CA VCS

Ventura County



In most markets, a spike in foreclosures provides a better opportunity to score a deal on a house, but it is not necessarily the case in Ventura County.

Erik J. Beckstrom, an auctioneer who handles trustee sales, has seen a growing crowd congregate at public auctions held at 11 a.m. weekdays outside the Ventura County Government Center. There's been a 50 percent increase in trustee sales during the past three months, he said.

"There's a lot of intrigue out there from people looking for smoking deals," Beckstrom said.

But bargains are difficult to find as banks try to recover the total amount owed on homes, leaving a small margin of potential profit for people interested in capitalizing on an investment.

At a Sept. 19 trustee sale, about a dozen people clustered outside the Government Center in Ventura as Beckstrom rattled off several foreclosed properties.

Most of the investors were unsatisfied, saying the asking prices were too high and the homes didn't come with enough equity.

Dan Bruce of Westlake Village was hoping to bid on a home for his daughter in his housing development. At most, he was planning to bid $1.25 million on a home that he estimated had a market value of $1.75 million to $2 million. Bruce thought the asking price of $1.3 million was too steep, considering it was a blind purchase. He learned the house had been trashed by its former owners, and he had no idea how much he would have to pay in back property taxes.

"Wait until 2009, it'll be $800,000," another person half-jokingly told him.

Thurlow Partridge Jr. of Simi Valley made the only bid of the day. Partridge, who has a real estate license, purchased a 2,100-square-foot Simi Valley house for $574,870.

He had done his research and determined that the market value for the home was a little less than $700,000. Still, he knows it might be a struggle to sell.

He purchased another Simi Valley house in July but wasn't able to sell it. He's now renting the home.

Dave Kingston, a real estate investor from Oxnard who has been flipping homes since 1971, regularly attends the auction sales in hopes of scooping up deals.

"This market is unbelievable," he said. "There are so many houses for sale."

But with four unsold homes in his inventory, Kingston is hesitant to buy more. He says he's discounted most of the properties to a point where he might lose money when they sell. He also expects home prices to drop 10 to 15 percent in the next six to eight months.

Even though investors and others in strong financial positions can reap profits from foreclosures, many recognize that their gains are another person's losses.

"It's a shame," Kingston said. "I hate to see so many people losing property."
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Ventura County


Losing a home can happen to anyone.

Many homeowners are a life-changing moment away from catastrophe: job loss, bad investment, divorce or death in the family.

And when a crisis occurs, some homeowners have little money squirreled away, leaving them vulnerable to foreclosure. It's gotten worse with the collapsing housing market that is draining home equity, once a buffer from hardships.

The magnitude of the problem is evident in Ventura County's foreclosure sales — they spiked 784 percent to 548 from January to June, compared with 62 for the same period a year ago — according to the Real Estate Research Council at California State Polytechnic University, Pomona.

It's a stark turnaround from the frenzied market two years ago when people were racing to outbid one another for nearly any home.

Foreclosures then were running at historic lows, but they now are a painful reality for hundreds of county residents who are being turned out of homes they can no longer afford.

Industry experts place much of the blame on subprime loans that enabled people who didn't qualify for traditional financing to jump into the hot market. The situation snowballed into a disaster this year when low introductory interest rates on those loans began adjusting upward, boosting monthly payments out of reach.

There is no one group of people who lose their homes, said Kay Wilson-Bolton, owner-broker of Century 21 Buena Vista based in Santa Paula. She's seen it happen to people from all walks of life, including real estate agents and a deputy sheriff.

Foreclosure often causes bewilderment, anger and shame, she said, adding, "It's like losing a loved one."

She speaks from experience. In 1992, Wilson-Bolton lost her home to foreclosure, the result of a divorce coupled with purchasing a Century 21 franchise in a distressed market.

Painful as it was, Wilson-Bolton said, she gained valuable insight for her job. Specializing in handling foreclosures for lenders, Wilson-Bolton is the message bearer who tells homeowners in default they are losing their property.

Delivering the news

She explains to some eligible homeowners that they have a choice: In exchange for their keys, the lender will assist them with $750 to $2,000, depending on the number and ages of residents in the house.

The so-called "cash for keys" system requires homeowners to leave the property in "broom clean" condition by a specified date.

During a recent visit to a house on F Street in Oxnard, Wilson-Bolton spoke softly to five children and two women standing by the front door. One of the young boys translated the news in Spanish to the family: The homeowner, Hector Alvarado, was way behind on mortgage payments, and the bank was foreclosing.

She tried to soften the sting by saying the bank would provide some money if they moved out within two weeks.

Some lenders offer this incentive because it saves them from evicting the homeowner, which can be expensive and take months, Wilson-Bolton said, and the house generally is left in much better condition.

Alvarado said in a follow-up meeting that he'd probably pass on the $1,000 from the bank if he could stay longer to find housing for his extended household of 12 people.

Bleak outlook

Wilson-Bolton expects foreclosures to rise significantly as subprime loans — typically adjustable rate mortgages — reset for some 2.2 million borrowers. She has dealt with 38 foreclosed properties from February through mid-September, ranging from a $230,000 condominium in Port Hueneme to a $1.15 million house in Simi Valley.

"There's a flood on the way," she said.

For Alvarado, it was a combination of many factors that cost him. The 35-year-old maintenance technician bought the home in December 2002. He scraped together the $2,700 monthly payment by pooling resources with several other adults living in the house.

But he later took out a $100,000 home equity loan to pay for various expenses, including property taxes. "The money went fast," he said.

"I feel bad, but I don't have a choice," said Alvarado, who has to move by Oct. 18. "I want to keep my home, but it's too late."

Strapped for cash

Some people set themselves up for ruin by spending beyond their means.

In 2006, Americans saved at a rate of negative 1 percent, meaning they spent more than they made, according to the U.S. Commerce Department's Bureau of Economic Analysis.

The heartbreak of losing a home is still very fresh for "Sylvia," a Ventura County resident who asked for anonymity because she didn't want to shame her family.

She and her husband purchased their house nine years ago for about $200,000. They borrowed against it a couple of times for upgrades and to start a business. When the business failed about two years ago, Sylvia became a Realtor. In early 2006, they refinanced again in a subprime loan.

When the interest rate adjusted, their payments ballooned from $2,000 to $4,150 a month. The family could not keep up. As the market softened, members became "upside down" on their home, owing more than what they could sell it for.

They were trapped in a down cycle, with prices trailing off from the peak levels of 2005. Ventura County's median home price for new and existing homes and condominiums was $575,000 in August, down $25,000 from August 2006, according to La Jolla-based DataQuick Information Systems. The median is the midpoint, where half the homes sold for more and half for less.

Sylvia and her husband decided foreclosure was the most viable solution. Her family moved out of their home July 1. Their monthly rent of $1,800 is much more manageable.

"I'd rather rent a home that's nice and be comfortable, than own a home that's a burden and struggle," Sylvia said.

Dealing with disbelief

Over and over, emotional homeowners overwhelmed by sadness and sometimes anger ask Wilson-Bolton: "How did this happen?"

"I've had them break down and cry, saying, No, it's not possible, I've given them the money,'" she said. "To some people, it's no surprise."

It's more painful for those who thought they paid the banks enough to keep their homes, Wilson-Bolton said. In one incident, a real estate agent borrowed $30,000 from her boss to save her home from foreclosure, but it wasn't enough to bring the loan current. She lost it all, the home and the borrowed money.

Foreclosure mostly happens to people who did not understand the terms of a loan or what effect a rate increase could have on their lives, Wilson-Bolton said.

She added that some buyers were told that they could get a better loan when it was time to refinance. "They trusted their lenders," she said. "Well, now that it's time, there are no loans out there available."

A lesson in trust

When he was a 20-year-old student studying psychology at CSU Northridge, Jorge Hernandez was approached by the real estate agent who had helped his parents buy a home. Hernandez considered him a trusted friend.
This house at 260 Bedford Place in Thousand Oaks is listed as being in default under a deed of trust. At the time of the initial publication at the notice of sale, the unpaid balance, interest and other estimated costs added up to $637,447.39.

Photo by Dana Bowler

This house at 260 Bedford Place in Thousand Oaks is listed as being in default under a deed of trust. At the time of the initial publication at the notice of sale, the unpaid balance, interest and other estimated costs added up to $637,447.39.

The agent asked if Hernandez could cosign a mortgage for a family with seven children. He explained that the family was constantly being evicted for having too many children, and that the loan would help get a place of their own. Hernandez said he was told he wouldn't be financially responsible for the house. Wanting to help, Hernandez cosigned. Two years later when the loan rate adjusted up, he was notified that a notice of default was filed against him. "I didn't even know what that was," he said.

Hernandez tried to save the house, but it was too late. He had to evict the family, and the foreclosure process was completed last fall.

To understand real estate, he began taking classes and eventually became a Realtor. He learned that his agent's actions were deceptive.

"I should have had someone else there and explain the verbiage, but at the time, I didn't know better," he said. "It really affected the direction of my life."

In addition to being a Realtor, Hernandez is a pre-foreclosure specialist who provides free assistance to people seeking alternatives to foreclosure.

