The Housing Bubble

A weekend topic around some comments in the desk clearing post. One reader said, “In the 1970s I remember having a long discussion with my uncle about all the doomsayers. Going off the gold standard, nuclear war, economy tanking, the end of the world…..all that stuff. His advice: proceed with life, because you can’t live in a box of fear. That is the best advice I ever received.”

I replied, “We’ve had at least two major manias in 15 years. My position is that we are in the midst of a global real estate bubble, and probably stock, bond, milk, art, antique car and rosewood furniture bubbles too.”

One replied, “With the exception of real estate, who does it hurt? If some successful 70 year old dude with a hot blonde 40 year old wife wants to pay a million dollars for a stupid 1970 Barracuda at Barrett-Jackson, then be my guest. That purchase probably caused the employment of ten marginally adequate body shop men in Texas.”

The Lodi News Sentinel. “Home prices are rising, and homeownership is falling. How can that be? If prices are rising, it must be because there is increasing demand for homes, but if there is increasing demand, then why are there fewer homeowners? In the nation’s 20 largest markets, home prices were 5 percent higher in February versus the same month one year ago, according to the S&P/Case-Shiller home price index.”

“‘Home prices continue to rise and outpace both inflation and wage gains,’ said David Blitzer, of S&P Dow Jones Indices. ‘If a complete recovery means new highs all around, we’re not there yet.’”

The Santa Cruz Sentinel. “After months of lagging, the high end of the housing market has taken off in Santa Cruz County, with one in five homes in March sold for more than $1 million. The median price — the midpoint of what sold — reached $749,000, the highest since August 2007, according to Gary Gangnes of Real Options Realty, who tracks the market. Prices are just about where they were before the housing bubble burst. ‘My God, right now, the shortage of listings, things get bid up and up and up,’ said veteran Santa Cruz appraiser Glenn Fuller. ‘On the Westside, everything as selling $20,000 over what it was listed.’”

“Low interest rates push prices up. When the cost to borrow is less, people are willing to pay more. Experts have been predicting a rise in interest rates but it has yet to materialize. ‘Who want to pull the punch bowl, so to speak?’ asked Fuller.”

The Star Exponent. “Culpeper has seen a steady increase the past few years in residential home permits with 230 issued last year, compared to a low of 49 in 2009 and the peak of 611 in 2006. In the first three months of this year, typically the slowest, the building department issued 40 permits, according to interim Culpeper County Administrator John Egertson. ‘I think we will surpass last year’s mark by the end of this year,’ he said. ‘The larger homebuilders are telling us that they will be very active with new home starts in the coming months.’”

“Ryan Homes is advertising various models, from the low $220Ks to the high $250Ks, where homes in the neighborhood, overlooking the mountains, once sold for $400K at the building peak. In Culpeper County, the median sold price for single family homes was $249,900 in the first three months of 2015, a 1 percent year-over-year increase, according to a new first quarter report from the Greater Piedmont Association of Realtors. While the slight increase is good news, it’s indicative that the market is still fragile, said Ellen Butters, principal broker at EXIT Cornerstone Realty in Culpeper.”

“‘Healthy numbers would be a bit higher, historically at 3 to 5 percent,’ she said. ‘If you look back at the boom in 2003-2006, we were experiencing double digit year-over-year increases, which was unhealthy in that it could not be sustained and a burst was inevitable.’”

“Of the five counties, Rappahannock showed the highest year-over-year increase in the median sales price for the first quarter, increasing nearly 38 percent to $344,150, compared to $250,000 in 2014. In Madison County, the median sales price fell 8 percent to $161,000 in the first quarter, according to the association report.”

The Real Deal. “Barbara Corcoran says that New York City might be in a new bubble, but she doesn’t seem too concerned. ‘Let people buy these apartments, they’re spending a ton,’ the Corcoran Group founder told Bloomberg News in an interview. ‘They’re parking their money here. It’s fueled by foreigners more than anyone else. And why not?’”

From Barron’s. “What’s your mutual fund worth? It seems such a simple question. But for investors in GL Beyond Income it’s currently impossible to answer. The mutual fund’s board froze its assets in December, pending the results of investigations by the Securities and Exchange Commission, and the Federal Bureau of Investigation into an alleged fraud by its manager, Dan Thibeault. ‘The trustees have determined that the valuation of the fund’s assets may not be reliable,’ the board wrote in a letter to shareholders after Thibeault’s arrest that month.”

“GL invested in obscure, difficult-to-value loans to medical students—a category ripe for scandal, according to some experts. Thibeault allegedly created fictitious loans. But the case has implications that go beyond a narrow subset of unusual funds. The fact is, almost every bond fund and some stock funds have assets that are difficult to value. Market volatility, negligence, or outright fraud can render the share prices of such funds inaccurate.”

“Managers can be tempted to maintain incorrectly elevated prices to prevent a stampede by redeeming shareholders. Such mispricing occurred, the SEC found, in its enforcement actions against now-defunct funds run by Regions Morgan Keegan after the 2008 crash. Worse, level 2 bonds can suddenly become level 3 during a crisis. The mortgage-backed bonds that Regions Morgan Keegan owned were fairly liquid prior to the crash.”

“‘Because of the housing bubble people thought these bonds were homogenous,’ says Stephen Keen, a securities lawyer. Then defaults spiked and it suddenly mattered which mortgage pools you owned. ‘Once it became apparent investors didn’t know what they had, there was no liquidity and the valuations collapsed,’ Keen said.”

The Charlotte Observer. “A Charlotte-area whistleblower suing Wells Fargo in federal court is now facing foreclosure from the same bank. Robert Kraus lost his job in 2006 after he says he raised red flags about questionable activities in the corporate and investment bank at Wachovia, now part of Wells Fargo. Since then, he says he has fallen behind on his mortgage because he hasn’t been able to find work in financial services. Wells Fargo started foreclosure proceedings against Kraus and his wife, Julianne, in December, according to court documents. The Krauses are behind on payments on the $515,000 mortgage for their Waxhaw home. A hearing before the Union County Clerk of Superior Court is scheduled for June 9.”

“Soon after being recruited to Charlotte-based Wachovia in 2005, Kraus alleges he found ‘problematic practices’ related to the booking of trades, the reporting of losses and other activities inside the investment bank, according to a lawsuit he later filed in state court. Kraus, who was a controller in the unit, brought his concerns all the way to the then-head of the investment bank, Steve Cummings, according to the suit. But months later, in July 2006, a lawyer for the bank told Kraus that an internal investigation had uncovered no wrongdoing, and he was offered a severance package on a ‘take it or leave it basis,’ according to the complaint. With a pregnant wife and a new home under construction, Kraus accepted.”

“Two years later, Wachovia was in serious trouble, hobbled by losses in its mortgage portfolio and in the corporate and investment bank. San Francisco-based Wells Fargo swooped in to buy the faltering bank in fall 2008 at the peak of the financial crisis. In 2011, he and another whistleblower, Paul Bishop, filed a suit in federal court in New York alleging Wachovia’s investment bank violated accounting rules and skirted internal controls to pursue short-term profits, benefiting senior management at the expense of the company’s financial health. The case was unsealed in October 2014.”

“The complaint includes allegations that Wachovia, in violation of federal law and proper accounting practices, routinely placed loans in an off-the-balance-sheet entity called the College Street Funding Master Trust, known internally as the ‘Black Box.’ Wachovia’s former headquarters was on College Street in Charlotte. The goal was to skirt regulatory constraints on the amount of loans the bank could keep on its balance sheet, according to the suit. In a 2005 email, a Wachovia executive, according to the suit, wrote that the accounting process was ‘held together with band-aids, spit and gum.’”

“Kraus doesn’t think it’s a coincidence that he faces foreclosure as his whistleblower lawsuit is pending. According to his 2010 lawsuit, Kraus received a loan modification from the bank after he sent a hardship letter explaining his dismissal from Wachovia. According to the suit, Wells Fargo pushed back payment on $395,000 of the balance until the end of the loan term and charged 2 percent interest on the remaining amount.”

“According to one of Kraus’ mortgage statements, his monthly payment is $1,192 for interest, principal and escrow. Kraus says his wife works, but it’s not enough to keep up with the family’s bills. They have two children. ‘The reason I can’t pay my mortgage is because I did my job at the bank,’ he says. ‘I’m losing my house to the same bank.’”

A reader suggested a topic on why there is no housing bubble. “HA says he can build a complete house for $55/SF, including land, permits, financing, construction costs and profit. If that was true, all these out of work builders would be building millions of houses and selling them, solving the housing cost problem. The average home in the Sacramento market is selling at about $175/SF. Even if you could find a land parcel for $75,000 (which is difficult) and built a 1500 SF house, the land portion alone equals $50/SF before you build the improvements. It is simply not true.”

A reply, “It is not very difficult to figure out that a house is made up of sticks, drywall, electric wiring, insulation, plumbing, ducts and a heating system among other things. The labor rate is $80 to $120 per day in most cases. How can anyone figure out that the cost per square foot for the above will ever reach above $55 per sq ft is beyond me? If someone pays $150 per sq ft fits the expression that there is a sucker born every minute.”

And finally, “I let someone else put in the basic infrastructure a century ago on the Reno I bought for my shop/studio/apartment. I used the old survey. My building permit was $40. The utility put in service and meters for free. My predecessor was a wannabe flipper and tore it down to the sticks literally. Steel roof, wiring and insulation surpassing code, new windows and doors, flooring, drywall, all of it including purchase price about half what HA claims. The Amish work cheap and fast and it is done right. OK, I haven’t put up any trim yet, and I won’t right now because boating season is at the doorstep.”

“When there are millions and millions of empty houses, why anyone would pay for built new at 4x cost is beyond me. Why they would pay some city $50K in permits for the privilege is a box of stupid.”

The Los Angeles Times. “Southern California is home to some of the most overpriced housing markets in the country. Three Southland regions ranked among the five most overvalued markets in the U.S. in a new report by real estate website Trulia. These are places where the housing costs have far outpaced growth in income. ‘Southern California has seen big price increases since the bottom,’ said Jed Kolko, Trulia’s chief economist, ‘without big increases in income.’”

“A number of regions across the West that saw price jumps last year as investors gorged on big inventories of foreclosures. Although incomes are growing — personal income climbed 2.8% in California last year, according to new numbers from the Commerce Department — home prices are growing faster. Prices are up 18.9% in metro Los Angeles from last January, according to S&P/Case-Shiller.”

“Those price gains have largely stopped in recent months, which could give the broader economy time to catch up with the housing market. That’s partly because interest rates have climbed, and partly because investors have pulled back, said Mark Zandi, chief economist at Moody’s Analytics. The housing recovery, he said, needs a new economic engine. ‘The job market has to continue to improve,’ Zandi said. ‘As people are more confident they can hold on to their job, they will start buying more homes.’”

“It also would help if credit eased. After the housing bust, lending standards swung too far in the opposite direction, he said, and that has hurt sales. Lending rules have been a factor even in the last few months, said David Cabot, chief executive at Berkshire Hathaway Home Services California Properties in San Diego. New mortgage rules that took effect in January gummed up some sales while brokers adapted. That may have had some effect on January and February sales.”

“But Cabot sees the spring getting off to a good start, with buyers and sellers both testing the market. ‘We think the spring season should be very healthy,’ he said.”

The Denver Post reports from Colorado. “Denver heavyweight commercial-real-estate honcho Andrew Klein’s Cherry Hills mansion fell into foreclosure this year. According to public records, the Buell Mansion neighborhood home had an outstanding principal balance of $6.998 million on an original balance of $7 million. According to the property listing for the home, the asking price is $8.95 million for the 21,193- square-foot property, which was built in 2007. The home has eight bedrooms, nine bathrooms, a nine-car garage, five fireplaces, a professional-style home theater, an outside kitchen and dining area, a 2,500-bottle wine cellar and a separate wing with a boxing ring, a gym and a guest apartment.”

“‘It’s been a hard three years,’ Klein said. ‘I’m trying to work something out with the bank.’”

From KWGN in Colorado. “Bank of America held an outreach event at the Colorado Convention Center for customers on the verge of foreclosure. It invited 6,300 homeowners in default of their loans in metro Denver, but only about 400 showed up. ‘It’s embarrassing,’ says one woman from Colorado Springs who didn’t want to give her name. She remains hopeful. But says reality always sets in. ‘If they can’t help you with your mortgage, where are you going to live? I thought about, do I live in my car, do I live at a homeless shelter?’”

The Deseret News in Utah. “The National Association of Home Builders recently reported that Salt Lake City reached a seven-year high for home affordability. In the Salt Lake area, 79 percent of homes sold in the second quarter of this year were within reach to families that make median area wages. About two weeks ago, Kristen Nelson, 27, and her husband, Tyler, 23, and their two children moved into their house on Ogden’s east bench.”

