 256) and it is listed as a short sale.

For over two years i’ve been tracking sales numbers for central Ark. Only in Jan have I finally seen evidence from those numbers of a solid decrease in median price. While I have seen several places listed for sale which I felt would have been listed for more in 06 or 07 this is the first example of a house that I can really see a price decline. (granted, being as busy as I am with school, I might have already found some examples if I were able to spend more time looking).

I’m probably going to look at it and unless there is something surprising I may very well make an offer at 180k, just to see what happens. But aside from that, it really warms my heart to such a clear and significant example of declining prices.

About a year ago, I had a conversation with my dad that prices here would drop by my calculation by at least 10-15% and possibly as much as 30% or maybe even a bit more. He flat told me I was crazy (at that time, there was still little or no evidence of price declines around here). This example, from 270 to 240 (assuming it sells for that) is -11%.

Not everyone agrees that the remedy to the credit crunch is a hair-of-the-dog effort to reload household financial balance sheets with debt.

# Mar 26, 2009 3:48 PM — Scott Jagow
Debt is the devil

If there’s one thing I’ve learned in my financial life, it’s that I hate debt. I used to find debt annoying, you know, like getting a ticket for rolling through a stop sign or stepping on a piece of gum. But that wasn’t good enough.

I’ve been thinking about debt during this whole financial crisis because to me, the frantic push to reopen the credit markets is a solution for people who only find debt annoying. Let’s just get the credit flowing again, and we’ll worry about the rest later. For me, that’s like someone who destroyed their marriage saying, just forgive me and everything will be fine.

Debt is on my mind today for two reasons. One is Stacey Vanek Smith’s series on Marketplace. She spent some time in Sioux Falls, SD, the town that credit built. A lot of credit card companies are based there. Today, she looks at what’s happened in Sioux Falls since Americans laden with debt can’t pay their cards off.

Plus, our Public Insight journalists are asking about debt on their blog, the Trading Floor. Their question of the day is: What are your top three debt regrets?

I hate debt because I’ve been in it, and I can’t stand the feeling. In a Marketplace Money story a few years ago, I said it was like being underwater.

That story was a personal one. I was $10,000 in debt at the time, and I was asking whether I should cash out some of my 401-K to bail myself out. The financial expert who advised me said absolutely not, and she listed several excellent reasons why. I took her advice and kept plugging along, which is how the radio story ends. But later on, despite cutting costs, with the interest mounting and a tight salary, I wound up further in debt. I finally caved. I sliced off a portion of my retirement money and paid it all off.

It was one of the best decisions I’ve ever made. I just couldn’t handle the stress. I honestly didn’t think I would live to retirement with that hanging over me all the time. But in exchange for taking the “easy” way out, I had to learn to hate debt and vow never to get in it again. I haven’t, and I won’t.

Barn door left open
All of the horses have fled
Hurry, shut the door

Mar 26, 2009 12:28 PM — Scott Jagow
Too big to… succeed?

Today’s big story is Treasury Secretary Tim Geithner’s proposal to Congress for regulating the financial system. You can read summaries of his testimony from Reuters, Marketwatch and The Washington Post. I’d like to highlight a couple things Geithner said, and a couple things he didn’t say.

What he said, in a nutshell: One, the government needs to address systemic risk, the “too big to fail” problem. Two, consumers and investors need more protection — better enforcement of existing rules, closing loopholes, increasing transparency — in an effort to prevent lending abuse, Madoff schemes, AIG shell games. Three, regulate the unregulated or barely regulated — hedge funds, non-bank financial companies, credit default swaps, executive compensation. Four, empower a single federal agency with policing risks in the financial system and assign clearer authority for other regulatory agencies. And finally, coordinate regulation with other countries.

Let me catch my breath for a second. The plan sounds like a brilliant model for retroactively preventing the collapse that’s already happened, but is it too ambitious, excessive and unrealistic?
…
We have to start on the regulation some time, but there is a system in place and many of these problems could be solved by tweaking the oversight instead of throwing the baby out with the bath water. Then there’s that other saying. Haste makes… bailout sink holes.

Finally, Geithner said this:

“… we need to establish a stronger resolution mechanism that gives the government tools to protect the financial system and the broader economy from the potential failure of large complex financial institutions.”

A glaring omission here — why should these extra-large financial institutions be allowed to exist in the first place? Instead of trying to prevent them from failing, why aren’t we trying to prevent them from being?