He urges people to always have an unbiased third party involved to explain loan documents and to walk away if there are any red flags.

"This is the rest of your life you're playing with," Hernandez said.

Asking questions and understanding all loan documents is vital during the complicated home buying process, said Laura Rocha, NeighborWorks HomeOwnership Center program manager.

Hernandez is now 25, married and living in Ventura. He has moved on, his wounds healing a little more each time he helps a family stay in a home.

But the experience has left a scar that will follow him for years. It's ruined his credit, destroying his chance of buying a home for up to seven years.

"I'm happy renting; it takes a load off," Hernandez said. "Someday I want to buy. But I want to do it right. It's the American Dream."

Avoiding foreclosure

Short sale: This occurs when a bank allows a homeowner to sell a home for less than what is owed on the mortgage. It lets a homeowner avoid foreclosure and maintain better credit. Banks see it as a way to recoup loan money. A lender issues a seller a 1099c form to note the difference between the amount paid for the home and the balance owed on the loan, which must be included as income on the seller's tax return.

Loan workout program: These programs are typically for a homeowner who is facing a temporary hardship, such as a job loss, and expects to be back on his or her feet. The borrower should call the lender's loss mitigation department. Some lenders are willing to give homeowners a break in payments for a few months. The payments are moved to the end of the loans.

Forbearance plan: A homeowner is allowed to delay payments for a short period in order to bring the loan current. In some cases, a borrower can make reduced monthly payments but must clear the delinquent amount through increased payments during the latter part of the forbearance period.

Loan modification: This is for a borrower faced with a permanent income reduction. The two most common modifications are interest-rate reductions and term extensions to reduce payments.

Sources: Jorge Hernandez, Realtor and pre-foreclosure specialist with Century 21 Buena Vista in Santa Paula; U.S. Department of Housing and Urban Development; NeighborWorks America.

Resources

Industry officials say that homeowners who are trying to keep their homes should contact a counseling agency approved by the U.S. Department of Housing and Urban Development, such as:

- Consumer Credit Counseling Service of Ventura County Inc. in Camarillo, 800-540-2227, or www.gotdebt.org.

- Cabrillo Economic Development Corp. in Ventura, 659-3791, or www.cabrilloedc.org.

- NeighborWorks Center for Foreclosure Solutions, 888-995-HOPE.
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CA Mod Bee 9.23

Modesto Bee


These are tough times for Northern San Joaquin Valley home builders.

They've got too many homes to sell and too few buyers who want them. That's causing some builders to auction off houses at bargain prices and others to indefinitely postpone construction.

A couple of developers are in jeopardy of defaulting on construction loans, which has put their partly finished subdivisions in limbo. Others have turned over their empty houses to real estate agents and simply stopped building new homes.

Potential buyers disappeared as the real estate market deteriorated amid slumping sales, falling values, rising foreclosures and tightening up of credit. Consumers also are fretting about the economy, employment and expenses -- such as fuel and food.

"We're going to be lucky to weather this. It's hit us hard," said Bernie Heyne, vice president of Pacific Pride Communities.

The builder has halted construction at its Thomas Terrace development in Modesto while it renegotiates with lenders, leaving nine finished-but-empty homes. It's laid off two-thirds of its staff and put its Modesto headquarters up for sale. "We are pulling back," Heyne said.

So is Lafferty Homes, which has temporarily stopped building at one of its Oakdale developments; indefinitely postponed another Oakdale subdivision; and pushed back the timeline for a Riverbank project.

Lafferty recently turned over sales of its finished houses in Oakdale, Livingston and Lathrop to real estate agents, and slashed its asking prices. Some homes that had been priced above $600,000 have been lowered to the mid-$400,000s.

Owner Rick Lafferty said this is the toughest sales market he's experienced in his 24 years in the business: "I don't think builders can give much more."

But some builders are offering even bigger potential discounts.

Anderson Homes has agreed to auction off 59 houses in Manteca and Los Banos to the highest bidders next month.

"It's a very efficient way to reduce our inventory," said Craig Barton, Anderson Homes' chief financial officer. That's what his company needs because it built too many homes last year when sales were strong, then got stuck with empty houses when buyers disappeared.

40 percent drop in asking price

To lure back buyers, the opening bids for Anderson Homes will start about 40 percent below previous asking prices.

Example: Its Paseo West houses in Manteca, once priced at $460,898 could go for as little as $285,000, and Anderson's Teal Landing houses in Los Banos, once priced at $353,316, could go for $215,000.

Craig said his company "won't be making any money if we sell for the minimum bids," but the company is going to trust "buyers to set the fair market value."

The Kennedy Wilson Auction Group will manage the bidding. The last time that auctioneer sold homes in the Northern San Joaquin Valley was in the early 1990s during an economic recession and housing slump. In 1991, for instance, Kennedy Wilson sold 54 new east-Modesto houses in less than two hours.

"The last (down real estate) cycle we did many, many auctions," said Rhett Winchell, president of Kennedy Wilson. While such auctions re-emerged recently in Northern California, Winchell said, "we're talking to many other builders, including some in your area, who are interested in this."

Several of the region's builders are stuck with costly inventory they haven't been able to sell.

For instance: Dunmore Homes has about 15 empty houses in its Copper Creek subdivision in Merced, but it apparently has stopped all sales there. Last week, the company's Web site removed Copper Creek from its listings. Officials from Dunmore Homes did not respond to inquiries from The Bee about what's happening at Copper Creek.

But other builders willingly talked about how difficult it is to sell new homes these days.

Joe Anfuso, who heads Florsheim Homes, said the market is so bad his company has in- definitely postponed its Rose Way subdivision in Modesto. It hauled away its sales trailers from the Merle Avenue site last week.

Rose Way was a much anticipated development because it was to include 22 affordable units among 122 single-family homes. Those units, also called duets, were to be sold at below-market prices to median-income families who were to receive down-payment assistance through various government programs.

"But now doesn't appear to be the right time to bring any new product to market," Anfuso said. "We've got to ride out this downturn, then come back when we can be successful."

Anfuso said that since the current sales market is so uncertain,he would rather continue paying the loan costs on the vacant land than invest another $5 million or so to develop Rose Way.

CA VCS

Ventura County


In an effort to entice buyers, Standard Pacific Homes is staging an aggressive campaign called "Mission: Possible" to sell 200 homes across Southern California over a 10-day period, ending Sunday.

The Irvine-based homebuilder has homes for sale at 49 new housing developments, ranging from $300,000 to $7 million for homes of 1,100 square feet to 4,000 square feet, said Stephen Boggs, division president in Westlake Village. He oversees the company's housing developments in Ventura County.

The company has some 40 homes for sale at developments in Oxnard and Simi Valley. Prices range from the mid-$300,000 at Waypointe at RiverPark to the high $800,000s at the Bluffs at Big Sky in Simi Valley.

A clear obstacle to moving those homes has been the depressed housing market. Sales have plunged over the past year in Ventura County and Southern California. The company is hoping to stir up some enthusiasm with its advertising blitz.

"Both in the resale market and brand-new homes, there are just some fabulous deals right now," said Joe Virnig, president of the Ventura County Coastal Association of Realtors.

Standard Pacific has advertised that its sale offers customers more than $20 million in savings. There has been some discounting in price, but it's been fairly minimal, Boggs said. He estimates that Standard Pacific has slashed prices by 5 percent within the past month, mainly for the blowout sale.

The bigger incentive is the low interest rates that the company offers, which can reduce mortgage payments by about 20 percent, he said. Standard Pacific offers lending through its wholly owned subsidiary Standard Pacific Mortgage Inc. The company has a handful of loan programs, with rates for a 30-year fixed mortgage starting at 5.375 percent.

Bonuses include a free 42-inch plasma TV with every house purchase and a daily $500 drawing. The company is also offering free upgrades for Oxnard locations, including stainless steel appliances, granite countertops and air conditioning.

It was the low interest rate that appealed most to Alonso Escamilla. A property manager, Escamilla owns two houses in Santa Barbara, but he's looking for something more economical. Since the interest rate on his jumbo loan adjusted upward, his payment has become sizable. By selling one of his homes, he wants to be able to put 10 to 20 percent down on a $450,000 house.

"I don't want to leave Santa Barbara," he said. "But it's either struggle, or move and live comfortably."

Blowout sales are growing more common as homebuilders attempt to entice potential buyers who have grown skittish in a slumping housing market. Homebuilders need to be more aggressive to make the sale, Virnig said.

In its "Deal of the Century" promotion, Hovnanian Enterprises Inc. trimmed home prices by as much as $100,000 during a three-day national sale.

But these type of campaigns by big builders can rankle smaller firms. Ian Bentley, sales and marketing manager of JM Development, a Santa Barbara-based real estate development company, calls Standard Pacific's campaign a "hype" and says the company isn't offering anything that it wouldn't already offer.

"All of these builders play a game with pricing," he said.

Bentley spoke of another builder that added $20,000 to the price so it could offer buyers a $20,000 credit.

This summer, JM Development permanently reduced prices by $80,000 at Henderson Cottages, a new 28-home community in east Ventura. There are 17 properties still available.