“The Nelsons were able to purchase their 1,800 square foot three-bedroom, two-bath property for $150,000 through a short sale after looking at more than 500 properties online and at least 50 homes in-person. ‘I’m pretty picky,’ she said. ‘We came from 900 square feet and wanted something where we could open the fridge and open the dishwasher at the same time and not have the person sitting at the dining room table not have to ’suck it in.’”

“Veteran Realtor David Seiler with ReMax Associates said prices will likely continue to fall as ‘the market struggles to find its reality’ from the artificially high prices of a few years ago.”

From KTVN Channel 2 in Nevada. “Have a spare million? Realtor Donna Spear with Chase International has a house for you. We found her singing the praises of Reno’s ‘Holly House.’ The Holly House is southwest Reno history. But even for this classic, selling in Reno is still a challenge. New numbers show our foreclosure frustrations are far from over. Notices of default went up more than 50% last month. Another 641 Washoe County homeowners in August could not pay their mortgage, up from 427 in July. It’s the highest level of defaults in a year.”

“Donna says, ‘More sellers are realizing that they have to compete with bank-owned and short sales, and so they’re adjusting their prices accordingly if they want to sell.’”

“For a house you love, the time is now. As the co-owner of the Holly House, Larry Johnston told us, ‘The time to buy is when there’s blood in the streets, and nobody’s going to raise a red flag and say this is the absolute bottom. But I can assure you, if it’s not the low, it’s darn close.’”

The Arizona Daily Star. “When Caylin Barter, a second-year law student at the University of Arizona, talks to homeowners saddled with high mortgage payments, she has an idea about what they’re going through. Barter bought a home in Reno, Nev., in August 2005. She then watched as the market crumbled and the value of her house evaporated. In the end, she got rid of her house in a short sale, where a bank agrees to sell the property for less than is owed on the mortgage.”

“‘It was bewildering for me and I feel like I’m a relatively savvy buyer and a relatively savvy negotiator,’ she said.”

“Barter and other UA law students are participating in a new program that aims to help homeowners facing foreclosure. The students spend 12 hours a week providing assistance at Southern Arizona Legal Aid’s mortgage clinic. Andrew Vanell, another second-year law student, worked in bank training loan offices in the years leading up to the mortgage crisis. He said he clearly remembers the financial climate - where borrowers were encouraged to consolidate debt using the equity in their homes - that got many people into their current situation.”

“‘Everybody was sort of caught up in the moment,’ he said.”

The Tucson Citizen in Arizona. “During the 1992 presidential election, James Carville coined the now-cliched phrase ‘It’s the economy, stupid’ to sum up what the election was all about. This go round, the phrase is back, though it’s been modified to ‘It’s about jobs, stupid.”

“But high unemployment and a sputtering economy are not what it’s all about. It’s about homes, stupid.”

“The burst housing bubble is what got us into this mess and it will be the recovery of the housing market that gets us out. America has a consumer-driven economy and the engine powering that car is the housing market. And for the past four years, the engine has been out of gas.”

“We have more wealth in our homes than in any other sector of the economy. At the height of the hyper-inflated housing bubble in 2007 American homes were worth an estimated $66 trillion. Two years later, they were worth $49 trillion (It’s back up to about $56 trillion now). That $17 trillion kick to the groin is what doubled over the American economy. And as any man can tell you, if you take a shot to the nards, it takes a while to recover.”

“The question for the President and the Congress is: Can they do anything to help speed the recovery?”

From InMaricopa in Arizona. “Last month I spent some time talking about the three ‘Game Changers” for Pinal County. Here are some more thoughts on one of those projects — Union Pacific Railroad’s Classification Yard proposal for the Red Rock area. The site they would like to acquire from the Arizona State Land Department (ASLD) is a little under 1,000 acres. As I said last month, Union Pacific has been working with ASLD staff since 2007 to acquire this site.”

‘ASLD holds the land in trust for public education and is required see that any sales of those lands (through a public auction process) go for ‘highest and best uses’ — presumably meaning residential rooftops. In light of today’s surplus supply of housing units, I personally think ‘highest and best use’ means bringing jobs to Arizona so folks can afford to buy some of those empty houses.”

“In the midst of the hyper-growth of the last decade or in a ‘normal’ economy that rooftop market goal probably made sense. But in today’s recessionary economy, we desperately need jobs, jobs, jobs to grow our way back to prosperity. So here we have a major employer with a sizeable budgeted sum of money to purchase land, a construction estimate for the project in the hundreds of millions of dollars, the very real prospect of a couple of hundred new Arizona jobs, and empirical evidence pointing to the ripple effect a yard like this has as a catalyst for transportation-related businesses.”

“Where do we go from here? You tell me. The challenge seems to be how to provide ASLD with enough information so they can see their way clear to letting the market speak by putting the land up for public auction as required by law.”

As the Solstice draws nigh and the winds grow bitter, I recall a conversation I had last year with my dear friend, Mrs. Miller. An ex-Carmelite nun now well into her 70’s, this remarkable woman has done everything from a stint as Bob Hope’s social secretary to founding what became an uber-exclusive private school in Westside LA. Like many of us, she escaped the crush of humanity in the city for the more expansive solitude of the countryside. Unlike many of us, she has taken her early religious vows seriously—and kept them faithfully throughout her life.

When she was my son’s fifth-grade teacher at our little local K-8 school, she had the kids transform their drab classroom into a pharaoh’s tomb for the semester while they studied Ancient Egypt. Gauze-wrapped dolls became mummies. The kids made cardboard crowns, milk-bottle amphorae, a labyrinthine maze. The classroom was remarkable, magical, history come-to-life; or in this case, a splendid imperial death. The 10-year-olds in this little country schoolhouse were enthralled, but some of their parents, alas, were not.

Our local school board had her removed for teaching the children “Satan worship”; ancient myths apparently threatening the evangelical mythology of the local board members. In disgust, she and her husband sold their few remaining worldly possessions, bought an old pickup truck and started a mission.

Every morning they get up, pack the truck full of donated bottles of juice and water, toothbrushes, clean socks, stationary and stamps, seasonal clothing. Then they drive into the Central Valley and make the rounds of the underpasses, the orchards and fields along the highways, the railroad tracks and parish parking lots, to bring supplies to the “blessed ones” (as she calls her flock,) who make their homes in America’s hidden places. When they are not bringing comfort, writing letters or delivering medicines, they are begging, cajoling local citizens and merchants for donations.

They have done this for the last twelve years.

Some of Mrs. Miller’s blessed ones have been living in their respective spots for years, while some are literally only a few days from death. Many are veterans of our military incursions into Iraq, or druggies in the last stages of HIV/AIDS. More than a few have a history of violence. She and her husband know and love them all, caring for them as they would their own children. More than any other people I know, these two live an authentically Christian life of poverty and service to the poor and the needy. Whenever I can, I stuff an envelope with whatever loose currency is hanging around my house and sneak it into their big rural mailbox out on the creek road. Although I do so anonymously, we both know I’m not fooling anybody, and I finally had to ask her to please stop writing me thank you notes—and save the stamps for her ministry.

Last year at Christmas time, as I struggled to come to grips with my newly disfiguring injuries, Mrs. Miller sent me a lovely card of encouragement with $25 in cash tucked inside. I, of course, sent it right back to her, along with a note telling her I would sooner gnaw off my own elbows (a improbability only compounded by my lack of teeth,) than take a penny from her mission. That’s why she had called.

She told me her blessed ones had been so worried about me after hearing of the bear attack, that they got together and took up a collection. For ME! And that these dear desperate, appallingly-deprived people had been praying for me, the godless humanist, and for my swift recovery.

Well. That was humbling. For a few moments I sat there stunned.

Then I hung up the phone, looked out onto my enormously self-indulgent rose garden, still blooming in spite of the winter’s first snow, and I wept for a good long while.

For myself? For the compassion of the downtrodden? For the cruel cosmic irony of it all?

Who can truly know these things? All I did know was that the tears I’d been holding back for months were finally spilling over in one cathartic rush of self-pity, and that I would never ever again doubt the human capacity for self-delusion. All this time I’d been thinking they were the ones whose lives had been irrevocably screwed up….

I went back inside and put another log on the fire.

Dear HBB, in case you haven’t noticed, it’s c-c-cold out these days. Even holed-up here inside my cozy little house, snug in a turtleneck and sweater in front of the fireplace, it’s cold. As reduced as my circumstances may be at the moment, I’m still hugely grateful for walls against the winter winds and the miracle of hot water on tap. As we relax in our leather recliners, TV remotes in hand, it’s all-too easy to forget that what most of us consider simple necessities, are amenities beyond the reach of nearly a million Americans—with an estimated 1.5 million more expected to join them in the next two years.

Mrs. Miller. c/o General Delivery. Sand Canyon, Caliente, CA. 93518

I’ll be taking a break for a few weeks while I undergo this next surgery. Be back as soon as I can.

ahansen

Another look at the media and the housing bubble, in the southwest.

The good:

The Denver Post, March 2005: “‘Lenders started giving money to people, and it’s gotten out of hand,’ said Jeannie Reeser, public trustee of Adams County. ‘I am talking to people who have jobs, but their income doesn’t come anywhere close to matching their financing.’”

“Soaring foreclosure filings in Arapahoe County for the first three months of this year helped drive metro Denver’s foreclosure rate 34 percent higher than the same period of last year and 30 percent higher than the fourth quarter of 2004. The rate represents 1.3 percent of 125,325 single-family, owner-occupied houses in the county.”

“One mortgage lender says…’Everybody has to have what they want right now, no waiting, no saving up,’ he said. ‘Credit is so loose today that I can buy the groceries I need on a credit card, eat the food tonight, discard the food by tomorrow at noon and finance my debt on a 30-year, amortized loan. How stupid is that? But people do it all the time - and then they wonder why they’re in foreclosure.’”

Rocky Mountain News, May 2005: “In the Boulder-Longmont area, 54 percent of loans made last year were interest-only, up from 11 percent in 2002. In Denver, 50 percent of loans in 2004 were interest-only, up from 6 percent in 2002. Wil Armstrong, of a mortgage firm, said it was too early to know whether the interest-only loans will produce fallout. ‘It wouldn’t surprise me to see these have a higher delinquency rate, ultimately.’”

“‘There’s not a cushion there if the market were to soften,’ said Ira Litke. ‘A high percentage of them are highly leveraged.”

Dalllas Morning News, May 2005: “To say that local prices won’t fall simply because they’ve risen more elsewhere is equally naïve. In fact, a lack of appreciation in a market like Dallas can be downright toxic, especially if new supply continues to flood the market.”

“Too often, local readers e-mail that they can’t get their 1- or 2-year-old home appraised for what they paid. All the while, new developments keep popping up as fast and as far as the eye can see. Teardowns are occurring at a pace last seen just before the late 1980s crash.”

“‘There is an enormous demand for investment real estate,’ Joe Milkes said. ‘As a result, prices are getting pushed up.’ It’s becoming more common to see a single buyer gobble up a dozen homes at a time at new developments. Add a bit of speculation to the supply and demand and you get a partial explanation for why local foreclosures remain so much higher than the rest of the country, and why it’s dangerous to assume that there’s no downside risk in local home prices.”

The East Valley Tribune in Arizona, April 2005: “Jackie Cole, a RE/MAX agent, said ’she recently sold a former rental property that was in ‘terrible condition. It came out on the market at $445,000. We had people bidding against each other and the sale price ended up at $545,000. This is the craziest I’ve ever seen it.’”

The Arizona Republic, April 2005: “As prices continue to climb there, the Ahillens say they are forced to look at smaller homes and act more quickly. ‘You find if you don’t act now, you’re going to get priced out of the market.’ The Ahillens said they want to keep the home they now own in Tempe as an investment for their 3 1/2-month-old son’s college education, which means they need to finance 100 percent of the purchase price in Gilbert.”

“Joi Belinda said an adjustable-rate mortgage, with its lower interest rate initially, could help her get into a house. The 35-year-old, who is renting a townhouse, says lowering interest by as little as half a point would make a big difference. ‘That half a point is money I can save.’ Still, she said that although buying a house is ‘definitely a hot thing to do, I feel kind of nervous about the market.’”

“Erik Lutz, president of Great Southwest Mortgage, said that six years ago, few of his company’s customers took interest-only mortgages because they would have had to buy points or pay down the interest rate. That isn’t the case anymore. About 70 percent of the mortgages his company did then were fixed rate. That figure has dropped to about 30 percent today. ‘People spend 45 to 50 percent of their earnings on housing. This is very dangerous, because it doesn’t provide a financial cushion. People are counting on housing appreciation to be their savings,’ Lutz said. “The homes need to appreciate, otherwise there is no savings.’”

