By Emily Friedlander and Lauren Baier Kim
Home builders down, have more to fall
Stocks for the largest U.S. home builders have dropped 65% since the beginning of this year, but home builders may have more to fall before they hit bottom, says Business Week. The magazine's Web site includes a slideshow of "America's Most Battered Home Builders," with Technical Olympic USA of Hollywood, Fla., showing the worst hit and posting a yearly return of -84.2%. Across the U.S., builders have been offering drastic price cuts of as much as $100,000 on a new home, Business Week says. Builders are likely to feel more pain next year when adjustable-rate mortgages are due to reset, which could push the number of U.S. foreclosures higher and hurt sales of newly built homes, the publication says.
Sub-prime standards haven't changed
The sub-prime loans backing mortgage bonds created early this year are going bad even faster than those issued in early 2006, a year that set a record for delinquencies on such loans, according to two new studies reported in the L.A. Times.
"It really is astonishing," says the author of one of the studies. "It's as if the lessons of the past two years were ignored in early 2007."
Lender may lose from failed condo deals
A few years ago, when the housing market was still hot, Corus Bankshares began financing condo projects in several locations across the U.S. Today, as many buyers of units in those projects aim to avoid closing on their purchases (many were speculators who had hoped to flip their properties), the lender may be forced take a big hit on its loans -- developers owe Corus $4 billion, 92% ($3.7 billion) of which are for condominiums, says the New York Times. Of the condo projects Corus financed, approximately 25% are in the Miami area and 9% are in Las Vegas, the Times says. This year, with the number of condos completed expected to rise 45% and with condo sales down (sales fell 12% through August of this year), other banks may find themselves in a similar predicament, the Times says. About 15% of all banks' loans are to construction, the publication says.
Bubble bloggers burst on scene
A few years ago, “bubble bloggers” who were predicting doom and gloom in the housing market, like Patrick Killelea, of Reality Parser, were largely overlooked and not taken seriously, reports the San Francisco Chronicle. But now that the housing market has taken a turn for the worse, these blogs are getting more attention, the article says.
There are scores of such blogs out there, including thehousingbubbleblog.com, housingdoom.com and bubblemeter.blogspot.com. Such bloggers are often distrustful of most anyone in the real-estate industry or related sectors and aren’t afraid to say it.
For instance, in his blog, Mr. Killelea writes: “Who disagrees that house prices will continue to fall? Real-estate related businesses disagree, because they don’t make money if buyers do not buy. These businesses have a large financial interest in misleading the public about the foolishness of buying a house now.”
Refinancing Gets ‘Freakish’ in Bay Area
Homeowners are struggling to refinance their homes in the East Bay Area, according to this article in the Contra Costa Times, which reports on that region of Northern California. The story says that many of these homeowners have incomes of $150,000 and more.
“Getting a loan is no longer a go-ahead no-brainer,” says one agent. “It’s a freakish set of circumstances.”
Bay Area home prices have finally ground to a halt, the piece says. From 2000 to 2005 median home prices rose an average of 11.5%. But last year they rose just 0.5%.
-- Ms. Kim is a senior editor at RealEstateJournal.com.