"Realistically, would we do what Standard Pacific is doing? Come talk to us. We can give you a deal of the century,' or mission possible.' We can do the same thing."

Part of Standard Pacific's campaign is to get sales staff energized, and to educate buyers on what they can afford, Boggs said, noting that a lot of people think that they can no longer afford a home or that they can't get financing.

On Thursday, Boggs said Standard Pacific was ahead of schedule and will exceed its goal of 200 sales by Sunday. He said the Ventura County division will exceed goals by 25 to 30 percent, but declined to release sales figures.

New homes sales are down, Boggs said, and Standard Pacific is trying to attract more buyers to move inventory.

Even before the campaign began Sept. 14, Boggs said there was an increase in traffic of 30 percent at each one of the model homes in the six developments he oversees in Ventura County, and sales increased 50 percent.

The goal of hitting the 200 mark is realistic, Boggs said. The company probably does about half as many sales in a 10-day period, although it's hard to tell because sales averages vary based on season, he said.

When Virnig heard Standard Pacific's ad on the radio, he thought that it sounded like a car commercial.

"Some marketing guy took a page from what people do in car sales," he said, adding that the company is obviously trying to drum up business by adding a sales deadline, similar to what automobile dealerships do.

"They are just trying to generate some excitement and buzz, just like every real estate professional is trying to do," Virnig said.

On the Net:

CA Inman

Inman News


New-home sales dropped 27.8 percent in July compared to July 2006, the California Building Industry Association reported today, and new single-family sales fell 20.3 percent, with median new-home prices dropping 4.8 percent and median new single-family home prices falling 8.6 percent.

Eleven of 29 regions in California had double-digit percentage declines in median new-home prices in July compared to July 2006, according to the latest CBIA/Hanley Wood Market Intelligence New Home Sales and Pricing Report, with data not available for three regions.

And 10 of 29 regions had double-digit-percentage drops in the median price of new single-family homes in July 2007 compared to the same month last year, with data unavailable for four regions, according to the report.

Among those markets with 100 or more home sales for all types of new housing in July 2007, median prices for all home types dropped 13.2 percent in the Sacramento area, 12.6 percent in the Fresno area, 11.5 percent in the Los Angeles-Long Beach-Glendale area and 10.4 percent in the Stockton area.

Among markets with 100 or more new single-family sales in July 2007, median prices dropped 27.6 percent in the Los Angeles-Long-Beach-Glendale area, 12 percent in the Stockton area and 10.8 percent in the Fresno area, according to the report.

The overall new-home median price jumped 18.7 percent in the Santa Ana-Anaheim-Irvine area in July 2007 compared to July 2006, while the single-family new-home median price fell 9.3 percent.

New-home sales for all housing types dropped in 16 of 29 market regions year-over-year in July 2007, with data not available for three market areas. And single-family new-home sales dropped in 13 of 29 markets, with data not available for four market areas.

Among markets with more than 100 sales of all new-home types in July 2007, sales plummeted 53.6 percent in Stockton, 47.3 percent in the San Diego-Carlsbad-San Marcos area, 39.7 percent in the Santa Ana-Anaheim-Irvine area, 39 percent in the Riverside-San Bernardino-Ontario area, and 36.5 percent in the San Jose-Sunnyvale-Santa Clara area compared to July 2006. New-home sales rose 30.7 percent in the Visalia-Porterville area and 16.6 percent in the Fresno area.

Among markets with 100 or more new single-family home sales in July 2007, sales dropped 51.5 percent in the Stockton area compared to July 2006, 36 percent in the Riverside-San Bernardino-Ontario area and 22.5 percent in the Sacramento area, while sales rose 28.5 percent in the Visalia-Porterville area and 15.5 percent in the Oakland-Fremont-Hayward area.

Steve Smiley, a consulting director for Hanley Wood Market Intelligence, said in a statement, "Home builders are doing everything they can to move their inventory, but the demand for concessions and incentives in this down market makes staying profitable a significant obstacle. With the recent tightening of credit standards, it's made an already challenging situation that much more difficult."

The California Building Industry Association trade group represents about 7,000 businesses, including home builders, remodelers, subcontractors, architects, engineers, designers and other building-industry professionals.

Metro Area


New Home Sales


Median Prices







6-Jul


7-Jul


% change


6-Jul


7-Jul


% change

Statewide


6,915


4,990


-27.8%


440,990


419,990


-4.8%

Bakersfield


228


199


-12.7%


310,990


287,990


-7.4%

Chico


25


15


-40.0%


325,000


339,000


4.3%

El Centro


78


62


-20.5%


291,990


309,990


6.2%

Fresno


235


274


16.6%


325,900


284,900


-12.6%

Hanford/Corcoran


33


23


-30.3%


289,400


305,000


5.4%

L.A./Long Beach/Glendale


719


586


-18.5%


507,990


449,715


-11.5%

Madera


46


50


8.7%


326,990


249,000


-23.9%

Merced


52


65


25.0%


395,990


288,990


-27.0%

Modesto


101


94


-6.9%


448,990


399,990


-10.9%

Napa


3


9


200.0%


832,900


681,522


-18.2%

Oakland/Fremont/Hayward


474


415


-12.4%


575,990


640,000


11.1%

Oxnard/1000 Oaks/Ventura


153


96


-37.3%


639,990


619,500


-3.2%

Redding


—


—


—


—


—


—

Riverside/San Bern./Ontario


1927


1175


-39.0%


428,990


415,000


-3.3%

Sacramento


727


470


-35.4%


454,950


394,990


-13.2%

Salinas


14


38


171.4%


610,333


484,900


-20.6%

San Diego/Crlsbad/San Marcos


945


498


-47.3%


424,900


459,990


8.3%

S.F./San Mateo/Redwood City


45


99


120.0%


765,000


815,880


6.7%

San Jose/Sunnyvale/Sta Clara


208


132


-36.5%


660,000


693,990


5.2%

San Luis Obispo/Paso Robles


—


—


—


—


—


—

Santa Ana/Anaheim/Irvine


307


185


-39.7%


591,990


702,405


18.7%

Sta Barbara/Sta Maria/Goleta


—


—


—


—


—


—

Santa Cruz/Watsonville


9


12


33.3%


499,000


389,000


-22.0%

Santa Rosa/Petaluma


19


37


94.7%


618,950


509,990


-17.6%

Stockton


222


103


-53.6%


502,500


449,990


-10.4%

Vallejo/Fairfield


121


73


-39.7%


481,999


552,000


14.5%

Visalia/Porterville


137


179


30.7%


292,990


280,990


-4.1%

Yuba City/Marysville


79


96


21.5%


349,020


327,990


-6.0%

Other (Colusa/Glenn)


8


5


-37.5%


244,950


340,900


39.2%

Source: CBIA/Hanley Wood Market Intelligence New Home Sales and Pricing Report

CA PE FB

Press Enterprise


The numbers of Inland families who lost their homes to foreclosure surged dramatically last month, as risky subprime mortgages strained the budgets of more households.

Riverside County posted 7,266 notices of defaults, trustee sales and lender repossessions, up 347 percent from a year earlier, and San Bernardino County posted 4,876 such notices, up 351 percent in a year, according to a report Tuesday by RealtyTrac, a foreclosure marketing firm based in Irvine.

In California, Riverside County ranked fourth and San Bernardino County ranked eighth in foreclosure activity.

"I think a lot of the loans going bad now are the highest-risk kind of loans," said Rick Sharga, RealtyTrac's vice president of marketing. "They were probably subprimes with adjustable rates and probably with 100 percent financing."

An especially telling statistic is the comparison of bank repossessions from last year, or even the prior month, to August.

In Riverside County, 21 homes were seized by lenders in August 2006. In July, 189 were seized. Last month 1,198 homes were repossessed. In San Bernardino County, 10 homes were seized a year ago. Lenders repossessed 518 in July. Last month, it was 708.

Properties with mortgages in default are increasingly being lost to foreclosure because there is not enough equity left in them to give their owners an option to sell or refinance, Sharga said.

Worse Is Ahead

Because more mortgages for subprime borrowers with poor credit or no down payment are scheduled to reset at rates that some borrowers will not be able to afford, the foreclosure picture will worsen before it brightens, Sharga said.

"There are at least two more big groups of subprime adjustable resets that will take place over the next 12 months and we will probably see a spike in foreclosure activity both times," he said.

Riverside County had one foreclosure filing for every 96 households and San Bernardino County had one filing per 134 households.

The Inland region's foreclosure pain was far more severe than for the nation on average, which had a foreclosure rate of one filing for every 510 households.

John Karevoll, an analyst with DataQuick Information Systems, which also monitors foreclosures, said the company is seeing "significantly higher default and foreclosure rates where bad loans were made" and the Inland Empire is one of those areas.

Lenders used the subprime mortgages to help people afford to buy houses as prices skyrocketed during the recent housing boom. Such loans are no longer being made but those that remain are having a lingering effect.

How long the rash of risky loans will hobble the housing market is a matter of dispute, Karevoll said. Some analysts predict the market could begin to stabilize in about six months after most of the loans reset. Others worry that by then home prices might fall enough to put other mortgages at risk of default.