“Not only are homeowners counting on appreciation, Lutz said in many cases people are taking the money they would have been forced to save and using it to buy a bigger house.”

AR April 2005: “‘I think it’s a lot of investors putting their houses on the market at the same time,’ said Brett Barry. ‘There are quite a few vacant, on lockbox,’ said Doreen Drew, an Anthem specialist. ‘There are quite a few with no landscaping, no window coverings, no ceiling fans, on the rental and for-sale markets. That tells me they are investor homes.’”

“Anyone with even a mild interest in Phoenix’s housing market is on alert for the first sign of investor selling.”

KVVU TV, February 2005: “A story of some people who found themselves on the wrong side of a home price bubble. ‘They claim Pulte burned them by inflating it’s home prices and steering them to in house lenders who were all too happy to underwrite their dreams’…’We came with the hopes of buying two houses. We left the first day owning four. Within the next week, owning 6 — all the way up to 19.’”

The Sierra Sun, April 2005: “In a region where million-dollar homes are springing up alongside world-class golf courses, Esteban and Leticia Lopez and their three boys live in a $6,000 pull-behind trailer the size of two Chevy Suburbans. At the back of the trailer, Esteban explains his family’s housing dilemma…He voices the conclusion he has come to in the 12 years since he moved to Truckee from an agricultural town in Oaxaca, Mexico. ‘This area,’ he says, ‘is for rich people.’”

“Many of these residents are not newcomers. Some have lived in town for over a decade. Ruth Hall, director of Sierra Nevada Children’s Services for eastern Nevada County, says Truckee is in danger of losing its workers. And if Truckee loses its workers, the town will lose its soul. ‘Because of the housing situation in Truckee, families are dispersing,’ says Hall. ‘Families are being forced out of a place that they have lived for a long time. It seems like we are making some families make unsupportable choices.’”

The bad:

Arizona Republic, May 2005: “Titled ‘A light at the end of real estate tunnel’…Jay Butler, director of the Arizona RE Center said many converted condos in the Valley are now being bought by investors who then want to turn around and sell them for a profit. ‘Every major investor is looking at Phoenix’s apartment market now, trying to find a condo-conversion project,’ said Brad Goff.”

“Angela Prestinario moved into her north Scottsdale conversion two weeks ago. She bought the three-bedroom condo last year for $210,000; now they’re selling for $270,000. She wants to buy another conversion as an investment. Prestinario, 25, who works in her family’s laser-tag business in Mesa, said she was tempted to sell but didn’t because it took her months to get the place. She was fifth on a list of people, including investors, who wanted to buy that unit but the other names fell away, and it fell to her.”

“Now, she wants to buy another conversion as an investment.”

“‘You are building equity if you get in at the beginning,’ she said. ‘It’s the same sort of thing with a new build on a house.’”

“Emily Haradon wasn’t sure she could afford north Scottsdale when she started looking for a place there last year. A big house was out of the question in a part of metro Phoenix where home prices easily run higher than $500,000. But Haradon, 27, an administrative assistant for Paradise Bakery & Grill, found a solution: an apartment building being converted to condominiums. ‘I was in shock,’ she said. ‘I loved it. It was in my price range. I made an offer the day I saw it.’”

“Haradon said a condo like hers in her complex is on the market for $164,000, a more than 38 percent markup since she bought. For many people like Haradon, buying an apartment converted to a condo is their best chance to become a homeowner or afford a home in higher-priced areas such as Scottsdale. Condo conversions are helping buyers move into neighborhoods where they couldn’t afford a big house.”

“Rising Valley home prices have shut the door on many wannabe first-time home buyers and forced others to purchase houses far from where they work. Converting apartments to inexpensive condos has helped ease the shortage of affordable housing in other large cities, including Los Angeles, New York, Chicago and San Diego.”

“Tyler Anderson, a broker who specializes in multifamily properties at CB Richard Ellis, said there also are conversion deals cooking in Mesa, Tempe and Ahwatukee Foothills. ‘We are just getting started on this,’ he said. ‘I think it’s going to continue.’”

“Just a couple of weeks ago, Montecito Investment Co. of Jacksonville Beach, Fla., paid $97 million for 679 apartments in two Phoenix complexes. Those buildings will be the company’s third condo conversions in the Valley. The Phoenix area hits Montecito’s targets for job growth, lots of second homes, and pre-retirement buying. Larry Bassani, the company’s marketing director, said he doesn’t think conversion is a housing fad.”

“‘We think that’s a price-point lifestyle that will be very attractive for years to come, no matter what the overall market is doing,’ he said.”

May 2005: “Downtown living is suddenly very hot, with more than 1,700 residential units just opening, planned or starting construction soon. And the biggest fuel to the fire is the Arizona State University Downtown Phoenix Campus.” Consider that units at 44 Monroe start at about $300,000 for a 780-square-foot space. The new Portland Place Condominiums also start at the low $300s and run up to more than $1 million.”

“About 90 people signed conditional sales contracts in the past two weeks for units that range in price from $199,000 to $965,000. Eddie Chang is among them. The 25-year-old apartment broker snapped up a two-bedroom, 2 1/2-bath unit on the eighth floor. ‘To me, it was a no-brainer,’ said Chang, a self-described Diamondbacks fanatic. ‘Phoenix is true urban living.’”

“The city’s downtown plan calls for as many as 10,000 units in the next decade.”

Tri-Valley Central, April 2005: “‘It’s public confidence in the economy, and the feeling that prices are going to escalate, so they better buy now,’ said Judy Lowe, Tucson Association of Realtors president. ‘Also, it’s believing that real estate is the best investment.’”

“Richard Kenney, an agent, said people are losing confidence in the stock market and looking to real estate as the better place to put their money. ‘People like the idea of having something they can see and touch and rely on themselves, rather than the paper money and the stock market.’”

“‘Our buyer demand far outstrips the number of available houses out there. It’s kind of scary,’ said (agent) Michael Smith.”

The Star Telegram, April 2005: “Home building, long a fragmented business with scores of small players, continues to consolidate around its large publicly traded companies. D.R. Horton, Pulte, Lennar, Toll Brothers, Centex and about half a dozen others have distinct advantages, which become more pronounced in a tough market. They have deep pockets to buy land and wait out the long permit process in many cities, and they enjoy economies of scale on everything from kitchen appliances to raw land.”

“Because it has the most lots and inventory across the country, D.R. Horton is more vulnerable to a housing glut. As long as a downturn doesn’t happen everywhere at once, it can remain the aggressor.”

The Albuquerque Tribune, April 2005: “In Los Angeles, the rate of return is about 4.5 percent. In Albuquerque the rate is from 5.5 percent to 7 or 8 depending on the property. ‘We’re meeting with at least one new West Coast person a week looking to get into this market,’ Romero said. ‘They’re looking for tax-deferred 1031 exchanges. Investors are bailing out of California in fear the bubble there will burst. They’re moving their equities out.’”

The Vail Daily News, April 2005: “The Vail Board of Realtors’ multi-listing service that tracks available properties showed 572 residences for sale on Monday. Combine the tight housing supply with the fact that there are 650 real estate brokers in the county, more brokers than property, at the moment, and it makes for a highly competitive real estate sales environment. ‘It’s a bit of a dogfight for listings right now.’”

“Don’t look for the stream of free-spending resort-real estate buyers to slow to a trickle any time soon. The cash-rich Baby Boom generation may continue to flood the market with buyers for a decade or longer. Minturn is preparing for a luxury 1,400-unit community. More residential and commercial development is planned near Eagle and Gypsum. Some of those proposed properties have been sold even before a single shovel-full of dirt has been moved.”

From KVBC, May 2005: “First it was the housing market, now it’s the condo market. It’s almost a given in Las Vegas, buy low and sell high. But Jim Snyder has a story that one attorney says could badly hurt the condo market in Las Vegas. ‘Imagine my disgust when I get a similar package in the mail that says, it’s not a half a million dollars any more, it is eight hundred and seventy-four thousand,’ (he) said.”

“They all attended a Vegas Grand sales event, put down anywhere from five thousand to 25 thousand dollars and signed letters of intent to buy a unit. That all screeched to a halt when they got a notice in the mail telling them they had two options: pay a revised price almost double the amount they agreed to, or get their deposit back with five percent interest. ‘Personally, my feeling is, they have dollar signs in their eyes and they know that if they can get rid of me they’re going to make a whole lot more money off my unit.’”

Market observers and reporters, you decide:

Danielle DiMartino, May 2005: “Richard Fisher, president of the Dallas Federal Reserve, noted that many areas of Texas have seen resurging economic growth. Dallas was not one of them. ‘The weakest spot is North Texas,’ Mr. Fisher said, ‘largely because of the hit that telecom, technology and aviation took.’ ‘And yet ‘builders just keep building,’ said David Houston. ‘The risk is not so much the prices of the homes themselves, it’s the loans being made on the homes. The danger I see here is that people are buying so much more home than they can afford.’”

“Jim Pearson of Pearson Appraisal Co., ‘This is where you’re seeing a lot of the problems, where irresponsible or downright fraudulent lenders are trying to find unethical appraisers to work with them. What will happen when those loans are stress-tested, if the local economy doesn’t improve, if the national economy falters, if interest rates rise?’”

DM, May 2005: “Over half of the new mortgages originated in the second half of 2004 were ARMs with lock-ups of less than three years. You’ll have a LOT of inventory flooding the market in a matter of years. I wouldn’t want to be one of the people coming in behind these sellers as those with 5 and 7 year locks rush for the exits all at once.”

“So-called ‘investors’ are buying up properties in McKinney and doing cash-outs simultaneously with the original closings, all based on fraudulent appraisals, yes, this kind of stuff even goes on in non-bubbly Dallas, the damage all of these criminals are inflicting on communities is abhorrent…the same fraud that’s going on on a national level is taking place here..Local foreclosures are three-quarters of the way to their 1989 record. Inventories have been north of 6 months for a long time, we are definitely in a buyer’s market and the credit standards are even worse today than what they were in the years leading up to the S&L crisis.”

“When the wheel stops spinning, we’re going to be sitting on a massive mountain of debt..debt loads could easily bring deflation on in a slowing environment and the Fed knows it, that’s why they would tell you, strictly off the record, that they HAVE to keep raising rates so that they have the needed ammo when the time comes to fight deflation.”

May 2005, “Texans aren’t likely to get trapped in a home price bubble. That upbeat assessment comes from a company that ranked Austin and Dallas as the No. 1 and 2 ‘high-risk’ cities for home price declines two years ago.” ‘Your home price appreciation has been pretty weak’ compared with the rest of the country, said economist Marco Van Akkeren of PMI Mortgage Insurance Co. That’s why Dallas is now ‘toward the bottom of our list’ in risk.”

“Most North Texas homebuyers have ignored the bugaboo talk about bubbles, said Sheila Rice of Virginia Cook Realtors. ‘They didn’t see any reason why it should be true. The price per square foot even in our most high-priced areas does not approach what it is on the coasts.’”

April 2005: “Economist Tucker Hart Adams argues that since 1999, builders have constructed more than 20,000 too many homes in the metro area. Builders pulled 3,181 permits for homes, condos and apartments in the Denver area in the first two months of the year, about 35 percent more than through February of 2004. ‘It’s the worst news I’ve heard all day,’ economist Tucker Hart Adams said. ‘Who is living in all of these homes?’”

One builder. ‘The homes are being absorbed into the market,’ he said. “Builders are building to meet demand. That has been my mantra and it continues to be my mantra.’”

May 2005: “Last year, 28 of every 1,000 Utah households filed for bankruptcy, twice the national average and nearly triple Utah’s rate a decade earlier. In April, Thomas Monson, the (Mormon) church’s second-ranking leader, said he was ‘appalled’ at advertising for home-equity loans that is ‘designed to tempt us to borrow more in order to have more.’ He repeated the words a Mormon elder spoke during the Depression: ‘Interest never sleeps nor sickens nor dies. Once in debt, interest is your companion every minute of the day and night.”

April 2005, “The average number of days a southeast Valley home was on the market jumped from six days in January to 35 in February, according to the Arizona Regional Multiple Listing Service. ‘You get a little carried away by the price of the home, and the overpriced stuff stays on the market. There are indications (that is happening), but nothing in evidence yet,’ said Jay Butler, director of the Arizona Real Estate Center at Arizona State University.”

“He said people seem to be getting more nervous and wondering if or when the market will crash. ‘Things are so good in the minds of a lot of people and they all know that sooner or later it is going to end, and they don’t know when it’s going to end..They don’t want to be hung up to dry.’”