This was a point of discussion at our morning meeting. Marketplace Senior Business Correspondent Bob Moon asked why do we have antitrust laws? They’ve done very little to stop corporations from becoming industry-devouring-and-destroying Pac-Men. The American system has prided itself on survival of the fittest and dog-eat-dog and all that, but once upon time, wasn’t it also about making sure there was competition left and that no one got too big to take down the system?

http://www.mcclatchydc.com/politics/story/64917.html

The so-called “intelligence fusion center” of the Mississippi Highway Patrol was forced to retract a scurrilous “intelligence bulletin” they had put out, linking support to Ron Paul and other third-party candidates as a possible indicator of anti-government militia involvement. I’ve heard widespread reports of people with Ron Paul bumper stickers being pulled over for no apparent reason, and now this.

“First they came for the Ron Paul supporters, but I wasn’t a Ron Paul supporter so I said nothing….”

The quest for squeaky-clean dishes has turned some law-abiding people in Spokane into dishwater-detergent smugglers. They are bringing Cascade or Electrasol in from out of state because the eco-friendly varieties required under Washington state law don’t work as well. Many people were shocked to find that products like Seventh Generation, Ecover and Trader Joe’s left their dishes encrusted with food, smeared with grease and too gross to use without rewashing them by hand. The culprit was hard water, which is mineral-rich and resistant to soap.

“Yes, I am a smuggler,” she said. “I’m taking my chances because dirty dishes I cannot live with.”
What further depths of depravity will “real estate agents” descend to? Stay tuned.

Mar 26, 2009 8:13 AM — Scott Jagow
Monopoly needs an update

Yeah, yeah, Monopoly is digital now, with debit cards and electronic banking. There are new tokens, like a flat-screen TV. There’s even a Here and Now, World Edition for the global economy. Still, if you go bankrupt, the game’s over. WHAT? Where’s my bailout?

Options trader Adam Warner found his son playing Monopoly on the Wii, and he overheard Mr. Moneybags tell one of the players, game over, you’re bankrupt:

And I’m thinking, “What are they teaching kids these days? This is 2009; that’s not how we roll.” Clearly, the words “too big to fail” don’t mean anything to this popular Parker Brothers mascot.

So Warner came up with his own Monopoly cards, which he calls the Greed and Graft edition. Samples below. Pretty amusing, but now that I think about it — Geez, how do we talk to kids about the new economic reality?

Captions shown on the cards below Scott Jagow’s article:

“Community Chest

YOU HAVE LOST $1 BILLION FOR PARENT COMPANY; COLLECT $10 MILLION RETENTION BONUS FOR EACH PLAYER”

“Chance

MAKE GENERAL REPAIRS ON ALL YOUR PROPERTY. CHARGE RICK SANTELLI AND HIS FRIENDS IN THE TRADING PIT.”

“Chance

GO DIRECTLY TO JAIL. DO NOT PASS GO, DO NOT TRY TO MAIL $1 MILLION DOLLAR VASES OUT OF YOUR UPPER EAST SIDE CONDO TO YOUR KIDS IN JERSEY.”

APR Marketplace
Thursday, March 26, 2009

Listen to the show
Taking Stock
Why home ownership is U.S. obsession
Columbia Professor Edmund Phelps

Kai Ryssdal speaks with Columbia Professor Edmund Phelps about the reason why so many Americans want to own their own homes.

Edmund Phelps, director of Columbia University’s Center on Capitalism and Society. (columbia dot edu)

TEXT OF INTERVIEW

Kai Ryssdal: So you grow up, get a good job, marry, you have a couple of kids, and buy a house. It’s the American dream, right? But a lot people got in trouble chasing that last part and helped take the economy down with them. In today’s installment of Taking Stock, our series of occasional conversations with people who can give us the longer view of our economic situation, Columbia University economist Edmund Phelps and American attitudes toward home ownership. Phelps says that dream of owning a house has been fueled, in large part, by the government.

EDMUND PHELPS: Democrats and Republicans have been very keen to make home ownership almost a national purpose. President Clinton got through Congress a 1997 act to force mortgage lenders to relax the conditions on loans for low-income people. And then there were tax breaks on capital gains and houses in 1998. But I have to say that it isn’t just public policy. The banks, which used to have something to do with business lending, sorta of lost their expertise in that area, and they began to focus all their lending efforts on residential mortgages and other soft targets.

Ryssdal: Let me ask you this, though. Because if the government gets rid of the home-mortgage interest deduction, I for one will be extremely annoyed, and so will the 70 percent of Americans who own their own homes. I mean, it would be a sea change in the way we look at homes in this country.

PHELPS: Yes, it would be. But to me it makes a lot of sense. Because, look, this is a very funny kind of asset in which the owner of the asset gets the services of the asset — the shelter and the comforts and so forth that the asset provides — and at the same time, as if the owner was paying income tax on those services, the owner gets to deduct the mortgage costs.