The deluge of mortgage defaults has caused lenders to tighten mortgage requirements, making it increasingly difficult for people to qualify as prospective homebuyers. Real estate experts say that the shortage of buyers has further depressed home sales and pushed down home values.

A Couple's Plight

Nancy Rubi said an unaffordable mortgage and falling home prices in her Orangecrest neighborhood forced her and her husband to try to sell their house even if it means getting less than they owe their lender.

The couple refinanced two years ago to consolidate bills, she said.

They intended to refinance again before the mortgage would adjust to a higher interest rate. But in August when their rate soared from 6.7 percent to 9.7 percent and their payment from $4,200 to $5,800, they learned falling values left them too little equity to refinance.

Making matters more difficult, she said, the couple two years ago bought a larger house to have space for their four adopted children. Then they rented out their first home for $2,000 less than the mortgage payment.

Rubi said that she, a district sales representative for the California State Lottery, and her husband, a retired schoolteacher, can no longer afford both mortgages.

Although her husband held an open house seven days a week since July 20, Rubi said they couldn't get the $685,000 price they need to repay their mortgage. Their next step, she said, is to try to persuade their lender to accept less than the mortgage.

Because the couple is 30 days behind on their mortgage payments, she figures they have six to nine months to find a buyer before the house goes to foreclosure.

"We never, ever thought it would end up like this," she said.

rankings

California counties ranked by households per foreclosure filing:

1. Stanislaus 79

2. San Joaquin 81

3. Merced 82

4. Riverside 96

5. Sacramento 100

6. Solano 106

7. Contra Costa 128

8. San Bernardino 134

CA mod bee

Modesto Bee


The housing market news just keeps getting worse for the Northern San Joaquin Valley.

Stanislaus, San Joaquin and Merced coun- ties had the highest foreclosure rates in the country during August. Statistics released today by RealtyTrac showed the valley's homeowners were six times more likely to be in mortgage default last month than the national average.

And home values have plunged. August statistics show home prices fell about 15 percent in Stanislaus and San Joaquin counties and nearly 20 percent in Merced County compared with a year ago, according to Data- Quick Information Systems.

Stanislaus County's median-priced home sold for $315,000 last month. Compare that with the market peak in February 2006 when the county's midpriced home sold for $392,000.

Values have been sliding since. But even at today's dramatically lower prices, home buyers are hard to find.

Only 450 homes sold in Stanislaus County during August. That's a 43 percent drop compared with last year.

Lenders, meanwhile, foreclosed at record rates last month.

RealtyTrac statistics show 407 Stanislaus County homes were repossessed in August. An additional 1,388 of the county's home- owners were served legal mortgage default notices, and 329 more were warned their homes were on the verge of being sold at public auction.

The number of default no- tices, trustee sale notifications and lender repossessions totaled 2,124 in Stanislaus County.

RealtyTrac calculated that such notices went to 1-in-79 homes in Stanislaus County, 1-in-81 homes in San Joaquin County and 1-in-82 homes in Merced County.

The foreclosure notice rate was 1-in-510 homes nationally and 1-in-224 homes throughout California.

"It's amazing to me how those foreclosure numbers continue to go up in your region," said Daren Blomquist, a spokesman for RealtyTrac, which publishes a national database of foreclosure and bank-owned properties. "Your notices of default (the first step in the foreclosure process) don't seem to be decreasing, which indicates you've still got some more pain to go through, unfortunately."

The foreclosure process typically takes a minimum of four months before a home can be repossessed. The process starts with a formal notice of default, then ends with homeowners catching up on payments, selling their homes, renegotiating their loans or losing their homes to lenders.

"What we're hearing from a lot of investors is that there's just not a lot of equity in these properties," Blomquist said.

When homes aren't worth as much as the mortgage on them, usually no one bids for them at foreclosure auctions. Such auctions happen at noon daily on the Stanislaus County Courthouse steps. When no one bids, lenders end up owning the property.

"For people who are being fiscally wise, this could be a pretty good opportunity to buy prop-erty," Blomquist said. "There are a lot of homes at discounted prices out there."

That's particularly true in cities such as Patterson, where median home sales prices have plunged nearly 33 percent during the past year, according to DataQuick records.

Waterford and Atwater prices dropped 24 percent, Lathrop fell 23 percent and Newman declined 22 percent.

Prices in central, western and southern Modesto decreased more than 20 percent.

About the only valley city where home prices haven't declined is Ripon, where the median sales price has stayed about $525,000.

Prices statewide slipped to a median $465,000 in August, down 1.1 percent from a year ago. There were 33,429 new and existing houses and condos sold statewide last month, which was down 34.5 percent from August 2006.

Last month's sales made for the slowest August since 1992 in California.

The typical mortgage payment that California home buyers committed themselves to paying last month was $2,251, according to DataQuick.

Press Enterprise


The Federal Reserve is expected to lower bank borrowing rates today, but buyers will not rush back to the housing market and foreclosures will not stop their upward spiral, economists and mortgage industry officials said Monday.

They said the expected drop of one-quarter percent to one-half percent in the rate that banks charge one another for overnight loans could translate into some relief for homeowners with adjustable-rate mortgages in that their monthly payments might not jump as high.

But the biggest potential benefit of the Federal Reserve's action would be a psychological one, they said, by convincing the financial markets, including companies that invest in mortgages, that it will do whatever it can to prevent a credit crunch from pushing the national economy into a recession.

"It should first and foremost prevent the economy from going into a recession," said Rich Weiss, executive vice president and chief investment officer for City National Bank. "No matter what they do, there is no quick fix to the housing issue. But this is clearly good medicine and going in the right direction."

Mortgage industry officials said it would require several rate cuts and consequent reductions in adjustable rates before homes would become significantly more affordable.

Chapman University economist Esmael Adibi said because the Federal Reserve rate is a benchmark for all short-term interest rates, a change is likely to be reflected in rates charged to holders of credit cards and adjustable-rate mortgages.

But any adjustment will have no impact on long-term rates, such as those on 30-year fixed-rate mortgages.

It was uncertain whether an interest-rate downshift by the Federal Reserve this week would be followed by many more cuts because of the agency's concern that rate cuts could spur inflation.

"The Fed's fear is that inflation is still a problem and if they reignite the housing market, that inflation ...will get out of control," Adibi said.

Brian Weide, owner of SunStar Mortgage Services, a mortgage broker in Ontario, said mortgage rates have been less of a problem for the Inland housing market than a drying up of mortgage money, reflected in a requirement for borrowers to show higher credit scores and to make larger down payments.

The most-needed outcome of the Federal Reserve's action, Weide and others said, would be to give investors confidence to put money back into the mortgage market.

Economist Chris Thornberg said he doesn't believe anything the Federal Reserve does will prevent an impending round of foreclosures.

"We have to take our lumps, period," he said. "We have a housing debacle on our hands that has to be cleared out of the system. It is going to be a painful."

Leslie Appleton-Young, chief economist for the California Association of Realtors, said, "It is certainly a step in the right direction and will calm the markets a bit and make credit a little more available. Every little bit helps.

Will it stem the tide of the downturn we are in? No."

AG WTF wsj nyt

Wall Street Journal

http://blogs.wsj.com/economics/2007/09/17/qa-greenspan-on-bubbles-saddam-cheney-and-bernanke/

In an interview in conjunction with the release of his memoir, Alan Greenspan discussed a wide range of subjects: the increased role of bubbles in business cycles; the global roots of what he now acknowledges was a housing bubble; his advice to the Bush Administration that Saddam Hussein should be removed before he gained too much control over the world oil supply; Dick Cheney; and the benefits of introverted Fed Chairmen. “The Age of Turbulence: Adventures in a New World,” published by Penguin Press, is to be released officially today. (See related story.)

At the Brookings recently, you talked about the role of psychology in business cycles. The book doesn’t get into that much.
It’s inferred. Sort of post-book. What strikes me about the current period is it’s wholly consistent with my generalized view of how important innate human characteristics are in sustaining the business cycle. I’ve always been concerned that in setting up an econometric model you take history irrespective of whether it’s up or down, and there’s an implicit judgment that the coefficients work symmetrically on the upside and downside. There is a general belief for example that capital gains on homes has a buoyant effect on consumption going up and precisely the same on the other side. I’m beginning to question whether that premise is true.

For example, the academic literature seems to have established that for most of us, the pain of a dollar of loss is far greater than the pleasure of a dollar of profit.
Yes. Fear is the driving force on the downside. Elements of wishful thinking and euphoria form the upside. When we look at the external world it’s very obvious. Fear is a far more dominant projector of action than is euphoria or anything like that. The division of labor … essentially creates competition and specialization and hence rising productivity and growth. Fear invariably and universally induces disengagement and disengagement is negative division of labor.

So a bubble is the inevitable end of every business cycle?
It comes to an end under two conditions. One is a bubble, or some variation of a bubble, in which capital investment is projected with expectations which are not realistic. The other is … you get an inventory cycle. [At the bottom of the cycle] inventories are liquidating .. and consumption is above production and as it goes up, production goes above consumption until [inventories need to be liquidated again]. There is no irrational euphoria, it’s just misjudgments.