April 2005: “Median home sale prices in Phoenix went from $128,500 in the first quarter of 2004 to $159,400 in 2005. Even if the market’s growth does slow, Realtor Carol Boles doesn’t think the prices will drop. ‘I just don’t see that happening,’ said Boles, who owns Firebird Realty in north Phoenix. ‘I’m still investing in real estate at today’s prices. If I had any indication (that prices would drop), I wouldn’t.’”

“Phoenix’s limited housing inventory and high selling prices have created an undesirable situation for many buyers, Boles said. ‘A lot of first-time buyers are getting squeezed out of the market,” she said. ‘You have to offer over the list price.’”

“‘”Historically, the first quarter is not one of the stronger quarters,’ said Jay Butler, director of the Arizona Real Estate Center. ‘So, by having a strong first quarter, that shows evidence the market is continuing to move along in growth. If you own a home and want to sell it, you have to turn around and buy a home to replace it,’ Butler said. ‘It could be difficult to (find a replacement home), so some home buyers stay either out of desire or are forced to stay with the home they have because they can’t replace it.’”

May 2005: “‘The market here is just absolutely nuts,’ says Pamela Harness, realtor in Chandler, Ariz. ‘I get investors calling; they want to buy a home. I tell them they’re a day late and a dollar short at this point.’”

May 2005: “No Arizona cities meet the Federal Deposit Insurance Corp.’s list of boom markets, those showing 30 percent total price gains, inflation-adjusted, over the past three years. Stephen Happel, an economics professor at Arizona State University, thinks such conditions persist in other states and he sees local warning signs too. ‘I can’t see how housing prices can keep going up,’ Happel said.”

April 2005: “Dawn McLaren an economist at Arizona State University: ‘The concern that I have is that most of our job growth is in terms of construction. In Las Vegas, for instance we’re seeing houses prices 40 percent above what they were last year, an incredible boom going on in prices and in a number of houses being built. And we’re going to have to think about retraining some of these people when that huge boom comes to an end.”

“I do feel that we do have a little bit of a bubble here, certainly in some areas like Las Vegas it will be a little bit worse. There are things that are threatening to it. First of all, over 20 percent of our market here in the Phoenix area is in investment. Investors have come in, they’ve come in from California, and they have been (driving) our market.”

“It can’t go on forever and there are signs that it is beginning to fizzle.”

April 2005: “Even a moderate rise in interest rates could cause a housing price correction that would affect home owners increasingly reliant on home appreciation as a source of wealth, local real estate expert Rick Pederson said Tuesday. Pederson, president of Foundation Properties Inc., said homes have become ‘our savings of choice.’ He’s concerned about consumers relying too much home on appreciation — or their belief about future appreciation — as they make decisions about spending and debt.”

“‘I believe far too much money is going into residential real estate,’ he said. ‘A good deal of consumer spending is going into what I think my house is worth.’”

“Pederson said adjustable rate mortgages (ARMs) have become more common in recent years, but what concerns him more arethe number of borrowers who have taken out larger home mortgages, called ‘jumbo loans,’ on an interest-only basis. ‘We are relying so much on home appreciation,’ he said.”

“Pederson has concerns about commercial real estate as well. In metro Denver, the office vacancy rate has hovered around 20 percent for the past three years, while commercial sales prices continue to rise. Pederson suggested real estate is overvalued, saying that high vacancy rates and simultaneous rising prices doesn’t make sense.”

March 2005: “WHITE HILLS, Ariz. This could very well be America’s next great bedroom community. A city or something like it could blossom in this no-man’s-swath of northwestern Arizona as the nation’s hottest housing market — Las Vegas — begins to spill over its traditional borders. Already, two developers are talking up plans to build 55,000 homes in this sand-scoured landscape that now boasts less than six people per square mile. Several other builders are quietly buying up land. ‘It can’t grow that big,’ scoffed Pat McGinnis, a retiree from Missouri who operates a roadside gift shop in neighboring Dolan Springs.”

“It’s a typical reaction in the rapidly changing West — and it’s almost always wrong, said Rob Melnick, director of the Morrison Institute for Public Policy at Arizona State University. With housing prices soaring in most of the region’s metropolitan areas, the most desolate places are now the hottest spots for development. ‘Thirty years ago, if you had said there will be this huge growth out here, people would have laughed their heads off,’ said Melnick, an expert in urban growth. ‘We’re poking into all kinds of areas that you wouldn’t have believed.’”

“‘You have to look at the available land supplies, what is available for private use,’ said Frederick E. Chin, chief operating officer for Las Vegas-based Rhodes Homes. By the time the bypass is completed, Rhodes plans to be well on its way to building more than 20,000 dwellings on the 2,000 acres it now owns here, along with an ‘urban center’ of retail development and other services. If the homes were already in place today, Chin said, they would probably be priced in the mid $100,000s, compared with the high $300,000s commanded by similar properties in the Las Vegas Valley. ‘We look at this [area] as a viable alternative for a lot of the employment that is going to happen’ in Las Vegas, he said.”

“Pat Kwast…a cook at Rosie’s Den on U.S. 93 (is) not fond of the changes but says she’ll weather them, maybe get to make some jokes at the ‘city slickers’ she sees plopping down $80,000 for a little house. ‘Sweetheart, it’s progress,’ she said with a sigh, taking a break at the counter. ‘Things change — that’s the energy of everything. Everybody knows you can’t stop progress.’”

The Enquirer reports from Ohio. “Linda and Peter Gatchell’s dream was simple. After years of saving, the Deerfield Township couple was ready to move from their suburban cul-de-sac to a five-acre spread in Morrow. So in June they placed their three-bedroom home in the Mason school district on the market for $175,000. Then they waited. And waited. And waited. ‘I thought it would be really easy to sell my house because of the price and the location. Boy was I wrong,’ Linda Gatchel said. ‘I had this big old plan, and now it’s crumbling before me.’”

“Caught between a deepening recession and poor housing market, the Gatchells are among a growing number of home sellers who - locally and nationally - are turning to a new strategy: permanent housing swaps. So far, Linda Gatchell has had one response from her Craigslist posting.”

“‘Unfortunately, our house wasn’t what the person was looking for,’ she said.”

The Detroit Free Press from Michigan. “At the end of the third quarter, 14.4% of Michigan banks were rated problematic, troubled or worse by BauerFinancial, up from 13% at the end of June and significantly above the national average of 6.2%. Michigan’s rising jobless rate and the crises in the auto and housing industries are expected to add to the financial pressures facing the state’s banks. Main Street was the first bank to fail in Michigan since 2002.”

“‘We will see further bank failures,’ said Terry McEvoy, an analyst who follows several Michigan banks.”

The Journal Sentinel from Wisconsin. “Marshall & Ilsley Corp. on Thursday declared a three-month foreclosure moratorium on mortgages it holds for owner-occupied homes. Milwaukee’s M&I, which is the biggest bank based in Wisconsin, said the moratorium is intended to allow the bank and struggling homeowners to work out loan modifications that could keep people from losing their homes.”

“‘There are certain situations that are beyond repair, but we’ll never know that until we actually counsel with them,’ said Richard Becker, an M&I senior vice president.”

“Russell Kashian, a University of Wisconsin-Whitewater economics professor who is tracking foreclosures in the state, said mounting job losses in the recession will make it tougher to modify loans enough to make them affordable. ‘There’s nothing you can do if people aren’t paying because of being unemployed,’ Kashian said. ‘You can’t lower the payment low enough.’”

“Wisconsin unemployment hit its highest November rate in 21 years, according to data released Thursday, and state employers continue shedding jobs in greater numbers. Separate payroll estimates show a loss of 32,400 Wisconsin jobs in the last 12 months.”

“November was the ninth month in a row of year-to-year declines and the biggest 12-month drop since mid-2002.”

The Post Tribune on Indiana. “Indiana has one of the highest foreclosure rates in the United States, according to the latest quarterly report issued by the Mortgage Bankers Association. The state was fifth in the percent of foreclosure inventory at the end of the third quarter in September, the association’s National Delinquency Survey revealed.”

“At 3.59 percent of all loans in foreclosure, Indiana was topped only by Arizona at 3.86, California at 3.90, Ohio at 3.93 and Nevada at 5.58 percent.”

“The reasons, however, are different for Indiana than for the four states ranked higher. Sam Khater, senior economist with First American CoreLogic, said Indiana has had foreclosure issues for some time. ‘But the United States is quickly catching up,’ he said.”

“Khater said a drop in home prices coupled with job loss hit Indiana hard. ‘Indiana lost 1.1 percent of its employment base in the last year’ Khater said. ‘That’s not a good combination.’”

The News Democrat from Illinois. “In November, 100,000 U.S. consumers filed for personal bankruptcy. More than 32 percent of them filed under Chapter 13, which allows debtors to restructure and repay creditors over 36 to 60 months. That’s more than 39 percent higher than the number reported in November 2007. This is happening after Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, a law enacted in October 2005 to make it more difficult for consumers to file for Chapter 7 bankruptcy, under which most debts are forgiven.”

“Bankruptcy attorney Bill Mueller has seen a shift in clientele. Once upon a time, bankruptcy was primarily a choice for the poor. Today, he said he has filed for clients from every economic status level. ‘I’ve filed for members of the military, ranking officers, clergy, lawyers, doctors and people who make a large income who are still above what they can handle,’ he said. ‘We have some with six-figure incomes.’”

“Although the new law intended to tighten Chapter 7 regulations, Collinsville bankruptcy attorney Karl Wulff said he is seeing a rise in Chapter 7 filings versus Chapter 13 filings. He said that before the collapse of the real estate market and credit crisis, about half of the cases had filed under Chapter 7. ‘Now, with equity no longer in their houses to save, what they are doing is throwing in the towel and filing Chapter 7 and surrendering the house,’ he said.”

“Mueller also said that the mortgage crisis…has pushed consumer confidence to a new low and has consumers taking drastic measures, like abandoning their homes. ‘I have never seen this number of people coming in and saying, ‘I’m giving up my house,’ doing Chapter 7 and just walking away,’ Mueller said. ‘In years past, they would have tried to something like Chapter 13 to restructure their mortgage.’”

“Attorney John Johnston in Belleville, said he has had many clients file under Chapter 13. Johnston said this option can help individuals catch up on a delinquent mortgage, but it probably won’t help afford the monthly payment. ‘We’re filing a whole lot of those right now,’ Johnston said. ‘The one thing about Chapter 13 that it can’t do right now is it can’t change payments. If you really can’t afford your mortgage payment, Chapter 13 isn’t going to solve the problem.’”

The Kansas City Star. “A federal jury in Topeka has convicted Kansas City area homebuilder F. Jeffrey Miller and two others of multiple felonies and acquitted a fourth defendant. Miller, 47 of Stanley, was convicted on four felony counts: conspiracy, unlawful monetary transactions and two counts of criminal contempt.”

“Miller and others still face charges under a larger indictment brought in May 2006. That case alleged a $25 million bank fraud that prosecutors said amounted to a ‘fraudulent real estate machine.’”

“As a builder, Miller was among the most active in the Kansas City area during the late 1990s. He pulled nearly 800 permits to build single-family homes between 1994 and 2002. The jury still must weigh the government’s case to require the defendants to forfeit certain assets. The indictment listed all assets of Miller Enterprises and other businesses and two boats — one named Bling-Bling and the other Pipe Dream — as subject to forfeiture.”

The Pioneer Press from Minnesota. “Foreclosures in the Twin Cities and across Minnesota keep piling up in record numbers, but the rate of increase this year has leveled off a bit, according to a report. The finding supports the idea that Minnesota already has experienced what Prentiss Cox, a University of Minnesota law professor who studies the housing market, argues is the first wave of the foreclosure crisis. That wave, he said, has been tied to the ‘inevitable’ failure of homeowners to make payments on subprime mortgages.”

“Such foreclosures crested in Minnesota this summer, Cox believes, and likely will continue to decline, since subprime lending largely came to a halt in mid-2007. But there’s still a second wave of foreclosures on the horizon, Cox said — homeowners failing to stay current on payments for so-called ‘Alt-A’ adjustable-rate mortgages.”

“Those loans were made primarily from late 2003 to 2006, and typically start resetting after five years, Cox said. Whether those homeowners will be able to stay out of foreclosure will have a lot to do with the general health of the economy, he said.”

“‘The second wave could be substantially less — we could see a moderation and a downturn in foreclosures,’ Cox said. ‘Or, it could make the first wave look bad but not remotely as bad as the second wave.’”

The Duluth News Tribune from Minnesota. “Now that the economic downturn is officially a recession, can we go back to the subprime mortgage crisis that started it all and ask the obvious question: Shouldn’t all those high-risk loans gone bad have been covered by private mortgage insurance? Yes, if all the high-risk borrowers and their lenders had been playing by the rules. But they weren’t.”