Does anyone have any viewpoints on Oldsmar, Fl. It appears that there are a huge number of houses for sale for such a small city- 450 or so by Realtor.com. Then I found that there are 150 or so foreclosures.
So, this is about 600 houses in a city of 15,000 people or so and 4536 households.
I used to live there. I loved the place. So 10% are up for sale and 3% are in foreclosure? Is this correct? Could someone give me a local assessment of what conditions are at the moment?
Tx,
Roidy

I was on a long line at Costco the other day, with the person at the checkout taking a very long time (perhaps didn’t have the money, credit card rejected, or something).

So as I changed lanes I let out a wisecrack I have often used when waiting to make a simple transaction, whether at a teller, the post office, etc. “The guy in the front must be getting a mortgage.” I went through the whole housing bubble without it hitting me that the wisecrack no longer makes sense — people were getting a mortgage as fast as they normally get a bag of chips.

Anyway, rents are falling in New York, which happened in the early 1990s but people were telling a few months ago couldn’t happen.

http://www.nytimes.com/2009/03/29/realestate/29cov.html?_r=1&ref=realestate

And for sellers, reality has arrived in Manhattan.

http://www.nytimes.com/2009/03/29/realestate/29deal1.html?ref=realestate

I’d say it’s late 2007 here, for those of you in other places. We still have that 30% to 60% drop ahead of us.

NPR is doing a stellar job with producing a steady stream of online articles and news stories which do not fall into line with the dead tree MSM FIRE-friendly positions. Keep up the great work, and we will keep sending in our membership contributions

APM Marketplace
Thursday, March 26, 2009
Fed as super-regulator a super bad idea
Susan Lee

Congress is seeking to create legislation to regulate the broken financial system. Commentator Susan Lee says one idea to make the Federal Reserve a super-regulator isn’t very super at all.

TEXT OF COMMENTARY

Kai Ryssdal: There’s a wide range of options open to Congress and the White House as they try to work out the details of these new regulations. Commentator and economist Susan Lee thinks one of those options is one too many.

SUSAN LEE: One totally obvious thing has emerged from our current mess: the need for a better, smarter way to regulate the financial system. And the financial-reform lobby has been furiously generating ideas.

So far there have been zillions of suggestions, and I’ve only heard one that stands out as nonsense: making the Federal Reserve into a super-regulator over the entire financial system.

It’s easy to see why this idea is appealing. Right now, regulatory authority is divided among dozens of state and federal agencies. And so it’s possible for somebody like Bernie Madoff, whose business was regulated by three different entities, to elude detection.

So maybe, just maybe, one regulatory superpower could nail criminal activity by individuals, or even mischief by a single institution. But that’s way different than the notion that one giant regulator can spot the beginning of systemic risk.

The current Fed failed to sight a bunch of alarming problems that were occurring system-wide. It didn’t notice the over-leveraged condition at many bank-holding companies; it was oblivious to the bubble blowing up the real-estate market; it ignored predatory lending practices; and it didn’t recognize that a little oversight of the derivative markets was necessary.

The problem, simply, is that a super-regulator requires super-people. People who have super foresight. Since no such people exist, pretending they do will only give us a false sense of security. And we’ll feel betrayed the next time a crisis hits.

If you doubt me, consider that the creation of this super-regulator is being left to a collection of some of the least super people on the planet. The U.S. Congress. And at the head of this effort is Barney Frank. The same person who had the foresight to declare that the financial position of Fannie Mae and Freddy Mac was absolutely solid. He made this declaration just weeks before those institutions collapsed into the hands of the federal government. I rest my case.

APM Marketplace
Thursday, March 26, 2009

Iceland in the cold after collapse
Icelandic author Andri Magnason

Iceland’s economy crashed last year after its three largest banks collapsed. Stephen Beard reports on how the country is coping with the fallout.

Andri Magnason, author of “Dreamland: A Self-Help Manual for a Frightened Nation.” (Courtesy of Andri Magnason)

TEXT OF STORY

Kai Ryssdal: Just last year Iceland was officially the happiest place on the planet. That’s how one survey in London described it. A high standard of living with among the best health care and education systems anywhere. Of course, that was before anybody figured out how to say subprime in Icelandic I think.

The global financial crisis crashed onto the island last fall. Its three largest banks collapsed, owing more than 10 times what the whole economy was worth. So Iceland became the first developed country to ask for help from the International Monetary Fund in 30 years. We sent Stephen Beard to the capital, Reykjavik, to see how things are going six months later.

STEPHEN BEARD: Icelandic tour guides usually take you to see volcanos and geysers. But local author Andri Magnason is showing me Borgatun Street, the site of a man-made disaster.

ANDRI MAGNASON: Yeah, we could call this street the “Boulevard of Broken Dreams.”

The street runs through the heart of Reykjavik’s stricken financial district. It’s lined with Iceland’s busted banks.