At the Fed you said housing was in a froth, but you avoided calling it a bubble. From the vantage point of 2007, can you say now that it was in a bubble? Oh yeah. Lots of froths are equal to a bubble… What was driving prices higher was essentially the aftermath of the decline of the Soviet Union and the fall in real long term interest rates which drove up residential prices all over the world. And indeed, the U.S. was not at the top of the list by any means. It drove them up sooner in Britain and Australia as I recall. I find this issue that the Federal Reserve created the housing bubble just utterly devoid of any awareness of who created all the other bubbles. And they all look alike. Long-term real interest rates moved [in] parallel all over the world and the results were what you always get: a fall in equity [risk] premiums, a rise in price:earnings ratios, huge increases in liquidity, and large increases in the market values of assets.

Many people, including some former colleagues of yours from that period, believe the Fed kept interest rates too low for too long, thereby contributing to the housing bubble and problems in subprime mortgages. Do you agree?
We kept them too low for too long because we were effectively creating an insurance against [deflation]. The problem in making choices is that you recognize that if you miss, you can end up with interest rates too low, too long. The question is, what did that have to do with the housing boom? Remember that long term Treasury rates and mortgage rates stayed flat from early 2004 through the summer of 2005 [while the Fed raised the federal-funds rate from 1% to 3.5% in 0.25 percentage-point steps]. We tried effectively to get mortgage rates up as part of our incremental 25 basis point operation and we failed… If we were dealing with an inflationary environment, we would have had no trouble getting the 10-year [Treasury yield] up… Had we [raised rates] earlier, do you think we wouldn’t have gone through exactly the same phenomenon?

Your book criticizes the Republican Congress and the Administration for abandoning small government principles. Is Dick Cheney part of the problem or part of the solution?
I don’t really know. I mean you have to understand how profoundly impressed I was with Dick Cheney during the Ford Administration. And he and I remain very close in the years subsequent. Indeed, he was the only person who showed up at both my 50th and 70th birthday parties. And I still hold him in high regard. There’s an extraordinary intelligence there. He has very good judgment on issues… I do know that other than the issue that we had on the deficit [whose importance Cheney downplayed] that he had very much the same ideas as I had. I have no reason to believe his views from the Ford administration have changed.

His popularity ratings are quite low and he’s sometimes portrayed as sinister. Is that an accurate characterization?
Not in the slightest. He has strong views but manipulator, that he’s not. He’s been very straight with me. Clearly we don’t hold the same views we did back in the Ford administration and don’t have similar objectives. As I point out in the book, it’s unrealistic to believe that people in public office and public life will not have their views changed as indeed mine were between, say, 1977, when I left the Ford Administration, and [now].

Tell me about your views on the importance of deposing Saddam.
My view of the second Gulf War was that getting Saddam out of there was very important, but had nothing to do with weapons of mass destruction, it had to do with oil. My view of Saddam over the 20 years … was that he was very critically moving towards control of the Strait of Hormuz and as a consequence of that, control of the oil market. His purpose would be very much similar to [Venezuelan President Hugo] Chavez’s actions and I think it would be very dangerous for us. So getting him out to me seemed a very important priority.

Did you share this view with Cheney and Defense Secretary Donald Rumsfeld?
Oh yeah.

Do you think it influenced the Administration’s decision to invade Iraq?Their decision had been made prior to my discussions with them. My recollection is that someone said, ‘We can’t deal with oil because it’s a major political problem’ [because both Bush and Cheney came from the oil industry]. But it was not Cheney or Rumsfeld.

Isn’t it ironic that you, a Republican, seem to have respected, Bill Clinton, a Democrat, most of all the presidents you knew?
Look, the Clinton Administration was a pretty centrist party. Pro-international trade. I could see myself fairly close to [Robert] Rubin and [Lawrence] Summers and Clinton and Roger Altman and a number of the other people there, but they’re not governing again. The Democratic party has moved away, I fear very significantly in the wrong direction.
And I’m saddened by the whole political process. It’s not an accident that Republicans deserved to lose in 2006, and I said it wasn’t that the Democrats deserved to win and they proved they didn’t deserve to win by having been very effective on the negative side. But when it came time to rule all of sudden their ratings collapsed, and the reason they collapsed is they’re just as negative as the Republicans. I mean, we have some very fundamental problems that require action.

Now it turns out politics is less important , domestically , than it was, because globalization is taking over an ever increasing part of the decision making process with the exception of national security.

How is your successor, Ben Bernanke, doing?
He’s doing excellent. I think he’s handling policy quite sensibly. And not of a small matter, his regulatory views are very close to mine in virtually every aspect I’ve seen. What he’s essentially doing is carrying forward the major regulatory issues I developed with staff, like on [government-sponsored mortgage companies] Fannie [Mae] and Freddie [Mac] and numbers of other questions that have emerged. I really appreciate that.

He’s an extraordinarily intelligent guy. I had previous contact with him at Jackson Hole [in 1999]. He was one of the very few people who supported us on the issue of not targeting asset prices. And very many of his views were consonant with things that I believe. The trouble is he’s as introverted as I am.
At least Bernanke eats lunch with the staff in the cafeteria. You never did that.
He’s more gregarious than I.
In your book, you refer to Paul Volcker as “introverted and withdrawn.” Isn’t that like the pot calling the kettle black?

He’s worse than I am. I think though … where the issue of policy is really complex and not just a survey of other people’s opinions, you want somebody who is comfortable with his own judgment. Volcker … may not have been open and jovial and outward-going but he had strong convictions. And that’s not inconsistent with introversion. I would be uncomfortable with a “hail fellow well met” central banker.

Because he might be too anxious to please?
Yes.

Do you aspire to a job in public life again? I don’t think so. There’s no other job in public life that is like chairman of the Fed. [This] gets around to a question of whether I should just be shutting my mouth and going fishing. I confronted the issue. Since 1948 I have spent every single day thinking how the economic and political worlds have changed. If somebody had said to me in June or July of 1987, ‘We’d like you to become chairman of the Federal Reserve, but you’re never allowed to discuss any economics after you leave,’ I’d have said, ‘Forget it.’ What do they want me to do? Become an anthropologist? The best thing I can do is try to stay away from the sensitive issues where it gets me second guessing what Ben is doing… I understand and am very much sensitive to my talking and what for example, my friends at the Fed may think … and I try as hard as I can to stay away from that.
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New York Times

After nearly two decades as chairman of the Federal Reserve, Alan Greenspan wants to solidify his standing in history.

In an interview timed with the release of his memoir Monday, Mr. Greenspan sought to distance himself from the economic policies of President Bush and refute critics who say his policies at the Fed contributed to the housing bubble and bust that is now roiling the economy.

Mr. Greenspan unleashed bottled-up frustration about President Bush, Vice President Dick Cheney and Republican leaders in Congress who, he contends, put politics ahead of Republican goals like fiscal discipline and lower government spending.

“I’m just very disappointed,” he said glumly, as he sat in his living room. “Smaller government, lower spending, lower taxes, less regulation — they had the resources to do it, they had the knowledge to do it, they had the political majorities to do it. And they didn’t.”

In the end, he said, “political control trumped policy, and they achieved neither political control nor policy.”

Mr. Greenspan, a lifelong Republican who presided over the longest sustained economic expansion in American history, sounded frustrated that neither a Republican White House nor Republican leaders in Congress were heeding his quiet pleas for greater fiscal discipline.

Mr. Greenspan said he met frequently at the White House with President Bush and Vice President Cheney, but his enthusiasm for the new administration cooled as he discovered that Mr. Bush ignored much of his advice.

In his first term, Mr. Bush would rarely let a week go by without visiting a small business or a camera-friendly factory to extol entrepreneurship or the importance of tax cuts. But back at the White House, Mr. Greenspan got virtually no response to his advice that the president veto spending bills. Mr. Greenspan said he was told his recommendations would be “taken under advisement.”

His observations are in line with those of others who engaged Mr. Bush frequently, including the former Treasury secretary, Paul H. O’Neill, who was fired in December 2002. After the Sept. 11 attacks, they said, Mr. Bush would become animated and even passionate about counterterrorism or the war in Iraq. But they said that broader economic discussions bored him, unless he could take them to the factory floor.

Mr. Greenspan has always been acutely aware of the explosive impact that his public comments could have in both political and economic circles. He never criticized specific Republican or Democratic politicians while he was at the Federal Reserve, even when he was under attack from one side or the other.

But in the interview, Mr. Greenspan seemed dismayed that leaders in his own party paid little heed to his pleas for spending restraint and for “pay-as-you-go” rules that would require Congress to offset the cost of new tax cuts with savings elsewhere. He repeated the conclusion about the Republicans’ loss of Congressional control in the 2006 elections: “They deserved to lose.”

Mr. Greenspan also spelled out his own views about the war in Iraq: he supported the invasion, he says, not because Saddam Hussein might have had weapons of mass destruction, but because Saddam had shown a clear desire to capture the Middle East’s oil fields.

“I supported taking out Saddam, because he was moving inexorably toward taking the world’s oil resources,” he said. “Iraq was a far greater threat than Iran to the world scene.”