“‘Exactly. They weren’t insured,’ Jeff Lubar of the Mortgage Insurance Companies of America said from Washington on Friday in response to my is-it-me-or-is-the-rest-of-the-world-crazy question.”

“As most first-time homebuyers know, PMI is a policy lenders will make you buy if you don’t put down enough money — usually 20 percent — on your home. The purpose is to insure the loan in case you default.”

“My wife and I had to pay it on our previous home in Massachusetts and assumed we’d have to do the same when buying a house here. But to our surprise, our mortgage broker said no, we didn’t. The trick (he didn’t exactly call it that) was that the 10 percent we planned to put down would instantly establish 10 percent equity in the home. That meant we could qualify for a home equity loan for an equal amount, bringing us up to 20 percent and Voila! No PMI required.”

“The mortgage company providing the primary loan on the house was offering us a second loan that we would hand right back to them to prove, with their money, that we weren’t a credit risk. ‘OK,’ I said, and we shrugged it off, thinking they were doing it because we had very good credit and because we planned to sell the Massachusetts house anyway. We did, and did well on the sale, and immediately paid off the second mortgage that we called ‘the stupid loan.’”

“But in fact, the deal had nothing to do with our ability to pay. Thousands (millions?) of subprime borrowers were doing the same thing, including those who checked the ‘no-income-verification’ box on their loan applications. Some even bought houses with zero down and still got home equity loans to avoid PMI.”

“So should I have been flabbergasted when the housing crisis hit and our mortgage company wound up in the center of it? ‘They made more money on it,’ Lubar said of the lenders who concocted the scheme. ‘The underlying premise of all of this was that the market would continue to expand and prices would keep rising.’ As we all know now, instead the bubble burst.”

“Some of the prey is as much to blame as the predators. In researching this column, I came across a financial writer’s advice to a California couple with a $415,000 first mortgage (at 5.75 percent) and a $163,000 second mortgage (at 9 percent) taken out to avoid PMI. Big shocker: They can’t pay.”

The Great Falls Tribune reports from Montana. “A subdivision slated to be developed on 58-acre piece of land fell through and the land is back on the market. A buyer from California was looking to develop a subdivision on the land, but the sale never came to fruition, said Dick Seim, the listing real-estate agent for the property. The land is listed for $1 million, and the ad says there’s room for 90 or more lots.”

“The land is a natural fit for homes…he said. The soon-to-open ice rink also will be nearby. ‘It’s a choice piece of property,’ he said. ‘It’s got some beautiful lots.’”

The Missoulian from Montana. “In the first half of 2008, local home prices have cooled slightly, there is greater inventory and homes are taking longer to sell, according to data compiled by the Missoula Organization of Realtors.”

“Jody and Brittany Tait listed their four-bedroom house west of Missoula for sale in early July. So far, they haven’t received any phone calls or inquiries about the house. The Taits, who’ve lived in their home for 23 months, wanted to try and sell their home themselves instead of paying fees for a real estate agent.”

“‘If we want to get any of our equity, then we have to sell it ourselves. So we’re trying this at first,’ said Jody Tait.”

“Don Cole, an agent and a loan officer, said he gets two to four people into homes each month with lease options. ‘With the lending programs changing, we just don’t have the options,’ he said. ‘Probably more than half of the people going into lease options could have bought the homes outright a year ago.’”

“Asked to characterize the local market, Cole said, ‘Missoula is not really in the dumps. It isn’t where it was, but nobody is. We are better off than many places.’”

The Idaho Statesman. “Real estate agent Janet Parsons is proud of the deal she wangled for her client, a 26-year-old first-time homebuyer. Parsons helped Brandon Beveridge through a seven-month process of buying home through a ’short sale.’ She said similar homes are selling for around $170,000; Beveridge got his for $133,500.”

“Beveridge, a computer programmer, is glad he waited. If housing prices continue to tumble, he said, he’s not going to worry much because he paid less than market value to begin with.”

“‘I had a bunch of friends who told me especially right now I would be stupid not to buy,’ he said.”

“In 2005, Jenni and Ryan Kroon traded the 1,100-square-foot, three-bedroom, two-bath home in Boise they shared with their two children for a 3,500-square-foot, seven-bedroom, four-bath home in Nampa that cost $200,000. Although financed with a 30-year, fixed-rate loan, the move still tripled their monthly mortgage payment to about $2,100.”

“That’s when the problems began. Jenni Kroon’s diabetes took a turn for the worse, requiring increased out-of-pocket outlays for doctor visits and expensive medicines. Then Ryan lost his job when his brother’s residential construction company folded.”

“‘With every month, it was more and more obvious that we had bitten off more than we could chew,’ said Jenni Kroon.”

“Today, the Kroons rent a four-bedroom, two-bath home in Nampa’s Royal Meadows subdivision for $895 a month. ‘My children and my husband hate it because it so much smaller, but I’m grateful for the cover,’ Jenni Kroon said.”

“Lance Churchill’s company…specializes in acquiring foreclosures. That door is likely to stay open awhile. Five-year ARM adjustments are still to come. Plus, there are homeowners who took interest-only loans, option-rate loans with payments that might not even cover the interest due, and so-called ‘liars loans,’ where borrowers’ income was never verified, Churchill said.”

“Originally, it was estimated that the five-year loans would not begin resetting until March 2009. That’s not the case anymore, Churchill said.”

“‘If the value of the home falls beneath what’s owed on it, the lender has the right to immediately adjust the interest rate and demand that you pay full price,’ he said.”

“As a result, some homeowners with five-year adjustable rate mortgages saw their payments begin to skyrocket as early as last April, Churchill said.”

The Daily Journal of Commerce from Oregon. “For the last year and a half, Herb Giffin has kept a steady stream of work flowing into his architecture firm. But with the economy slowing down, that might change soon. ‘Around this fall, we will be looking at beating the bushes and responding to more public RFP’s,’ said Giffin.”

“At Otak Inc., principal Dennis Haden said the firm’s condo design business ‘has slowed way down.’ Otak has worked on condo projects in some of the regions hardest-hit by the housing collapse - Arizona, Nevada and California.”

“Developers are ‘trying to figure out what’s gone wrong’ and re-assessing projects that are on the boards, Haden said. In some cases, they’re even switching condo projects to market-rate apartments.”

“‘The (Arizona) market went so far down, I don’t know how long it will take for it to come back,’ he said, referring to condos.”

The Bend Bulletin from Oregon. “The rise and fall of Bend’s real estate economy has resulted in foreclosure proceedings against The Shire, a village-themed concept in southeast Bend patterned after J.R.R. Tolkien’s ‘Lord of the Rings’ series.”

“The Shire concept originated with Ron Meyers, who sold his share in the development for an unspecified amount to Dr. Lynn B. McDonald - a former emergency room physician at St. Charles Bend. McDonald died July 7.”

“‘It basically destroyed my life financially, but that’s the price of a dream,’ Meyers said. ‘The development wasn’t able to materialize fast enough before the market crashed.’”

“”Jan McDonald is trying to sell the 14 developed lots, one house and additional land before the 6-acre property goes to public auction in December, she said. The family owes Umpqua Bank $3.4 million on the project, according to the default notice.”

“‘It was Ron’s concept, and it was a good one,’ Jan McDonald said. ‘Had the market not gone to where it went, it had the potential to be successful.’”

“The Shire began to unravel in summer 2007 when the subprime mortgage crisis began to dry up credit sources, Meyers said. ‘Banks were getting nervous,’ Meyers said. ‘They’re still nervous.’”

“‘Some people were turned off by living in ‘Disneyland,’ he said. ‘It’s more of an artists’ community for a certain market segment that wanted something different. There’s been enough people that have come through that would say, ‘What a wonderful concept.’ But then the market crashed, and everyone (went) home.’”

The Bellinham Herald from Washington. “Last week Gragg Miller of Coldwell Banker Miller-Arnason released his mid-year report about the state of local real estate. What caught my eye, however, was his comments at the beginning of the report. The biggest challenge these days, he said, is pricing a home.”

“‘For this area, I don’t think we (the industry) are doing a good enough job with pricing. It’s a little less challenging now, because new sellers understand that the market is different now and are not insisting on the price appreciation their neighbor may had seen a couple of years ago,’ Miller said. ‘Still, it’s important to look at how comparable homes are sold a week ago; looking back six months or more won’t cut it for most homes.’”

“For used or existing homes, the Meridian area has 20 months of supply, while the Deming area has 8.5 months of supply. In Bellingham neighborhoods, Happy Valley has 12.5 months of supply.”

“In the second quarter of 2008, there were 1,206 overall properties sold in Whatcom County, continuing a downward trend from the peak in 2004, when there were 2,587 sold in that same quarter.”

“Listing a price too high is much more a problem in the current climate, he said. The buyers have much more to choose from in every home price level, so if they think it’s too high they can keep browsing. There is no competition among buyers for houses viewed as overpriced. Once the seller starts reducing the price, buyers are in a position to wait to see how far the price will fall.”

The Olympian from Washington. “A new Honda scooter, a trip to a Caribbean destination and a chance to win free gasoline are just some of the incentives that South Sound real-estate agents are using to entice prospective buyers in a slower housing market.”

“Tamera Strawn of Riley Jackson Real Estate is working with a Tacoma builder giving away Honda scooters for sales at The Overlook, a new 138-lot development at the top of Tumwater Hill, she said. ‘We’re just looking for something new and out of the box,’ Strawn said about the promotion.”

“Real-estate company John L. Scott offers visitors to its open houses the chance to enter a drawing for a trip to a Caribbean destination or Hawaii, said Eric Shull, broker of John L. Scott’s Olympia office.”

“Although the Thurston County housing market has slowed to the point where incentives are common, the market is nowhere near as slow as it is in California, he said. Shull said some homes in California are being marketed with BMWs.”

“Homeowner Karen Scherf of Chehalis and her husband, Scott Mattoon, each owned a home before they got married. Mattoon sold his house in Rainier, and Scherf still is trying to sell hers in west Olympia with real-estate agent Mark Plowman’s help. Today, she and her husband live in Chehalis, Scherf said.”

“She said she is grateful they’re not paying three mortgages, but Scherf still is eager for a sale.”

“Her 3,000-square-foot house has been on the market since April, and she’s hoping to sell it before she has to drop the price again. She also is considering renting the house, although Scherf added that she’s not particularly interested in becoming a landlord.”

The West Seattle Herald from Washington. “Area 140’s biggest economic downers over the last year were not home prices but rather inventory, and its troubled twin, ‘Days on Market.’ ‘I sometimes feel like a taxi driver showing property around,’ said Jennifer Suemnicht, with Re/Max Metro Realty in Seattle. ‘Buyers are shopping around more than a year ago.’”

“Of course, feng shui and accent pieces only help if the potential buyer has the money for the home in the first place. ‘You’d be surprised how many people don’t have any savings,’ said Ginny Lee of a privately owned mortgage bank near Safeco Field.”

“‘Lenders want to see you spend no more than about 36-percent of your net household income on your mortgage payment,’ said Kevin Ehlers of Cobalt Mortgage, Inc., in Kirkland, who specializes in ‘Area 140′ homes.”

“‘The average-priced West Seattle house the first five months of 2008 was $465,000,’ he said. ‘Your total payment at that price would be about $2,700 with 20-percent down with a 6.25 (percent) 30-year fixed rate. You’d need to net $90,000 a year, about one Microsoft salary. I realize that’s a lot of money. And if you only put 3-percent down with an FHA your monthly payment goes way up.’”

The Seattle PI from Washington. “Michelle Miran didn’t realize that there was something wrong with her mortgage until the interest rate reset last year. Her truth-in-lending statement noted a 30-year fixed rate with monthly payments of $1,311 for 359 months. But two years into it, her monthly payment shot up to about $1,700, and she and her husband fell behind.”

“They’re now fighting foreclosure on their Tacoma home and fighting back in court, suing the mortgage broker and lender.”

“Deb Bortner, head of the Department of Financial Institutions’ consumer services division, said the agency has been able to scrutinize lenders better over the past two years because of an increase in enforcement staff and examiners, along with a shrinking field of consumer loan companies.”

“And more charges are in the pipeline, she said. ‘I see more problems coming up. There’s a credit crunch, so I think each mortgage broker and each consumer loan company is struggling to maintain their business,’ she said.”

“Ari Brown, the Mirans’ attorney, and others say the increased oversight comes too late for thousands of borrowers who were duped by unscrupulous lenders and brokers.”

“Miran said the loan officer rushed her through the closing process, sending her a 2-inch- thick stack of documents while she was out of town on business. Miran signed the documents alone in her hotel room, and not in the presence of an escrow agent, even though an agent’s signature appears on the documents, according to the lawsuit.”