MAGNASON: Just here in front of us is the headquarters of Kaupthing, where capitalism fell in Iceland.

Iceland’s three biggest banks borrowed and lent billions overseas, but when the credit-crunch struck, the tiny Icelandic economy just wasn’t big enough to bail them out. The crash hit the wider economy hard. The local currency fell 50 percent against the dollar. Unemployment has soared, and pretty soon one in 10 will be out of a job.

Examiner dot com
Michele Lerner
Residential Real Estate Examiner
Surge in FHA loan defaults
March 13, 7:50 AM

Washington Post reporters studied federal data and discovered that FHA (Federal Housing Administration) mortgage defaults are on the rise. Their research shows that the number of borrowers who failed to make more than one payment before defaulting nearby tripled over the past year.

According to the article by Dina ElBoghdady and Dan Keating, “Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers, and most notably, foul play among unscrupulous lenders looking to make a quick buck.”

If someone lapses on their mortgage because they have suddenly lost their job or face a health crisis, that’s understandable these days. But, after everything our country has faced since the subprime lending mess began a few years ago, it is criminal to think that lenders are once again committing fraud and failing to do the work to make sure the people they are lending to can actual repay their loans. Do we have to learn this lesson again?

Even scarier is the fact these loans are government-backed. So, guess who pays when these borrowers default? Not the lenders who messed up and made bad loans. Nope. The FHA has make good on those loans from government reserves - which, in case you aren’t sure, come from taxpayer money. If the FHA reserves run out, Congress will be expected to bail out the FHA, with — you guessed it — taxpayer money.

Examiner dot com
Michele Lerner
Residential Real Estate Examiner
Home prices continue to slide across the country
March 27, 6:45 AM

First American CoreLogic and its LoanPerformance Home Price Index (HPI) shows that resale housing prices dropped by 11.6% in January 2009 when compared with January 2008, which represents 11 consecutive months of deprecation of more than 10%.

Since U.S. home prices peaked in July 2006, they have declined 21.2 percent on a cumulative basis and are currently back to the lowest price level last seen in March 2004.

The number of metropolitan markets experiencing price declines is, by far, the highest ever. As of January 2009, over 700, or nearly three-quarters, of all metropolitan markets were experiencing home price depreciation, up from 254 markets experiencing depreciation in December 2007 and 394 in June 2008.

“Home prices nationally continue to fall, and are no longer confined to just the ’sand’ states. Nearly three quarters of all CBSAs are now experiencing declines, almost three times more than a year ago.The economic downturn and high levels of distressed housing inventory means that the likelihood of a price recovery will not begin until 2010,” said Mark Fleming, chief economist for First American CoreLogic.

Among the country’s 35 largest metropolitan markets, or Core Based Statistical Areas (CBSA), 10 markets show depreciation of more than 20 percent.

CBSA 12 Month HPI Change %
Riverside-San Bernardino-Ontario CA -29.62%
Miami-Miami Beach-Kendall FL -28.79%
Las Vegas-Paradise NV -28.41%
Oakland-Fremont-Hayward CA -27.73%
Cape Coral-Fort Myers FL -27.23%
Los Angeles-Long Beach-Glendale CA -25.14%
Phoenix-Mesa-Scottsdale AZ -24.26%
Fort Lauderdale-Pompano Beach-Deerfield Beach FL -23.48%
San Diego-Carlsbad-San Marcos CA -21.99%
Orlando-Kissimmee FL -20.96%
Tampa-St. Petersburg-Clearwater FL -18.05%
San Francisco-San Mateo-Redwood City CA -15.12%
Washington-Arlington-Alexandria DC-VA-MD-WV -14.77%
Chicago-Naperville-Joliet IL -13.12%
Portland-Vancouver-Beaverton OR-WA -11.62%
Seattle-Bellevue-Everett WA -11.48%
Minneapolis-St. Paul-Bloomington MN-WI -11.10%
Honolulu HI -10.82%
Edison-New Brunswick NJ -9.34%
New York-White Plains-Wayne NY-NJ -8.46%
Boston-Quincy MA -7.25%
St. Louis MO-IL -5.85%
Cleveland-Elyria-Mentor OH -4.84%
Charlotte-Gastonia-Concord NC-SC -4.38%
Atlanta-Sandy Springs-Marietta GA -3.58%
Detroit-Livonia-Dearborn MI -3.44%
Raleigh-Cary NC -3.38%
Salt Lake City UT -2.95%
Philadelphia PA -2.85%
San Antonio TX -1.10%
Denver-Aurora-Broomfield CO 0.97%
Dallas-Plano-Irving TX 1.54%
Houston-Sugar Land-Baytown TX 3.58%
Austin-Round Rock TX 3.92%

Source: First American CoreLogic, LoanPerformance HPI, Single-Family Detached as of January, 2009

Is it really that hard for a federally insured lending program offered by the FHA to police fraud? Or is deliberately lax regulatory effort which turns a blind eye to lending fraud an intentional part of the home price reflation strategy? After all, if the borrower defaults, the loan is federally guaranteed, so the lender has nothing to lose on making fraudulent loans (unless they get caught).