But Mr. Greenspan also seemed intent on protecting his reputation in history about a debacle that is a focus of his successors at the Federal Reserve: the housing bubble that peaked while he was chairman of the Fed and the bust that now threatens to tip the overall economy into a recession.

Though he says little about the issue in his book, “The Age of Turbulence: Adventures in a New World,” (Penguin Press, $35) Mr. Greenspan sought to staunchly refute charges that he contributed to the housing bubble by cutting interest rates from 2001 until 2004 and by making little effort to regulate the explosion of risky new mortgages.

On Tuesday, after a month of almost unremitting turmoil in financial markets, Ben S. Bernanke, Mr. Greenspan’s successor as Fed chairman, will preside over a crucial Fed policy meeting to decide whether and how much to lower interest rates in order to prevent a broader economic downturn.

Mr. Greenspan, 81, acknowledged that the housing frenzy had been pumped up in part because of very low interest rates and in part because of the growing willingness of mortgage lenders to underwrite dubious and often fraudulent loans that were much bigger than many borrowers could realistically afford.

But he said it was a mistake to blame the Fed, which needed to reduce interest rates in order to fend off the recession of 2001 and what many economists thought was a real risk of the kind of “deflation,” an across-the-board drop in consumer prices, that had plagued Japan.

John B. Taylor, a professor of economics at Stanford University and a former under secretary of the Treasury under President Bush, recently argued that the Fed’s rate cuts after 2001 appeared to have exaggerated both the housing boom and bust.

“There has been a bit of historical revisionism going on,” Mr. Greenspan grumbled. The real force behind soaring real estate prices, he said, was a global one: a drop in worldwide inflation and interest rates, in part because of the end of the Cold War and the rise of China as a manufacturing colossus.

“The housing boom is not an American phenomenon — it’s a worldwide phenomenon,” Mr. Greenspan said. “The evidence is quite overwhelming that what we are going through is a consequence of the fall of the Soviet Union and the shift of a billion workers from central planning in to the labor market.”

The United States was only one of 40 countries that experience a housing boom after 2000, he said, and all of the booms were driven in part by low interest rates.

“If you line up all the major developed countries and all the developing countries, leaving out the Zimbabwes, inflation rates were all in single digits. This is utterly unprecedented, there is no history like this. And the consequence was a fairly dramatic decline in real interest rates, which created dramatic housing price increases around the world.”

David E. Sanger contributed reporting.

AG bubble

http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html


US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.

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But Mr Greenspan said that his successors at the Fed – who meet on Tuesday to set interest rates – would have to be careful not to ease rates too aggressively, because the risk of an “inflationary resurgence” was greater now than when he was Fed chief.

Mr Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.

Fed expected to cut rates

The US Federal Reserve is expected to ease monetary policy this week, with its main interest rate expected to be cut by up to half a point on Tuesday. Economists differ about whether the US Fed Funds rate will be cut by 0.25 per cent or 0.5 per cent from the current rate of 5.25 per cent. The Bank of Japan is likely to keep rates on hold at 0.5 per cent on Wednesday.

In the US, the regulator for US government-backed mortgage lenders Fannie Mae and Freddie Mac said rescue loans were not being arranged quickly enough for homeowners facing foreclosure.

European Union finance ministers and central bankers also agreed on a set of principles for bailing out crossborder financial institutions, in the wake of the Bank of England’s rescue of UK mortgage lender Northern Rock last week.

Mr Greenspan said house prices were probably already down about 2-3 per cent from their peak on a national level.

However, he cautioned that it was very difficult to predict how large the ultimate decline would be.

As Fed chairman, Mr Greenspan had talked about “froth” in the housing sector, but never said there was a bubble in the market as a whole. His successor Ben Bernanke has also avoided the word “bubble”.

But Mr Greenspan told the FT that froth “was a euphemism for a bubble”.

He said he still thought froth – a collection of bubbles – was a better description, because of the variation in house price appreciation in different local housing markets. But he said “all the froth bubbles add up to an aggregate bubble”.

The former Fed chairman said the current turmoil in financial markets was “an accident waiting to happen”.

He said the price of risk had fallen to unsustainably low levels beforehand, with investors addicted to asset-backed securities that offered some additional yield over Treasury bonds as if they were “cocaine”. Mr Greenspan said this demand induced the big increase in the origination of subprime mortgages by mortgage brokers.

The rise in defaults on subprime mortgages was only the trigger that set off a broad re-evaluation of risk, he argued.

Mr Greenspan said the off-balance sheet investment vehicles that issued much of the asset-backed commercial paper represented a “savings and loans disaster waiting to happen” because of the mismatch between their assets and liabilities. Mr Greenspan thought the issuance of asset-backed commercial paper ”is probably not going to get back to where it was.”

They had “five-year maturity assets financed with 30-day commercial paper”, he said.

The former Fed chairman said collateralised debt obligations – securities that slice up and repackage loans to meet the risk-appetite of different investors – “will never get back to the levels and structures that they were, because now everybody knows you cannot price them”.

He added that in an innovative financial market “there will always be products that fail”.

However, he said he believed that credit default swaps were “here to stay” and had demonstrated their capacity to diversify risk.

Mr Greenspan said the flexibility of the US economy would help it cope with the spillovers from the financial crisis, but said the prospect of a negative wealth effect from housing meant this crisis was “trickier” to manage than financial crises that did not directly touch consumers.

In his memoirs, Mr Greenspan, a lifelong Republican, criticises his party for abandoning its small-government principles, and warns that the trade-off between inflation and growth is likely to worsen.

Copyright The Financial Times Limited 2007

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http://www.newsreview.info/article/20070916/NEWS/109160054


Eric Pickle and his wife, Misty, dream of moving farther to the west side of their West Harvard Avenue neighborhood.

But to make the jump with their four kids from West Rainbow Street to a larger house on West Broccoli Street, they have to sell their current home first. And attracting buyers has proven a difficult challenge these past six months amid a stagnant real estate market.

"Unfortunately, I missed the boom," Pickle said.

In fact, the 34-year-old sales manager at Roseburg Auto Center may have waited about 18 months too long to put his 1,900-square-foot home up for sale.

According to the Regional Multiple Listing Service, houses for sale in Douglas County in July 2005 outnumbered closed sales by a ratio of only 3 to 1.

Two years later the ratio had jumped to 12.7 to 1.

The inflated inventory reflects a lull in home sales, keeping houses like the Pickles' on the market longer than expected.



NATIONAL TREND

The downturn is also occurring nationwide. It has been linked to rising interest rates, and subprime lending practices in which risky mortgages were extended to less credit-worthy buyers who later defaulted on their loans.

Credit has since tightened, making it tougher for prospective buyers to obtain loans, and thus decreasing the available pool of buyers.

"It's a pretty big deal that sales aren't as brisk," said Diana Woodward, president-elect of the Douglas County Board of Realtors and a real estate agent with All State Real Estate.

But there's a positive side to the glut of homes on the market, Woodward said. Real estate has become a buyer's market and sellers are more inclined to lower prices in order to unload their homes.

"The banks are just tightening up," Woodward said, adding, "it's not time to panic."

Pickle, who originally listed his home for sale at $237,000, has since dropped it to $197,000.

He paid $105,000 six years ago for the four-bedroom, two-bath house on Rainbow Street. Since then he's spent $30,000 in upgrades, mainly in the kitchen and bathrooms, and expected to turn a nice profit when he initially put it up for sale.

When the Pickles put their house on the market, many homes in the area were listed at prices comparable to 2005 closing prices. So they compared their home to the market and set a price.

"We were able to look at our home and say, 'We could make this such-and-such profit,'" he said.

It didn't stay at its original listing for long. Two weeks later, the Pickles slashed $18,000 from the asking price.

They cut another $10,000 a month later. Not until they dropped the price below $200,000 did interested buyers come by to take a serious look.

Pickle said the home's appraisal two years ago was $198,000. And that was before the upgrades.

"It was a starter home. I was thinking how I can get in the market and make a profit on a home," he said. "That's the whole idea."

There are currently 1,283 homes for sale in the county, more than double the 572 homes for sale in September 2005, according to Natalie Middleton, a spokeswoman for RMLS.

The saturation, however, has not stemmed a rise in prices. In July 2006, the median sale price for a home was $182,000. This past July the median sale price was $207,000.

"Really, I think the prices are too high. Prices need to come down," Woodward said.

Unable to explain the inflation, Woodward said many sellers are forcing potential homebuyers to consider their odds and wait for prices to fall.

Statistics on the amount of time homes are staying on the market would seem to support Woodward's perception. In July 2006, a home would stay on the market for about 85 days. This past July homes were on the market an average of 103 days before being sold, according to RMLS data.

The majority of homes currently pending sale in the county are priced around $225,000 or less, Woodward said. Newly built homes, however, are largely hovering at $400,000 or more and are not in high demand.

"Two years ago you could buy a ranch for that," she said.



TOUGH SELL

The Pickles, who are now on their own, had a contract with a real estate agent which ended Sept. 1.

Pickle said he and his wife are constantly picking up after their kids and cleaning the house to make it more appealing to homebuyers. They've followed their former real estate agent's advice and keep personal pictures and other effects out of view, but since deciding to go it alone, they have also added the stress of fielding every inquiry about the house.