“Miran and her husband were able to make the mortgage payments on their three-bedroom home until the loan rate reset. The increase of about $400 a month, coupled with a maternity leave, made it difficult for them to keep up with payments.”

“‘I’m worried, knowing that I’m going to lose my house,’ said Miran, who works two jobs. ‘It’s going to be very hard for me.’”

The Sacramento Bee reports from California. “It’s the question faced by thousands making peak 2005 loan payments on a home with 2008 values: Should I stay or should I go? In Antelope, Randy Fatius has had it. He says he’s walking away from the 1,200-square-foot house he bought in October 2005. Fatius made his last payment in March. Until April, he had never missed a payment.”

“‘I thought that was the best I could do with the situation,’ Fatius says.”

“The three-bedroom, two-bath home he bought for $312,000 with no money down is now worth $184,000, according to Zillow. But a slightly smaller house near him is listed at $125,000 and has been on the market for 119 days. Within a mile, he counts nearly 80 homes owned by banks or in varying states of foreclosure.”

“Walking away is embarrassing, Fatius admits. But staying is ’stupid,’ he says.”

“‘I crunched the numbers and it floored me,’ he says. He figures he’s lost around $200,000 in less than three years and that ‘it would take me 17 years to get back the value I’ve lost.’”

“He knows what he’s in for. ‘My credit score is going to tank,’ he says. But he thinks the penalty isn’t as bad as owning a house whose value has dropped so far below what he owes.”

“This was the first home Fatius bought. ‘I don’t think I’ll ever buy a house again,’ he says.”

“And, finally, don’t start in with him about standard advice to call his lender for help. He did, he says, and got no help that could have made much of a difference.”

“Looking back almost three years after buying, Fatius says, ‘I had a gut feeling from the beginning I shouldn’t have done it. I’ve felt it the whole time.’”

“Sacramento County has had almost 9,400 foreclosures so far this year.”

“Corner by corner, the gradual metamorphosis of Sacramento’s core continues to unfold, much as it has for the past decade. Downtown isn’t immune to market forces. Projects opening now were mostly started during the real estate boom - and were too far along to stop when the bottom fell out. Housing has been particularly hard hit.”

“Downtown developers say they’ve had to heavily discount their product to move it, and they’re making little, if any, profit these days.”

“‘This is a depression in real estate; everybody who was really flying high isn’t anymore,’ said developer Mark Friedman, who has sold 12 of his 26 Sutter Brownstones in midtown.”

The Mercury News. “Santa Clara County just closed a third straight year of slower growth in property values, Assessor Larry Stone said Thursday, as plunging starter-home prices undercut a booming market for commercial and industrial buildings.”

“Jef Tyler and his pregnant wife got a notice indicating the assessed value on the townhouse they bought two years ago in San Jose’s Japantown was being dropped $47,000 to $539,000. The declining value has forced them to delay their plans to trade up to a bigger home to make way for the baby.”

“Although Jef Tyler expects the tax break to be small, he said it’s at least a silver lining. ‘I guess it’s better than just saying, ‘Gee, we lost $40,000 on our house.’ Maybe we can get an extra tank of gas, or a half-tank.’”

The Bay Area Newsgroup. “AmeriDream Inc., a buyer assistance program…is now under fire in the U.S. Senate and the Department of Housing and Urban Development, which is proposing to get rid of the nonprofits - mainly AmeriDream and Nehemiah Corp. - that use money from the seller to pay FHA down payments or closing costs.”

“Jason Ellis bought a home in Tracy with AmeriDream, after looking for more than five years. The sole breadwinner in a family of four, he said, ‘There was no way we were going to be able to save 25 percent for a down payment. That would be $80,000 to $90,000 on a $300,000 house.’”

“Ellis said that his rent was rising so fast, from $1,400 to $1,800, he figured he should buy. ‘Rents were really getting out of hand,’ he said. ‘We were at the mercy of our landlord’s finances.’”

“They found one that was affordable, a four-bedroom house just under 2,000 square feet for $300,000. Ellis was able to put 3 percent down by liquidating his 401k, and used AmeriDream to pay 3 percent towards closing costs.”

“A few years ago Ellis said he was approved for a $750,000 house, an amount he said he could never afford. ‘The minimum payment was more than I made a month before taxes,’ he said.”

“Other loan agents promised up to $100,000 in cash-back financing. ‘We could have gone with a couple of brokers a few years ago who promised us the big dream but we would probably be in default right now,’ Hamilton said.”

The Recordnet. “William McClamy, with a family of 10 that includes a grandchild, is in a world of hurt and frustration as he has wrestled futilely to get a home mortgage loan modified so he and his family can stay in their Tracy home.”

‘He contacted the lender, Countrywide, when his adjustable-rate mortgage payment was about to jump $1,200 a month to $4,100 and was told the company couldn’t help, because he wasn’t behind on payments yet.”

“Seven months ago, he was in trouble and couldn’t make full payments and was passed from one Countrywide staffer to another to another. Still, nothing happened, he said. ‘We’re in limbo,’ he said. ‘We’re looking at foreclosure at any time now. They ignored us. They don’t care.’”

The St Helena Star. “At 55 percent, Napa County has suffered the sharpest decline in home prices among nine Bay Area counties. Notice of Trustee sales for the county rocketed to 359 in 2007 - three times what they were a year earlier, and five times what they were in 2000.”

“The 704 Notices of Default issued last year more than doubled the number issued in 2006 and were more than three times the total for the year 2000. So far this year, the numbers in both cases are on track to far exceed ‘07 totals.”

“To the south, both Napa and American Canyon are reeling. Stan Brody of Burlingame-based U.S. Mortgage Corporation, talked about a Web site he accessed listing 18 ‘comps’ in American Canyon.”

“‘They were all new homes built from 2002 on,’ he said. ‘Among them were three sales, 10 were bank-owned, the others were short sales.’”

“Just over the Lake County line to the north, a Hidden Valley Lake real estate broker’s ad states that out of 134 homes listed for sale, 42 are below $250,000, 28 are foreclosures and 15 are short sales.”

“No place has been more affected than San Joaquin County, said Brody, where 1,600 homes have been foreclosed upon and 22,000 are in one stage or another of default. ‘In Stockton, we closed escrow for $197,000 on a property that sold previously for $550,000,’ he added.”

“Still, the Upper Valley is not totally immune from the effects of the massive downturn. ‘Any kind of a decline is a shock to sellers here,’ added Skip Lane of Town and Country Real Estate. ‘They just assume that prices will go up and they haven’t in the past year or so.’”

“Home sales in the Upvalley are affected by stock market fluctuations, said Brody. ‘Well, guess what. The stock market has this whole fear thing going, too,’ he said.”

“Brody believes that modifications by lending institutions providing some form of mortgage relief may ultimately be the only way out of the real estate mess.”

“‘Right now, you have Senator (Christopher J.) Dodd who wants to put out $200 million for foreclosure counseling,’ Brody added. ‘My question is, what are you going to counsel these people on? How to pack boxes so they can move out for the foreclosure sale?’”

New Times SLO. “Like a series of beached whales, each more decayed and skeletal than the one before, the buildings line the hillside behind Broad Street in SLO. Torn plastic building wrap flaps in the breeze and an incomplete wire fence dissuades, but does not prevent, would-be trespassers from exploring the buildings.”

“City documents show the project on Rockview Place, which began in 2005, was envisioned as nine condos that would fetch as much as $6 million when sold.”

“But running into foundation problems, among other concerns, work on the steep hillside project was stop-and-go for most of its history and for the past year work has entirely ceased. Now it’s been formally declared ‘abandoned’ by city planners.”

“‘We’ve asked that he put in fencing and that he keep a daily log showing that he’s at the site and that he’s keeping the vagrants out,’ said Tim Girvin, SLO’s chief building official. ‘You’ve got an unprotected structure there; you don’t want people coming in and setting fires to warm themselves, or doing something else that results in the place burning down.’”

“For now, Girvin said, the developer has been responding to most city requests, but has emphasized that no significant work can happen until he gets new funding.”

“‘The problem is, it’s trying to get blood out of a turnip,’ Girvin said. ‘How can you put these financial requirements out on a project where the guy’s got no money to move forward?’”

“So for now, he said, while the city could legally seek to have the project razed, instead officials are waiting for the results of…court actions. ‘We’re kind of treading water,’ Girvin acknowledged.”

The Daily Bulletin. “It’s a buyer’s market out there. Real estate agent Javier Sanchez has had a 1,400-square-foot Montclair home on the market for just a week, and already he has had several offers.”

“Sanchez said the owner of the house, a short-sale, had enough equity in the home to lower the price to $245,000, but he’s going to walk away with nothing. Sanchez said he’s seen a lot of changes in the market, with people struggling to pay their mortgages.”

“‘Most people are are pulling the equity from their home to make those payments but in the end they can barely afford it,’ he said.”

“Sanchez said there are 120 houses within a two-mile radius of the Camarena property with owners who are 90 days behind on their mortgage payments. There are 17 other houses with mortgages that are 120 days past due and will be repossessed within the next 30 days.”

“In the past 12 months, Sanchez said, 102 homes have been repossessed within two miles of the home.”

“‘(The former homeowners’) mortgages were too high, they got tied up in the middle of the sub-prime loans, and they just didn’t have their equity to fall (back) on,’ he said.”

“The glut of short-sale and foreclosed homes is making this the ideal time to buy, some experts say. For those looking to unload property, a little patience is probably in order.”

“‘Those who are trying to sell their home with equity can’t because there are already too many homes in the market,’ Sanchez said. ‘My advice to them is stay in their home until the market gets better.’”

The Press Enterprise. “A Beverly Hills home builder has purchased 163 finished residential lots in Victorville…from Pulte Homes Inc, in hopes that the High Desert residential market will rebound during the next few years.”

“Similar land sales have become common in the High Desert recently, according to one home builder familiar with the market. Rollie Heschong, founder and president of High Desert Homes in Joshua Tree, said lack of business caused him last fall to shut down the company temporarily.”

“‘In a year or two I think High Desert might come back, but for now the ’spec’ housing market up here has dried up,’ said Heschong, who now builds custom homes.”

“Kennedy Wilson Residential plans to develop their new lots after the housing market turns around or sell them to another home builder if the market is still stagnant three years from now, said managing director Eric Taylor.”

“Cost of the land, in the Cypress Pointe community about a half-mile from Interstate 15, was not disclosed.”

The Berkeley Daily Planet. “Berkeley City Council members seem to think that there’s an infinite demand for brand new condo bunkers, despite numerous warnings over the years about the housing bubble.”

“New condos seem to have hit a wall. Two massive projects opened around the beginning of this year, both on ‘transit corridors.’ During construction, a large sign announced that 1801 Shattuck would be condominiums. The website still boasts that it will be ‘the first major Condo development in the Gourmet Ghetto in over a decade.’”

“The project opened without fanfare in early spring-as rentals. The apartments are being advertised with great enthusiasm: ‘1 Month FREE-HURRY-Rent Special! Hurry Ends Sunday!’ (This ad has been running for weeks, so I surmise that the special offer expires on Sunday and is revived on Monday).”

“The project at 2700 San Pablo is another story. Newspaper ads for the condos began in December 2007 with a catchy new project name.When I attended an open house tour, only two units seemed to be complete.”

“In late February 2008, mechanics’ liens against the property began appearing at the Alameda County Recorder’s Office, eventually totaling 49 liens filed. The amount still owed to contractors is approximately $1,036,468.”

“The two completed units at 2700 San Pablo, 210 and 406, were advertised vigorously until early May, when advertising ceased. Number of condominium sales recorded: Zero. On June 2 a Notice of Default was filed at the Recorder’s Office. The construction loan of approximately $9.5 million appears to be in arrears.”

“Why are the councilmembers so condo-crazed? All I can figure is that they are following their leader, Mayor Bates, whose campaign contributors include a long list of developers (and their wives and employees). It is rumored that the only job Bates has ever held other than politician was-commercial real estate broker.”

Readers suggested a topic on decision making. “Land of the biggie house, the biggie mortgage, the biggie vehicle, the biggie belly, and the biggie cereal box. Cereal box?”

“Yeah.. try this: Open a cereal box and remove the contents, squeeze the air out of the bag and look at what five bucks got you. Somewhere in this observation is a analogy for how we make many of our purchasing decisions. Guess what that analogy would be?”

A reply, “This morning’s Dow Jones Money Report (radio) mentioned that great rooms had fallen out of favor with consumers, because they ‘take up too much space.’ I’m wondering if McMansions will lose more value relative to normal 3 or 4 bedroom houses as real estate prices continue to slide.”