P.S. Exercise special precaution when considering a decision to purchase Florida swamp land.

WaPo
The Next Hit: Quick Defaults
More FHA-Backed Mortgages Go Bad Without a Single Payment

The Palm Hill Condominium project in West Palm Beach, Fla., has a default rate at 80 percent for loans from one lender. A dozen loans went bad after no payment or one. The apartments built 28 years ago on former Everglades swampland were converted to condominiums three years ago.

The Palm Hill Condominium project in West Palm Beach, Fla., has a default rate at 80 percent for loans from one lender. A dozen loans went bad after no payment or one. The apartments built 28 years ago on former Everglades swampland were converted to condominiums three years ago. (By Joshua Prezant For The Washington Post)

By Dina ElBoghdady and Dan Keating
Washington Post Staff Writers
Sunday, March 8, 2009; Page A01

The last time the housing market was this bad, Congress set up the Federal Housing Administration to insure Depression-era mortgages that lenders wouldn’t otherwise make.

This decade’s housing boom rendered the agency irrelevant. Americans raced to aggressive lenders, seduced by easy credit and loans with no upfront costs. But the subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency’s historic role in backing mortgages is more crucial now than at any time since its founding.

With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency’s overall growth in new loans, according to a Washington Post analysis of federal data.

Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.

We’re in Palm Coast, FL. It’s a heavily wooded community of about 68k between Daytona Beach and St. Augustine. It borders the Atlantic and stretches about 4 miles inland.

Unemployment here is 14%. Flagler County was the fastest growing county in the U.S. during the boom. I read the other day that it is still fourth! With 14% unemployment?!

The town was a tree farm owned by ITT, which decided to develop it with a master plan of quarter-acre lots. It was incorporated in 2000. All homes are custom-built, no tracts, mostly 3br/2ba, about 1800sf. The builders range from small shops to national companies. Many are now gone. But there are no unfinished homes.

Few condos except on the beach. So we have not been hit with that blight. There are a couple high-priced gated golf communities, mainly sf homes. Tiger Woods spends time here. His yacht is sometimes berthed on the intracoastal.

The average lot price shot from $5k in 2000 to $75k at the top, now half that at best. We moved here in 2004 and there was the constant sound of lots being cleared for new homes. It’s been quiet since mid 2006.

The town is mainly retirees. Many want to move to condos somewhere else but can’t sell their homes. Not for the prices they want. Most paid cash or are carrying small mortgages. But they got used to seeing prices go up, up, up. They’ve been trying to ride out the downturn. Now they have to deal with the stock market crash. They feel besieged. But we’re doing better than many other FL communities with big tract and condo developments.

We have our share of renters who come and go. Some don’t keep up the property thinking the landlord should do it but that’s not in the lease. Local government is doing a good job enforcing code and fining tenants and landlords who let things slide. So the town still looks good. For now.

The city government recently moved out of city hall so they could lease it to a tech company from another state. Jobs and revenue. The city now rents space in an office park that completed just as the real estate market crashed.

Based on web sites I visit, foreclosures and short sales here seem to have declined a great deal. A lot of speculators have been shaken out. I am not a realtor and don’t talk regularly with any, so the web stats could be misleading. I hope not.

Kohls just opened a new store, which surprised everybody. New retail, especially restaurants, is coming in as long as the price is right. An upscale strip of restaurants and shops got slammed hard so that is not being repeated.

I think we are a ray of light in a terrible market but few of my neighbors would agree.

Nobody has to buy, nobody has to catch a falling knife, and it really makes no sense as a long-term investment strategy to buy when home prices are still falling and unemployment is still climbing.

But don’t take my word for it, if you think the DataQuack analysts know better — go for it!

San Francisco Chronicle
Bargain home prices attract investors, novices
Carolyn Said, Chronicle Staff Writer
Sunday, March 29, 2009

Despite a tattered economy and grim real estate market, every month more than 5,000 people buy a house in the Bay Area.

Are they fools to invest in homes that could plunge in value, or are they fortunate folks taking advantage of bargains?

“You hear all this talk about how nobody wants to catch a falling knife,” said MDA DataQuick analyst Andrew LePage, referring to the expression for investing in a plunging market. “Despite that, there are plenty of people who have decided that it is time to buy. They are bargain hunters buying because they perceive a lot of these homes as good deals.”