"There's no relaxing at home now," he said.

Riddle resident Fred Williams is no stranger to the demands of trying to sell a home. The 81-year-old put his 12 acres of property, including a two-bedroom, single-wide trailer with housing added, on the market in August 2006. His asking price at the time was $299,000.

After several re-pricings Williams is now holding firm at $219,000, and is anxious to sell the property.

"It's too much for me to take care of," he said. "I thought it would sell before this. It's beautiful up here, secluded and quiet."

Williams purchased his spread on Shoestring Road in 1973. He has since planted more than 5,000 Douglas firs, an orchard with pears, plums, walnuts, apples and peaches, and a large garden with nearly every vegetable that grows under the sun.

Williams has also cleared a landing at the back of his property atop a hill for a future new home. However, the land has so far failed to attract a buyer who can also afford to build a new home.

"Basically, they have to have money," said Williams' real estate agent, Brenda Major of Century 21.

With a two-acre pasture, Williams said the property is perfect for a homeowner who also wants horses and cows, including a peacock, which has also lived for years on the land.

"Pretty Boy goes with it," he said.

CA VCS

Ventura County

Anyone wondering just how many Ventura County properties are being lost in the battered real estate market need only look at the foreclosure sales from the first half of 2007.

With 548 tallied through the second quarter, foreclosure sales have increased 784 percent compared with 62 in the first half of 2006.

It was the largest upswing among seven counties in the Southland region. Santa Barbara County's foreclosure sales rose 768 percent and Los Angeles County's jumped 675 percent.

The data, mined from the counties' recording offices by the Real Estate Research Council at California State Polytechnic University in Pomona, tracks the transfer of real property, commercial and residential.

The primary cause of the leap in foreclosure sales is the lax lending that went on in 2005 and 2006, said Michael Carney, executive director of the council.

"Lenders were apparently shoveling the money out the door," he said, adding that there were lots of dollars floating around when lenders were experiencing extremely high liquidity.

Another cause is that home prices leveled off and started to fall. "A lot of people are forgetting this," Carney said.

Borrowers and lenders made decisions assuming prices would continue to rise, he added, but that was a faulty assumption.

That's what Bob Majorino saw happen from his seat at the helm of Prudential California Realty in Ventura County.

Buyers only saw the bright side and did not plan ahead, he said, comparing the behavior to an ocean liner that hasn't prepared for a turn.

"A lot of buyers were trapped in the turnaround period," he said.

"As the market transitioned they kept buying. Unfortunately, the appreciation stopped so the cushion they thought they had was gone."

Foreclosure is the last step in a long process that most property owners are able to avoid. In the second quarter this year, roughly half, 54.6 percent, of the California homeowners in default emerged from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owed, according to DataQuick Information Systems, a real estate tracking service. For the same period in 2006, it was 88 percent.

Early this week, Majorino took a team of Prudential employees out to tour the Oxnard properties that have been foreclosed upon.

"Looking around, I have to mentally adjust because I don't see this every day," he said of the change in prices.

"For 50 years," he said, "Ventura County has proven to be so resilient that it not only recovers from every downturn in the market but grows to new heights even further every time that happens.

"So the bottom line is, if you don't need to follow the pack and run scared, now is the time to get out there and shop. Find a nice home and hold it, and four to five years from now you'll be very happy you did."

WSJ mcmansions

Wall Street Journal

The McMansion may be shrinking.

With the nation's housing market in a slump and the mortgage market in disarray, many home builders are putting up fewer supersize homes and offering smaller floor plans. That seems to be what buyers suddenly want in an era of high prices and tougher financing.

"Financing has tightened down so much that many people aren't able to qualify for the larger houses," said Kathryn Boyce, an account executive in Northern California for Boston-based real-estate research firm Hanley Wood Market Intelligence. "Throughout the U.S. people can't afford what they previously did. Floor plans are going to get smaller."

Home sales have plunged over the past year, leaving builders saddled with excess inventory, especially of larger, more expensive homes. In July, new-home sales were running at a seasonally adjusted annual rate of 870,000 units, down sharply from 1.3 million in 2005.
[Small Home]

More recently, turmoil in the mortgage market has made it harder for buyers to qualify for bigger loans. As lending standards get stiffer, lenders have cut back on mortgages exceeding $417,000. That's the maximum size loan that lenders can sell to Fannie Mae and Freddie Mac, the government-sponsored financiers that buy mortgages from lenders and repackage them into mortgage bonds for sale to investors.

All this is causing builders to redraw their blueprints. After reducing prices on their current inventories of unsold homes, the next step is to "start building to a new market. That new market is a lower price point at a smaller size. To the extent they can do it, they will," said Kermit Baker, chief economist at the American Institute of Architects.

Over the past three decades, prosperity and a demand for space to accommodate home theaters, offices, gyms and palatial kitchens has pushed up the average size of newly constructed single-family homes by nearly 45% even as the size of the average family has declined. Last year, according to the Census Bureau, the median size of a newly completed single-family home reached 2,248 square feet, up from 1,560 square feet in 1974.

The expansion continued into the first quarter of this year, with the median home size inching up to a near-record 2,302 square feet. But it slipped to 2,241 square feet in the second quarter, and many analysts think a broader decline may be in the offing.

Jeffrey Mezger, chief executive of Los Angeles-based KB Home, said the change has been "driven by data on what our home buyers want and what they can afford in a new home." Mr. Mezger estimates that the average size of a newly built KB Home today is 2,200 square feet, 200 square feet less than before the shift in sentiment took hold.

A spokesman for Centex Corp., which is based in Dallas, said that in some of its developments Centex is scaling down the size of its homes or their amenities to put them within reach of more buyers.

Even Toll Brothers Inc., known for its sprawling suburban "McMansions," recognizes that buyers may want smaller homes. Kira McCarron, the company's chief marketing officer, said Toll doesn't track home size, but she concedes that there "probably is more demand for 3,000- versus 6,000-square-foot," homes.

Ms. McCarron added, however, that for Toll's high-end buyers, the issue isn't so much cost. "It's not that people don't want or can't afford [big houses]. It's that they're afraid of them now -- it's a confidence issue more than an affordability issue."

In some cases, home builders are making the shift to smaller, less costly homes in existing subdivisions, angering homeowners who bought large homes during an earlier stage of the project's development.

David Raidman, 37 years old, moved into his 2,760-square-foot lake-front home in Fort Pierce, Fla., last fall in the first phase of a gated community developed by Lennar Corp. of Miami. Mr. Raidman said he was told that his home would be surrounded by similarly sized and priced homes. But when he heard Lennar was planning to build much smaller homes in his neighborhood, he and other homeowners fought the company's plans.

Although Lennar agreed not to build the smallest of its new models -- at just 1,326 square feet -- next to the larger ones, the home builder has continued with its plans to downsize.

"Our biggest concern is what it would do to the value of our homes," said Mr. Raidman, who doubts he can sell his home today for the $300,000 he paid for it last year. Standing on his back porch, he can look out across the lake and see at least six newer, smaller homes. "The garage looks bigger than the house," he said.

Pulte Homes Inc., based in Bloomfield Hills, Mich., is also offering buyers less costly alternatives within its existing communities. "The base price that we start with when we release a new phase might be lower than what the base price was in the previous phase," Pulte Chief Operating Officer Steve Petruska said in a conference call with investors in July.

Pulte said it expects its average selling price for the third quarter of this year to be $331,000, down from $335,000 last year.

But while home builders are aware that customers increasingly want smaller, cheaper homes -- and in some cases can't afford anything else -- building those homes eats into their profits, often because of the high price they paid for the land the homes are built on. That leaves them having to hope for higher sales volume to offset their reduced margins.

Some welcome the downsizing trend, including author Sarah Susanka. Since 1997 Ms. Susanka has written several best-selling books extolling the virtues of "The Not-So-Big House," and she says she has recently been attracting more interest from home builders. "I used to be asked all the time why would anybody want to downsize? People thought I was crazy," she said. "Now it's becoming much more mainstream."

Local Market Observations

What do you see in your local housing market this weekend? Overbuilding? "In Loudoun County, Va., it seems that everywhere you look, construction crews are still building. But more than 440 foreclosures have been filed at the courthouse in Leesburg so far this year. 'Everywhere you go, there are for sale signs and foreclosure signs,' Jack Baumgartner said. 'People got in over their heads with mortgages they can't afford. It makes you sick.'"

Slower sales? "North Texas home sales continued a downward trend in August, with 10 percent fewer houses changing hands than a year earlier. The drop was even steeper in the condominium market, where sales were off 17 percent. 'Some companies seem to be down significantly, while others are down slightly,' said Jim Fite, president of Dallas-based Century 21 Judge Fite Realtors. 'Same with areas' of the city."

Canceled projects? "A Chicago-area home builder will not proceed with expansion plans for a large condominium development in St. Francis that overlooks Lake Michigan. The move ends Kimball Hill's troubled foray into the Milwaukee area."

Housing related layoffs? "With the housing bubble bursting and new homebuilding in decline, Montana's lumber industry is starting to feel the pinch, according to Charles Keegan, a researcher with the University of Montana."