Another said, “And yet CNN is reporting today that house prices (they must mean median prices) have risen slightly!”

“Every month upbeat figures are released by this or that organization or agency, then then next month ‘revised’ downward. It’s so regular and predictable, it has to be deliberate. Why the Press bothers reporting anything positive NAR or homebuilders say is beyond me, since it ALWAYS proves wrong.’

“Even the sales figures are baloney, since they reflect banks and mortgage companies buying back their own foreclosed or abandoned properties, often at their fake original valuations, or even higher (thus boosting that tricky median price number).”

“When Fannie and Freddy can declare losses as temporary, and avoid factually writing them down, nothing related to real estate appears to be believable, except that it isn’t worth a fraction of what we’re told.”

The Seattle Times. “Sue Wilson was among the 3,000 laid off by Washington Mutual in December. She’s had no success finding a job since.”

“‘It’s a little scary,’ she admits. ‘I had recently gone part time, so I felt more vulnerable. It’s worse for a lot of my friends there. … These are people who felt they were very secure and making good money. Now they’re faced with being laid off. There’s not a lot out there to go after.’”

“The state lost 1,800 nonfarm payroll jobs in April, and nearly 159,000 residents are seeking work.”

“Some observers to speculate that the worst of the credit crisis is over and the recession will be mild. That would bear out the ‘incurable optimism’ of Patsy Carmichael. Even so, in a recent interview she says with a rueful laugh, ‘I’m a Realtor without clients. … There’s a bunch of buyers waiting. I say, ‘What are you waiting for? It’s a buyer’s market.’”

“Carmichael is 75 and has been selling houses here for 20 years. With a good year in 2007 and three closings earlier this year, Carmichael considers herself fortunate.”

“‘A lot of agents are hurting,’ she says, adding that she’s grateful for her frugality.”

The Philadelphia Inquirer. “We thrifty Americans should all take a bow. Our national savings rate just crept above zero, clocking in at 0.2 percent of income in the first quarter of this year, up from a goose egg at the end of last year!”

“OK, so we’re not a nation of savers; at least, not anymore. Our long-term savings decline is worrisome in and of itself; many economically stressed households currently have little to fall back on. But of even greater concern are (a) our continuing dependence on debt, and (b) the sources of our more recent borrowing.”

“Debt became a much larger driver of growth in the 2000s than before. Now that the main channels that financed all of that borrowing are closed, we’ve got some tough lessons to absorb.”

“Consider this. Forever in American economics, the mantra was that “consumer spending is two-thirds of the economy.” Yet, during the last decade, that share climbed to 71 percent, the highest on record, a shift equivalent to $575 billion today.”

“At the same time, real incomes for most families were flat. Even though the 2000s have been a period of fast productivity growth, the nation’s real median income - the income of the family smack dab in the middle of the income scale - was actually a bit lower in 2007 than in 2000.”

“As incomes stagnated for many yet consumption soared, we made up the difference with borrowing. Household debt, including mortgages, just about doubled in seven short years (2000-07), from $7.4 trillion to $14.4 trillion.”

“Now, with home prices once again obeying the law of gravity, millions of homes are worth less than their mortgages. At the same time, we have a fading job market and paychecks that have lagged behind inflation for the last seven months.”

“In this climate, it’s no surprise we’re stuck borrowing from our retirement funds and our credit cards. We (not all of us, of course, but enough of us to bring down the house) bought into a bubble, felt a lot wealthier than we were, got hooked on debt, and our consumption grew untethered from our incomes.”

The Dallas Morning News. “Henry Potter: Have you put any real pressure on these people of yours to pay those mortgages?”

“Peter Bailey: Times are bad, Mr. Potter. A lot of these people are out of work.”

“Potter: Then foreclose!”

“Bailey: I can’t do that. These families have children.”

“Potter: They’re not my children.”

“Bailey: But they’re somebody’s children, Mr. Potter.”

“Potter: Are you running a business or a charity ward?”

“Our current crisis was a product of the new century, a fairly conventional speculative bubble involving legislators, regulators, lenders, great financial houses and borrowers in roughly equal culpability. Under the mantra that ‘housing prices in America have never gone down,’ modest eligibility standards for taking out mortgages were essentially scrapped.”

“Risk was ’shared’ - i.e. hidden - by the relatively new process of bundling mortgages for resale to investors. As housing prices soared, the rush to get into the game produced all the usual assurances from the financial talking heads, until the inevitable collapse.”

“How many of the imperiled homebuyers are actually young families with children? How many are singletons who used this speculative opportunity to jump onto the housing escalator? How many are empty-nesters who rode the bubble to move into a McMansion? How many are would-be investors looking for quick turnarounds?”

“George Bailey would surely marvel at the stupidity and greed of our current crop of great financiers, who make Mr. Potter look like a genius - even a humanitarian. He would want to see the sham geniuses and their boards of directors held personally liable to stockholders and investors. He would expect criminal fraud to be vigorously investigated as well.”

“Over the long haul, George Bailey would probably try to return the housing and mortgage industries to their real purpose: providing homes to families. He would support limiting the tax deduction on home-mortgage interest to one principal residence per family.”

“He might even favor a cap on the amount that could be deducted, so that only good shelter - not princely luxury - enjoyed favored tax treatment.”

The Orlando Sentinel reports from Florida. “Developer Cameron Kuhn said Thursday that he is all but broke, in the process of swapping property and assets to clear his debt, and will soon be down to just one employee to keep his Orlando-based development business going. ‘There is a clarity in going broke. You find out who your friends are,’ Kuhn told about 70 business people attending a meeting in Orlando.”

“At the height of his expansion in early 2007, he said, he had 70 employees, $650,000 a month in overhead expenses and holdings in Orlando and Jacksonville. He said that when he saw access to secondary-market capital drying up in June, he began cutting costs but could not get ahead of the downturn.”

“The mixed-use office-condo and residential-condo towers were the largest redevelopment project in downtown history. Kuhn said that, once he auctions off items to repay bank debt, he no longer will have any control over what happens there.”

“‘Fixed overhead will eat your lunch. That’s what happened to me,’ he said.”

“From Monday through April 13, auction giant Hudson & Marshall will offer more than 500 foreclosed or bank-owned homes across Florida. About 200 homes will be auctioned in Miami alone. Nearly a hundred more are in the Orlando area, with about 80 others in Tampa.”

“‘Overbuilding and the disproportionate number of foreclosures in Florida compared to other states has severely weakened Florida’s real-estate market,’ principal Dave Webb said in a statement.”

“He said that buyers who were priced out of the market during the boom years can get a deal now because ‘banks don’t want to continue holding these bad mortgages on their balance sheets and are willing to sell them at discounts.’”

The Palm Beach Post. “After unsuccessfully trying to sell his spacious spread west of Boynton Beach for the past six months, Art Espanet decided he had little choice but to cut his price.”

“Discouraged by the lack of interest from buyers, Espanet dropped his listing price from $832,000 to $795,000. It’s not exactly a fire sale, Espanet acknowledges, but he considers $795,000 for a 1.8-acre property that includes a 3,800-square-foot home and a four-car garage a fair price.”

“And the retired carpenter considers a $37,000 discount to his first price a big chunk of change. ‘That’s a lot of money to me,’ Espanet said.”

“‘We’ve coached our owners that they can’t look back,’ said Henry Kaplan, a sales manager at Century 21 Tenace. ‘The only thing that sells a home is price.’”

“‘In today’s market, we are in a price war and a beauty contest,’ said Richard Bass, who owns Keller Williams Realty offices in Boca Raton and Boynton Beach. ‘The seller has to be the best-priced house out there, and they have to be the best-looking house out there.’”

“In hard-hit St. Lucie County, sellers are competing with a flood of foreclosures that lenders are selling at big discounts, said Scott Wingfield, president of the Realtors Association of St. Lucie County.”

“‘There’s still a lot of properties that are priced rather high,’ Wingfield said. ‘But due to the number of foreclosures in our area, sellers who have a need to sell really have no choice but to lower their prices.’”

The Daily Business Review. “It took condo converter Juan Puig little more than a decade to build his fortune. After a seven-hour auction, the developer’s expensive possessions were gone, gone, gone to the highest bidder.”

“The items ranged from a collection of Latin American art works to luxury autos to jewelry. Not everyone in attendance was impressed with Puig’s taste.”

“‘The quality sucks … no way he will get all the money he needs [to pay off creditors,]‘ said Marc Cooper of Miami.” “Ed Waterman recalled the confidence that Puig exuded the day he walked into Waterman’s Motorcar Gallery Vintage Exotics in Fort Lauderdale.”

“‘He had to tell me how successful he was and that if I treated him right, he would do more business with me because he had a lot of money,’ Waterman said. ‘But I guess his fortune turned on him soon after.’”

From TC Palm. “The Sunshine State led the nation in mortgage fraud in 2007. Florida’s ranking — the second consecutive year it topped the mortgage fraud list — comes from the Mortgage Asset Research Institute, in its report to the Mortgage Bankers Association.”

“‘It’s sloppy work by the title companies,’ said Steven Allender, a Cocoa Beach-based real estate attorney. ‘When the real estate market was buzzing, some of these title companies offered loans with no documents required.’”

“‘I hate to pick on our brethren in South Florida, but Miami is notorious for this,’ Allender said.”

The News Press. “Natalia Lage said she and her family have found the good life in Cape Coral. She described the neighborhood as a close-knit one struck by a trend that is scattering friends to the four winds.”

“‘A lot of people are moving now, a lot of people are doing short sales,’ she said. ‘I’m sad they’re moving.’”

“Realtors said northwest Cape Coral has been especially hard-hit by short sales and foreclosures, particularly inside the confines of U.S. Census tract 102.01. Cindy Roper, a real estate agent with Sellstate Achievers in Fort Myers, said she has been encountering a lot of short sales in the tract.”

“‘There was a lot of vacant land there and a lot of people built on speculation, hoping to make some money off of it,’ she said. ‘But instead, the market turned. You had a lot of construction workers out there and they were able to purchase a newer home, 2000 and up, and of course, a lot of them lost their jobs. It’s been a spiral-down effect for everyone.’”

“Roper is the listing agent for a home just a few doors away from Lage. The bank holding the mortgage is reviewing a short-sale purchase offer for the three-bedroom, two-bathroom home with a pool and a two-car garage, she said.”

“The asking price was $239,000 when the house, built in 2001, hit the market last October, but now stands at $138,000, she said.”

The St Petersburg Times. “In a cobalt blue Bentley that he bragged once belonged to boxer Mike Tyson, Marty Donovan looked the part of a superstar real estate agent. The Chicago native racked up dozens of home sales between 2004 and 2007, most in a single neighborhood, Clearwater’s Island Estates. His $40-million in annual sales placed him at the top of heap.”

“‘I was living in la-la land in Island Estates,’ Donovan says now. ‘I even did tours in a pimped-out golf cart. People loved it. It was island living.’”

“Island living isn’t so sweet anymore. And a lot of residents single out Donovan’s business dealings for ruining their neighborhood. Of the 36 houses in some stage of foreclosure in Island Estates, at least a quarter were owned, listed or handled by the 44-year-old Realtor.”

“Prices have dwindled more than 45 percent since 2006, nearly double the decline of the Tampa Bay area market in the same period. Sale prices on the island averaged $1.25-million two years ago. Among the homes under contract this month, the average price is $670,000.”

“Critics have distributed anti-Marty flyers. Others bray for his punishment, including suggestions he be tarred and feathered. When critics describe Donovan’s prominent role in inflating property values — and abetting their subsequent collapse — they point to the Realtor’s unusual shopping spree in the spring and summer of 2006.”

“A typical purchase was the house at 213 Leeward Island. Listed for $998,000 by an investor who’d bought it two years earlier for $530,000, Donovan bought the 50-year-old, 1,900-square-foot house for the recorded price of $1.3-million.”

“The owner got his $998,000. Almost all the rest of the loan money was kicked back to Donovan’s business partners, allegedly to make repairs on the house. But within less than a year, Donovan stopped making monthly payments. Promised renovations never materialized and no one can account for the money supposedly borrowed for that purpose.”

“M&T Bank foreclosed and marked down the house for quick sale this year. The sale price: $451,000.”

“‘Homes kept selling that I knew weren’t even worth the price of the ones I had. I just kept wondering what the hell had gone wrong,’ longtime Island Estates Realtor Bill King said of Donovan’s deals.”

“Donovan left town in December, after the banks initiated foreclosure against all six of his remaining properties, valued at more than $7-million. He’s living in Lynchburg, Va., to ‘clear my head a little bit.’”

“Donovan insists all he’s guilty of is greed, stupidity and blindness. He trusted colleagues whom he shouldn’t have trusted. He wanted to become a millionaire the easy way. He views himself as a whipping boy for a housing market few thought would collapse.”