A Chronicle analysis of sales data from MDA DataQuick, a San Diego real estate research firm, indicates that the majority of local buyers are either first-time homeowners or investors taking advantage of the huge glut of fire-sale-priced distressed properties - bank-owned foreclosures, short sales and homes surrounded by foreclosures and short sales.

“At least two-thirds of the market is split between investors and first-time buyers,” said LePage. “The balance is mainly the people who have to buy because of a new job or other life events.”

Many homes here have returned to the realm of reasonable prices, with the median sale price hovering below $300,000. That means that even people with incomes around the Bay Area’s median of $80,000 or so can find properties within their price range.

“They are able to get a toehold because things are becoming so much more affordable,” said Stephen Bloom, a Realtor with Lawton Associates in Berkeley.

The comp prices continue to drop at a high rate in California. But I have seen no evidence yet that prices have bottomed out, especially given the news that investors and first-time buyers are driving the market. I have also seen no evidence the high end of the market has capitulated yet, as, for instance, the median SFR list price in our (predominantly middle class) zip code, 92127, is stuck at $1,150,000, where it has been for maybe a year or more already. I don’t expect the market to bottom out before first time buyers and investors are too scared or broke to participate any more.

Thursday, March 26, 2009, 6:00am PDT | Modified: Friday, March 27, 2009, 9:21am
California home sales up 83% as prices plunge
San Francisco Business Times

The number of homes sold in California rose 83 percent in February compared with last year, as the median existing home price dropped 41 percent, according to the California Association of Realtors.
…
“Home sales in California continue to be considerably stronger than the nationwide sales figures,” said association president James Liptak, in a news release Wednesday. “The market will continue to register large, but diminishing year-to-year percentage gains in the coming months, as current sales are compared against the extremely low numbers that prevailed during the early months of the credit crunch.”

The statewide median existing home price was $247,590, 41 percent less than February 2008’s median home price of $418,260. The February 2009 median was 2 percent less than in January.

“The California median price has declined by a larger margin than the nationwide median price,” said association vice president and chief economist Leslie Appleton-Young. “This can be attributed to the under-$500,000 portion of the market, which has experienced larger price declines than the other market segments due to the large share of distressed homes for sale. This further contributed to the decline in the statewide median.”

My BIL who is a realtor tells me that the market for lower end REO’s in the SFV is hot. He told me that numerous low priced REO’s are getting multiple offers. I responded that of course there would be activity in these really low priced houses.

The only reason there is increased activity is because of the artificially low interest rates and low prices. The difference now is that people are NOT buying for future appreciation, they are simply buying because it is cheaper than renting.

That said, the majority of these listings are still crap and overpriced!!! I am just thoroughly disgusted with the whole manipulation of the market. I think that I’m going to find another blog, one that talks about gardening or something soothing!!!

I’m willing to bet real money that when he says that it’s not a “possibility”, he really means it’s virtually guaranteed.

There is so much money to be made here, it’s like dollar notes everywhere.

Britain may have to go to the IMF for a huge financial bailout, the influential investor George Soros warns today.
The man who made $1 billion on Black Wednesday in 1992 told The Times that Britain was particularly vulnerable to the economic crisis.
Mr Soros – speaking days after an auction of government bonds failed for the first time in 14 years, ringing alarm bells about Britain’s ability to fund its growing debts – said that Gordon Brown might have to go begging for billions of pounds in international aid. He also warned that next week’s G20 summit in London was the last chance to avert a full-scale depression that could prove worse than that in the 1930s.
“You have a problem that the banking system is bigger than the economy . . . so for Britain to absorb it alone would really pile up the debt,” he said. Asked about the chances of Britain having to seek help from the International Monetary Fund, he said that if the banking system continued to collapse, it was “a possibility”. At this stage, he added, it was “not a likelihood”.

BWAHAHAHHAHAHHAHAHHAHAAHHAHAHHAHAHAHAHAHHAHHHHHH!!!

Why is this not going on at the big banks??? They’ve taken a lot more money than GM has.

http://www.detnews.com/article/20090329/AUTO01/903290328/Wagoner+forced+out+at+GM

General Motors Corp. Chairman and Chief Executive Rick Wagoner has agreed to step down as part of an agreement to get a new package of federal aid for the auto maker, people familiar with the matter said.

An administration official confirmed that Mr. Wagoner was asked to step down by the administration as a precondition for ongoing restructuring within the company.

“Help me, OBWan, you’re my only hope.”

BWAHAHAHHAHAHAHHAHAHAHHAHAHAHHAHAHAHHAHAHHHHHH!!!