"After a five-year building frenzy fueled by low interest rates and real estate speculation, the downturn in building is expected to last through next year, Keegan said. 'Construction this year and next year will be considerably below long-term averages,' he said."

"According to Keegan, the high rate of construction, which started around 2001, led to a glut in the market and a nosedive for housing prices nationwide."

"Paced by losses in construction and manufacturing, the world's largest economy shed jobs for the first time in four years last month, according to the U.S. Labour Department. 'A drop of this magnitude has never been observed outside recessions,' National Bank Financial economist Stéfane Marion remarked. 'That is unnerving.'"

"Countrywide Financial Corp., the biggest U.S. mortgage company, plans to cut its workforce by 10,000 to 12,000 in the largest round of firings since the industry's contraction began last year."

"CEO Angelo Mozilo said in an interview he has 'no regrets' about adding staff in recent years. 'We adjust to the environment we're in,' he said. 'It was impossible to anticipate the credit crisis we've seen on a worldwide basis.'"

Lending changes? "Citigroup Inc., the largest U.S. bank, curtailed lending to mortgage companies, according to two people with knowledge of the decision. The bank's First Collateral Services unit won't accept new clients for 'warehouse' credit lines, which provide cash to mortgage banks so they can fund home purchases and refinancings, the people said."

A letter to the editor? "In all of the articles regarding the mortgage mess I have yet to see some part of the blame directed to Congress for changing the capital gains provisions of the tax code in 1997, which in part contributed to the current problem."

"Lenders were now free to design loan programs tuned to a 2-to-5 year turnover with a minimum of monthly payments and expecting that the property would be sold at a windfall profit. As a result, housing prices rose, therefore the price of raw land rose for developers, and the spiral began."

"I am a Real Estate broker, have been since 1975. I've been through up markets and down markets for a long time. Consumers of bad loans should bear the action of their greed. All of them knew they were buying homes they really could not afford. And they all thought they could sell the property for much more than they paid for it in a short period of time. They need to accept responsibility for their own actions."

The Housing Boom Has Run Its Course

The Daily News reports from Florida. "Foreclosures are at a record high across the county, and you’re looking to snag a deal. The first step? Proceed slowly and carefully, said Okaloosa County Clerk of Courts Don Howard. 'Anytime you’re buying foreclosed property, there is some risk involved,' Howard said. 'The availability of foreclosures is much more simply because the filings are up. Considering the falling prices, it might not be a bad time to look.'"

"Some real estate agents say it makes more sense to concentrate on the current market, which has started to correct itself. 'I’d much rather be buying today than two or three years ago,' said Jim Gilliland, a veteran Realtor on the Emerald Coast. 'Prices are much lower.'"

The Palm Beach Post. "Foreclosure filings in the Treasure Coast more than tripled in August as the worst housing slump in 16 years continued to send shock waves through local households amid more evidence that severe economic problems could be on the horizon."

"In Palm Beach County, lenders foreclosed on 1,210 homeowners last month, compared with 435 in August 2006, according to the county clerk's office."

"'Owners of condos who speculated pre-construction are trying to dump them at their sales price,' said real estate lawyer John Pankauski in West Palm Beach. 'Investors will have to realize that to get rid of their condos — and to stop paying real estate taxes and maintenance fees - they will have to take a hit.'"

"Buyers have dried up, however, because of tougher credit practices and 'the fact that the housing boom has run its course,' he said."

The Belleair Bee. "Mayor John A. Robertson has reiterated his claims that short term rentals in the town are 'really a disaster.' The town began prosecution of the owners of three beachfront homes last month, when he described neighbors complaining of debris littering the beach in front of those homes, noisy parties with cars parked indiscriminately and crowded beaches."

"Robertson said, the property owners have continued to advertise their homes for rent. He said this appeared to be a snub of the town’s warnings. Rhonda Hogan of Hillsborough County, who owns two of the houses in question, allegedly has told Robertson that she must rent the houses until they are sold to avoid bank foreclosures."

The News Journal. "Palm Coast resident Al Mascolo said he has spent 80 to 90 hours each week for the last few months finishing the construction of his new home. But it isn't because he wanted to do the house himself. He says the builder left him no choice."

"'This is costing me a lot of money,' Mascolo said."

"Homebuyers like Anthony Rappa say Canterbury Estates Homes's owners, Herbert Heron and Noel Richardson, didn't pay the subcontractors who worked on their homes. But the company has left them scrambling to pay the people doing the work."

"Ron Paulsen, owner of R&R Drywall (said he) didn't get paid and placed liens against the homes. 'Where's all the money going if they're not paying their bills with it?' Natalie Krassner said last month when some of the affected customers gathered together to swap Canterbury experiences."

"In an interview Thursday night, Richardson and Heron denied any intentional wrongdoing. They blame recent complaints against their company on the soft real estate market and sudden increases in material and overhead costs during the previous hot housing market."

"They said their company has been hit with deficits in the tens of thousands on many of their contracted homes because they didn't have the heart to reduce the quality of their work or pass the increased costs along to the customer. 'Maybe that's where we went wrong,' Heron said."

"Enrollment in Volusia public schools is down about 1,100 students from a year ago, meaning some teachers could lose their jobs and others will have to switch schools."

"This is the first time Volusia school enrollment has declined in 25 years. Volusia officials don't know why enrollment declined, but Superintendent Margaret Smith said they've heard some parents are moving away because of the slumping economy."

"'We've had some parents report to us they're involved in mortgage foreclosures,' she said, also pointing to some state reports indicating more people are moving out of Florida these days than coming in, especially if they work construction jobs."

The St Petersburg Times. "This week was supposed to climax Trump Tower Tampa's two-year pursuit of financing. Area developer SimDag LLC promised either to seal a deal to build the $300-million luxury high-rise or concede defeat and refund buyers' deposits on condominiums costing up to $6-million."

"But as the work week drew to a close Friday, the project found itself in familiar territory: limbo."

"Buyers, who placed deposits of 20 percent on units costing from $700,000 to $6-million, had been told to expect a decisive turn of events by Wednesday. By Friday, it appeared they had been left hanging. 'They've e-mailed us nothing new,' George Galiourides, one of the condo buyers, said Friday."

"Banks have steered clear of financing the project in the slumping housing market. According to Trump's lawsuit in May, fewer than 70 percent of the 190 units had 'bona-fide purchase contracts.' Several buyers have sued to get their money back."

The News Press. "A Charlotte County golf course that had become popular with Cape Coral golfers closed this week. A few golfers had parked Friday near the almost-deserted Tern Bay course, where Tom Cavanaugh of Sarasota-based Double Bogey Transport loaded up golf carts that were headed for Cart Guys in Punta Gorda. 'This joint’s closed,' Cavanaugh said."

"The course at Tern Bay seems to be another victim of the current housing market in Southwest Florida. 'The project is not dead,' said Geri Waksler, who represents the developer on land-use issues. 'The market is dead.'"

"Waksler said Tern Bay would remain dormant until the housing market rebounds. 'As recently as a couple of weeks ago, they were still working on permitting for the project,' Waksler said. 'The only thing that is not happening is a function of the market — houses are not coming out of the ground.'"

"Fourteen homeowners live in Tern Bay, which was planned to have 1,800 homes. Twenty coach homes and 15 single-family homes are either waiting to be sold or are under construction, according to Lennar Corporation, the project’s builder. But a Lennar spokesman said the company has no plans to continue building."

"Waksler said she represents other developments in the area experiencing the same problem, but she declined to name them."

AZ family buckeye

AZ Family


Our country's housing slump is affecting communities of all kinds, including those once considered up and coming.

Not long ago, Buckeye was considered one of the fastest growing communities in the state.

Just a few years ago, housing permits were going through the roof and many speculated that Buckeye could soon pass up Mesa when it came to the number of homes.

Well, a lot of those homes in Buckeye were built, but that doesn't mean people are living in them.

Ricardo Galindo has seen a lot of his Buckeye neighbors come and go in the past few years.

"This one has been for sale three times already and the one next door and the one over there twice," Galindo said.

But the ones for sale on Galindo's block just aren't selling and as lifelong resident and Buckeye Realtor Brenda Bruehl will tell you, many of the homes are vacant.

"There's a lot of investors that bought and couldn't get them rented out so it's been sitting vacant," Bruehl.

According to the Arizona Multiple Listing Service, also known as MLS, there are 708 houses for sale in Buckeye and 241 of those are sitting vacant. That's more than a third.

"I remember when there was only 500 homes in Buckeye," Bruehl said. "Seven hundred and eight active is a lot."

According to data compiled by the research group that tracks foreclosures in Maricopa County, there were 453 foreclosure filings alone in the town of Buckeye this year.

That means Buckeye makes up 10 percent of foreclosures right now compared to the rest of Maricopa County.

For Bruehl, who grew up and makes her living in Buckeye, those numbers are disturbing but not discouraging.

"I think we're going to be OK," she said. "We're going to ride it out."

And as for Galindo and his neighborhood, that number could mean those for sale signs will stay up a little longer.

I don't want folks to think I'm picking on Buckeye. I'm not. But it does give you an idea how all of these foreclosures are affecting communities here in the Valley and Buckeye is just an example of the big picture.