“‘The market controls itself. No one controls it,’ Donovan said. ‘I do feel bad about prices going down. It does make me sick. I do not revel in it at all. I’m in the same boat as they are.’”

“Donovan said money borrowed in his name totalling more than $1-million went into an account for Shorefront Ventures LLC, controlled by his friend Chris Malcom. It vanished. ‘I swear on the Holy Bible I didn’t get any money. The only thing I’m guilty of is complete stupidity,’ Donovan said.”

“Though Donovan’s deals weren’t the only bloated transactions on Island Estates, they were more numerous and conspicuous. Benchmarks set by his sales and purchases inflated residents’ property tax bills and polluted real estate data. People confident they were sitting on $1.3-million houses have learned the homes are worth half as much.”

“Donovan, despite claims of poverty, hopes to re-establish himself in the realty business — if the island will have him. ‘I’m scared to go back since everyone hates me,’ he said from Virginia. ‘People love to see other people’s misery. You learn who your real friends are.’”

Inside Bay Area reports from California. “Irene Pena is buying her first home, a three-bedroom house in San Pablo priced at about $500,000. She was scheduled to get the keys to her house this week, but instead she learned 10 days ago that her loan had fallen through because the lender changed its criteria.”

“‘There will be some customers that qualified even a week ago, and this week there’s no place to go with that loan,’ said Jim Svinth, COO and economist at LendingTree.com.”

“Pena’s seeking 100 percent financing using a combination of a first and second mortgage, and applied for the loans using a ’stated income’ process, because she cannot document her full income using pay stubs or W2 forms.”

“Her real estate agent, Gema Smith in San Jose, said Pena’s credit score is very good, but the lender denied the loan at the last minute because Pena works for a janitorial service and cleans houses as a side job. Smith said lenders are suddenly balking at making loans to workers who can’t easily document their income, even when they have good credit scores. Two other adults in her household will be contributing to the mortgage, but they lack income documents, too.”

“‘I feel like I was discriminated against,’ said Pena.”

“Many in the mortgage and real estate industries say changes to lending criteria are overdue. ‘It got to the point where it was easier to buy a home than it was to buy a refrigerator,’ said Rigo Bracamontes of Intero Premier Team in San Jose. ‘The highest priority was to make the loan.’”

The Visalia Times Delta. “Mirroring a suddenly alarming national trend, home foreclosures in Tulare County are on track to break records in 2007. According to Julie Poochigian, Tulare County chief deputy clerk/recorder, in the first 2 1/2 months of 2007 her office recorded 408 notices of default. That’s more than double the number from the same period last year.”

“If those numbers hold steady through the rest of 2007, Poochigian said the county would eclipse the annual all-time high of 1,601 foreclosures, set in 2001.”

“Gaylynn Heitzig, president of the Tulare County Association of Realtors, said it was still too early to tell how the recent increase in foreclosure activity will affect the local real estate market.”

‘”When you look at the numbers so far,’ said Heitzig, ‘our county really hasn’t been inundated with foreclosures yet. Whether that wave might be coming or not, I don’t know. It’s going to be an interesting year.’”

“Signs of growing trouble for homeowners struggling to pay their mortgages began appearing here last year. In the fourth quarter of 2006, foreclosures across the county shot up 109 percent compared to the same period in 2005.”

“‘Lenders are very nervous right now,’ said Brad Maaske, owner of Realty World in Visalia. ‘Suddenly they have to look at all of their portfolios and try to figure out what percentage of loans out there are bad.’”

The Sacramento Bee. “In another indicator of the turbulence buffeting the subprime mortgage industry, as many as 300 Sacramento-area Ameriquest Mortgage Co. employees were issued pink slips Thursday.”

“In announcing its downsizing, Ameriquest’s parent company said it was necessary to rein in costs and increase efficiency amid the current turmoil. ‘This is a very challenging non-prime market. Only companies with the ability to control costs and improve loan quality are going to be successful,’ said the statement from ACC Capital Holdings.”

“The subprime industry ‘kept the real estate boom going longer than it should have, and the repercussions are what’s happening now. It’s pretty scary. It’s really scary,’ said Bob Bader, head of Arden Mortgage in Sacramento. Arden Mortgage is not a subprime lender.”

The LA Times. “The parent of Ameriquest Mortgage Co., once the biggest provider of home loans to Americans with checkered credit, fired a large number of its workers Thursday and closed six operations centers around the country in a bid to survive the shakeout in sub-prime lending.”

“On Thursday afternoon, parking structures near the office towers of Ameriquest and sister company Argent Mortgage Co. in Orange were less than half full. At Ameriquest headquarters a few miles away, the 11-story building appeared deserted, with packing boxes strewn about the corridors.”

“‘Oh well,’ said a receptionist who wouldn’t give her name. ‘It’s sad, but it’s happening all over the business.’”

The Union Tribune. “Beleaguered San Diego mortgage firm Accredited Home Lenders gave itself some breathing room yesterday when it said it had agreed to sell $2.7 billion in mortgages to undisclosed buyers.”

“But these buyers are coming forward at the bargain prices. Accredited said it was selling the mortgages at a ’substantial discount.’ The company expects to take a one-time charge of $150 million related to the sale of the loans.”

“Accredited also is setting aside a reserve of $40 million to satisfy any future claims against the loans, including potential defaults.”

“Late yesterday, the San Diego law firm of Lerach Coughlin Stoia Geller Rudman & Robbins filed a class-action shareholder lawsuit in U.S. District Court against Accredited. The lawsuit alleges the company has made false or misleading statements since November 2005.”

“Accredited also is continuing to seek waivers and extensions of waivers of financial and operating covenants from its warehouse lenders. ‘There can be no assurance that the company will be successful in receiving any of the required waivers,’ Accredited said in a statement.”

The Recordnet. “Sales of existing homes continued to slip in San Joaquin County, falling to 251 last month from 270 in January, the lowest sales level since the past decade.”

“Last month’s median of $395,000 is down 7 percent from a high of $425,000 in December 2005.”

“‘Baby boomers are buying what they want, and the lower end, where you have the 100 percent financing, is slowing down,’ said Bruce Davies, co-owner of Partners Real Estate in Stockton. ‘They are more afraid because the house could still go down in value. So they’re not stupid. If I were a lower-end buyer, I wouldn’t buy right now.’”

The LA Times reports from California. “The number of Californians defaulting on their mortgage loans is rising rapidly, according to figures released Tuesday, providing striking evidence that more people are at risk of losing their homes. Default notices jumped 145% in the last three months of 2006, accelerating a trend that began in late 2005 as home sales started to cool.”

“It was the largest number of default notices in any three-month period since 1998.”

“James Brown, a retired insurance agent in Salinas, Calif., has a history of heart trouble. When he had an operation in 2005, he said, ‘the doctor gave me a 50-50 chance I’d die on the table. So I did a stupid thing: I refinanced the house.’”

“Brown’s goal in tapping his equity was to give his wife, Monica, a $100,000 cushion after his death. But he didn’t read the paperwork carefully, and didn’t realize that his monthly loan payment would skyrocket.”

“There was also a problem with the operation: It worked. A year or two earlier, that would have been nothing but good news. In the early part of the decade, Brown recalled, ‘property values went crazy.’ ‘People pulled up in Silicon Valley and went to Salinas, and paid here what they had been paying there,’ he said.”

“But Brown awoke to a different world. With the new loan, his payments went to $4,500 a month from $2,900. The $100,000 in equity he pulled out of the house went to his medical expenses and other bills.”

“The property has dropped in value to $750,000 from $899,000, leaving him without enough equity to refinance. He arranged to sell the place, but the prospective buyers couldn’t qualify for a mortgage. In September he gave up and stopped paying the mortgage. He’s now in default, speeding toward foreclosure.”

“‘Three times a week, they call and say, ‘Where’s my money?’ he said. ‘If I hadn’t survived, everything would have been fine.’”

“‘People are living on the edge, and they can’t help it with the price of houses,’ said Barbara Swist, a Costa Mesa mortgage broker who is helping Brown sort through his options. ‘They have good jobs but they bought over their heads, buying into the American dream.’”

The Press Enterprise. “There were 7,678 defaults filed against home and condominium owners in Riverside and San Bernardino counties in the fourth quarter, compared to 3,080 in the same quarter of 2005. Defaults have increased 181 percent in Riverside County and 140 percent in San Bernardino County. Riverside, Tulare and Merced counties were the most likely locations for defaults, Dataquick reported.”

“Homeowners in Inland Southern California and the Central Valley were the most at risk because of a concentration of first-time buyers who were forced to settle for mortgages with riskier terms.”

The Press Democrat. “Next month, the century-old Chauvet Hotel in Glen Ellen will reopen as ‘The Chauvet,’ a collection of six luxury condominiums currently priced from $1.15 million to $1.3 million.”

“Some wonder who’ll buy upscale condominiums in the heart of a tiny Wine Country village best known as the home of author Jack London. ‘Where are all these millionaires coming from?’ asked Sue Separk, walking her dog a block away.”

The Record.net. “The number of existing homes on the market has been plunging since summertime because of slow sales, and property managers now report a surge in the number of homes hitting the rental market.”

“Jerry Abbott, co-owner of Coldwell Banker Grupe in Stockton, said many sales-market dropouts are investors who couldn’t sell and now need some cash flow for mortgage payments.”

“Norbert Huston, a Stockton real estate broker who manages rentals, said he gets three calls per day from homeowners wanting him to rent out their properties, up from maybe three calls per week a year ago.”

“Diane Starr, owner of Starr Property Management in Stockton, said the rental housing market is tough now, with more houses for rent than there are potential renters. Demand starts plummeting for houses at the $1,300-per-month mark, she said.”

“During the housing boom, many renters became homeowners, she said, while nowadays, competition has jumped among rental-home owners for too few renters. ‘We traded one problem for another,’ Starr said.”

The Orange County Register. “Lennar Corp. is asking its homebuilding subcontractors to cut their current charges by 5 percent or more or face a minimum six-month ban on bidding for work, a company executive said.”

“The builder, one of the bigger developers in Orange County with plans to build up to 9,500 homes in the former El Toro Marine Base, began circulating letters and meeting with subcontractors earlier this month seeking cuts that reflect lower home prices, said Jeff Roos, Lennar’s Southwestern U.S. Regional Vice President.”

“‘As our customers continue to pay us a lower price for our homes, we must in turn pay you a lower price for your services,’ said a letter circulated to subcontractors in Lennar’s Orange Coast, Corona, Temecula and Palm Springs divisions.”

“‘Every builder is doing the same thing,’ added Roos, who works in Aliso Viejo. ‘Everybody understands that the market has softened.’”

“Some subcontractors said they’ve already cut their asking prices because the housing slowdown is leading to stiffer competition for work.”

“Shea Homes also is seeking cuts from subcontractors, said Michael Bobeczko of Sukut Construction, California’s largest earthmoving contractor, but hasn’t issued similar warnings about being excluded from future bidding. ‘The homebuilders are in a tough spot, so they’re doing everything they can to cut costs,’ said Bobeczko.”

The Sacramento Bee. “The home auction spectacle that began last year with impatient sellers aiming to cut their losses has expanded to home builders: The region’s first auction of new houses is scheduled for Feb. 3 in Elk Grove.”

“Irvine-based Standard Pacific Corp. will sell four model homes and two nearly finished houses to the high bidders at a live auction, company officials said Tuesday. Analysts say it marks the reappearance in California of a tactic employed by builders during the state’s 1990s housing bust.”

“‘This is a fast, efficient way for us to close out and complete the project,’ said Jackie Shipley, the firm’s VP of sales and marketing. ‘We feel like we’ve had a lot of success in that community. … It’s important for us to do this and move on.’”

“Minimum bids will range from $430,000 to $530,000 for the four- and five-bedroom houses in a new neighborhood near Elk Grove’s Franklin High School. The builder’s minimums are well below market highs reached during construction of the subdivision. Early last year resale versions of the smallest $430,000 price tag sold for up to $546,000 on the next street, according to Zillow.com.”

“‘It’s very difficult and expensive to draw traffic to those models to try and sell them, and we want to move our sales staff to Roseville,’ said Jon Nicholson, president of Standard Pacific’s Sacramento division.”

“The firm begins sales in Roseville next month for a 115-home project called Monet at Diamond Creek.”

“Carmichael-based West Coast Home Auctions, which will auction the houses in an Elk Grove hotel conference room, said the builder’s decision is an indicator of slow home sales in a market with more supply than demand.”

“‘When you’ve got some excess supply, this is another avenue for home builders to take,’ said Rick Baldonado, a building industry analyst.”