OOPS - To GrizzlyBear, on his comment yesterday re: my housing security systems - “Aww, Jane, bless ya. I’ve got my own big bear! Have been in the breed for more than 20 years, and I can’t imagine life without one by my side. I even showed this one in his early years and, boy, was that a comedy of errors on my part”

Yay! Great to find a Kindred Spirit! As well as being security systems, they are great companions, IMHO. The downside with rescues, you don’t know their ages, and they are stoic. When they start declining, it is because they simply can’t hold it together anymore, and it is precipitous. I just lost one to age who I’d only had for four years, and he was the best. The rescue org assigned me a “replacement” immediately - they are crawling with Akitas in this downturn - but it takes time to sort out the swim lanes. And of course, it is never the same kind of bond.

Seems so ancient now:

http://www.youtube.com/watch?v=f7sXTLkBmic

___

Last?!!!!

Nah, someone will just HAVE TO post a reply and ruin this awesome great last post.

Muir Last = FAIL.

March 30 (Bloomberg) — The Monetary Authority of Singapore may devalue the city’s currency and allow it to drop 4 percent against the U.S. dollar by June 30 to aid exporters and lift the economy out of the worst recession since independence in 1965.

March 29 (Bloomberg) — The Obama administration plans to give General Motors Corp. enough government aid to restructure over the next 60 days, while Chrysler LLC is being told it must complete a deal with Italian automaker Fiat SpA, according to a government official.

March 29, 2009
Why Are These Renters Smiling?
By ELIZABETH A. HARRIS

WHEN Whitney Pettyjohn and her 19-year-old sister, Chelsey, moved to Brooklyn last August, the best deal they could find in their price range was a two-bedroom in Bushwick with unreliable heat, nine blocks from the Morgan Avenue stop on the L train. It cost $1,700 per month.

When they looked again this year, they found a very different market. Four weeks ago, they moved two stops closer to Manhattan, into an apartment with more character and more storage for the exact same price.

“We’re one block from the subway,” Ms. Pettyjohn, 24, said. “It’s like living in a dream!”

Rents are down throughout New York. According to the February Manhattan Rental Market Report produced by the Real Estate Group, a New York brokerage firm, rents in the borough have fallen “across the board.”

The biggest drop was in studio apartments in doorman buildings, which have fallen 8.33 percent from the same time last year.

Many people who signed leases in the bubble years are paying much more in rent than what their apartments would get today. So when their leases expire, some New Yorkers are trading up for better deals, finding comparable places for less money or nicer apartments that do not come with a big rent increase.

“No one’s willing to pay more now, because there’s always another deal next door or down the block,” said Georgia Kaporis, an associate broker at Citi Habitats. “They’re just upgrading for less.”

Erika Allen, for example, moved earlier this month from a first-floor studio in the East Village between Avenues B and C. Only through a remarkable New York-style exercise in stacking belongings and maximizing space did Ms. Allen, 21, a journalism student, manage to share the place with her boyfriend, Clark Hassler, 25, a professional skateboarder. (Picture shoe storage above the refrigerator.) They were paying $1,885.

For $15 more a month, the couple now have a one-bedroom five blocks from their old apartment that is closer to the subway, has a working fireplace and, perhaps most important, more privacy.

“I was looking forward to having a bedroom door,” Ms. Allen said. “I love to have people over, but it’s hard when you have to have them sit on your bed. It’s just crazy the things you get used to.”

Though more apartments are becoming more affordable as rents come down from their lofty peak, New York prices might still seem shocking to the uninitiated.

In February, the average rent for a one-bedroom apartment in a nondoorman building was $2,632, according to the Real Estate Group. It was $3,395 for a one-bedroom in a doorman building.

“Probably somebody who’s relocating would still be surprised today: ‘This is the size of apartment I get for this price?’ ” said Caroline Bass, an associate broker with Citi Habitats. “But New Yorkers think this is great right now. Maybe you appreciate it more if you spend more time here.”

Another bonus for New Yorkers concerns the broker fee, which has usually been paid by the renter and can add 15 percent of a year’s rent to the initial cost of leasing an apartment. These days, as attracting good tenants has become more difficult, owners have started paying the broker fees themselves.

According to Halstead Properties, out of 4,230 open and exclusive listings for apartments between Feb. 15 and March 15, 30 percent offered owner payment of the broker fee. Over the same period in 2008, only 8 percent of Halstead’s apartments offered that incentive.

A big jump, but it still leaves the majority of apartments requiring tenants to pay the fee.

“There’s so much media attention paid to no fee, free rent, rental prices coming down, that now everybody has an image that everything is a no fee,” Ms. Bass added. “But it’s not true.”

Liz Sterling, a client and friend of Ms. Bass, stepped up to a larger, less expensive apartment in a neighborhood she prefers, but to do so she had to pay a broker fee. It was, she said, worth it.

“I did not think I could get an apartment as nice as I did,” she said.

When she moved into a studio apartment in Midtown last year, $1,800 was the best deal she could find. “It was the biggest place I looked at that I could afford,” she said.

“I wanted to live on the Lower East Side, but I couldn’t find any place that I could afford,” she said. “I figured if I couldn’t live in a neighborhood I really wanted to, I’d at least live someplace convenient.”

From her Midtown studio, Ms. Sterling, 28, could walk to work at Christie’s, where she is a specialist in the American paintings department, and to Hunter College, where she is studying for a master’s degree in art history.

After moving in, however, she discovered the apartment had some quirks, including little sunlight, the smell of greasy meat from the restaurant below (Ms. Sterling does not eat meat) and an acupuncture parlor down the hall that stayed open very, very late and served a male clientele.

So toward the end of her lease, she began looking elsewhere. When she saw how far rents had fallen, she asked her landlord to drop hers to $1,650 per month. But, she said, “they wouldn’t lower my rent. So I moved.”

She looked at some 25 apartments and finally settled on a large one-bedroom in just the location she’d hoped for, the Lower East Side. “It’s exactly where I wanted to be,” Ms. Sterling said.

According to her broker, Ms. Bass of Citi Habitats, the asking price was $2,400 a month for the apartment. It sat vacant for weeks and the building had several other vacancies to fill, so the landlord was amenable to lowering the price drastically — and throwing in a month of free rent. Ms. Sterling signed a two-year lease for $1,700 per month — $100 less than for the studio that smelled of hamburgers. She moved in this month.

Seven hundred dollars less than the asking price is a striking drop. But Marc Lewis, the president of Century 21 New York, said a lot of surprising things are happening in the rental market right now.

One new experience for Mr. Lewis is being told by landlords that they will accept tenants with bad — even very bad — credit.

“Imagine that, saying, ‘I’ll take anyone,’ ” Mr. Lewis exclaimed. “I’ve never seen that in 36 years.”

Roberta Axelrod, the director of residential sales and rentals at Time Equities, a real estate developer and management company, says that from the owner’s perspective, the important thing is to keep apartments filled.

“Look, we would rather rent the apartments for more than for less if we can,” she said. But, she added, she believes that the rental market will strengthen again in the future. “I wouldn’t panic,” she said.

With great deals available, some renters may be tempted to break their leases. But, said Dov Treiman, a lawyer and the editor of The Housing Court Reporter, they probably won’t have much luck. Landlords are not obligated to let tenants out of a lease.

It’s impossible to know when rents will stop falling. Gregory J. Heym, the chief economist at Terra Holdings, which owns Halstead and Brown Harris Stevens, said there are two key indicators to watch: the for-sale market and the job market.

“When do prices reach the point when people start buying again, or when does the confidence return?” he said. “Also look at hiring, that’s one of the more direct links to the rental market.”

Rents, he said, are unlikely to rise until jobs start coming back, and the Independent Budget Office of New York does not expect the city to add jobs again until 2011.

Dire economic projections like that, of course, make people nervous.

Kiley Bates, 34, a freelance fashion stylist and event producer, and her boyfriend, Patrick Brennan, 28, an editor at Scholastic, decided that in this economy saving money was paramount.

“I’m a freelancer, and I was getting a little worried about work,” Ms. Bates said. So even though she and Mr. Brennan liked the spacious apartment they shared on the border of Park Slope and Gowanus, they realized they could be paying less than $2,350 a month.

“At first I was like, ‘what if we found a place that was $2,000 a month — that’d be amazing!’ ” Ms. Bates said. “But then we saw that there were places that were even cheaper.”

The apartment they moved to this month was another one-bedroom, slightly smaller than their old place, near the Grand Street stop on the L train in Williamsburg, Brooklyn, for $1,775.

Even New Yorkers who feel secure in their jobs are moving to save money.

Elizabeth McKeveny, who works in academic fund-raising, and her boyfriend, Sean Hamel, who works in public relations, were paying $2,800 for a one-bedroom on the Upper West Side.

“It was a good building, good people,” Mr. Hamel said. “We just wanted to find something cheaper.”

Both 27, they moved to a one-bedroom in Midtown last month, in a prewar building with high ceilings and hardwood floors, for which they pay $2,000 per month.

“It definitely felt like things were more, quote-unquote, negotiable, in terms of rent and broker fees,” Mr. Hamel said, comparing their apartment hunt this year with their search last year.

“Prices are still coming down in virtually every sector,” said Daniel Baum, the chief operating officer of the Real Estate Group. “There’s a general theme out there. It’s called ‘Let’s make a deal.’ ”