The good:

The Morning Call in Pennsylvania, April 2005: “It might be reasonable to suppose that they aren’t individual bubbles but rather one mega-bubble, the totality of the economic and financial world we live in. Some Wall Street veterans say the global bond and mortgage markets may constitute the scariest bubble of all, as investors and lenders have fallen over themselves to extend credit to companies and individuals at generously low rates of interest.”

“But true bubbles on the scale of dot-coms in the late 1990s, or Japanese stocks in 1988-89, or tulip bulbs in 1636-40, are relative rarities.”

“Jeremy Grantham said: The Federal Reserve, by cutting interest rates to generational lows in recent years, inflated a new crop of financial market bubbles by giving investors the wherewithal to aggressively bid up the values of bonds, real estate and (once again) stocks, he said. That’s what easy money will do, and that’s what it did.”

May 2005. “Average local home prices shot up 12 percent in the first three months of the year, proof that the predicted cooling of the real estate market hasn’t arrived. That 12 percent uptick is ahead of the solid growth the region saw in the same period last year, when prices for existing homes rose 9 percent.”

“Housing prices are rising faster than Lehigh Valley residents’ wages, largely because of a steady influx of new homebuyers with higher incomes from costlier areas such as New York and New Jersey. ‘What we see is the local people not being able to make the move,’ said Sam Ruta, of Coldwell Banker. Ruta said he held an open house last fall for a home that ultimately sold for $250,000. Nearly all the people who attended the open house hailed from New York and New Jersey. But one Lehigh Valley man came with his young son. ‘He looked around and said ‘I can’t afford this house and I am from Palmer Township.’”

The Philadelphia Inquirer, March 2005: “For high-rate subprime loans..11.94 percent foreclosed each year..Two of every five mortgages made in Philadelphia by high-interest “subprime” lenders in 1998 and 1999 had resulted in defaults and foreclosures by 2003.”

“Traditionally, the fear of losses kept banks from lending to people with bad credit. Since big banks have cut back on mortgage loans..Wall Street investors have stepped in, there is less risk for loan originators and brokers, because loans are quickly sold to other investors.”

From Philly.com, April 2005: “American Business Financial Services Inc., a leading subprime lender announced, “it was abandoning its bid to resume operations under U.S. Bankruptcy Court protection and would lay off its 820 employees.”

“The company’s demise should bring a speedier resolution for the mostly elderly investors who bought unsecured investment notes from the company through newspaper advertisements. They are now owed $622 million. But note holders are expected to recover only pennies on the dollar.”

From DelmarvaNow, May 2005: “‘A concern has been [that] commercial usages, restaurants and the like , have been replaced with condo projects,’ said Mayor James N. Mathias Jr.”

“Geoffrey Robbins, a dentist would have kept Atlantic Cosmetic and Family Dentistry in Ocean City, but when he was ready to expand, he couldn’t afford to buy additional land for parking. So he moved his practice to West Ocean City in January. ‘You can’t pay a million dollars for a parking lot,’ Robbins said. ‘We were faced with either staying where we were and not doing what we had wanted to do’ or moving out of town.”

“Norman Gilden said, ‘With land and property, what is the worst thing you’ll have to do? You’ll have to sell it, and you’re not going to sell it for a loss.’”

“Most consumers are aware of the record building activity in recent years from Lewes to Fenwick Island. “‘It grew so fast, it just blew up,’ said Kitty Harmon, manager of the Coffee Mill in Rehoboth Beach. ‘Every day, I ride up and down [Del. 1], and if I blink I miss a new condo. Prices are going to come down.’”

The Baltimore Sun, March 2005: “The city has a love-hate relationship with investors, though. Speculation during the real estate boom of the 1980s - particularly from out-of-town buyers who thought anything cheap was a deal - helped push the city into a real estate slump from which it only recently recovered.”

“Low-income residents making their first foray out of renting were victimized. So were other investors, people hoping to be landlords. But Baltimore officials say it’s different now.”

The Washington Post, May 2005: “At issue is the fast-growing market for home equity lending, which rose to $881 billion at the end of 2004 from $492 billion at the end of 2000, up 79 percent. Overall mortgage indebtedness nationwide climbed 57 percent, to $7.54 trillion at the end of 2004 from $4.8 trillion at the end of 2000.”

“Veteran banking consultant Bert Ely said the warning comes at a time when a growing number of industry observers think the real estate price appreciation bubble ‘can’t expand further.’ He added that whenever home prices rise for a long time, ’some lenders go overboard.’”

“Some lenders do not see a looming problem.’As long as the housing bubble doesn’t burst, home equity lines should remain strong and remain safe,’ said Scott Stern, chief executive of Lenders One.”

“The government warning was issued on the same day that the National Association of Realtors called for increased consumer education on the dangers of what the trade group called ‘toxic’ loans with predatory terms that hurt homeowners’. The group said that banking regulators were doing little to protect homeowners. ‘Consumers are also at risk, and the possibility exists that they could lose their homes’ to foreclosure, said JoAnne Poole, president of the Maryland Association of Realtors.”

April 2005: “‘In Real Estate Fever, More Signs of Sickness,’ in the Washington post. “Jennifer Tyler isn’t worried. She just took out a 10-year, interest-only loan to keep the monthly payments affordable. ‘Anything can happen in 10 years, I can move, I can re-finance. Anyway, the house will almost certainly appreciate, too.’”

The bad:

The Loudoun Times Mirror, April 2005: “Three years ago Greg and Jessica Furr paid $230,000 for a single-family home. They recently sold it for $445,000, pocketing a $215,000 profit. The Furrs and their two young children moved into a new, four-bedroom, brick-and-vinyl-sided home. The couple bought the place for the pre-construction price of $380,000.”

“We plan on selling this in two or three years..They say we’ll get $750,000. It’s hard to believe. To make 80 or 100 grand on a house is one thing. To double the value is kind of absolutely mind-boggling.”

“Mr. Furr (is) a 34-year-old general superintendent for a City of Fairfax-based concrete company. Mrs. Furr has since returned to work as a loan officer for a mortgage company. The couple also has a place on the Northern Neck, where they spend most weekends.”

The Washington Post, May 2005: “Tom Regnell has refinanced five times since he bought his house. When he refinanced this last time, he finally took out some cash; enough to buy a piece of property near the Homestead resort and start building a second home.”

“Ileann Jimenez-Sepulveda and her husband bought four years ago. They used their growing equity to buy another house three blocks away and renovate it to sell it. Then they bought a house in South America, and soon they’ll close on a large single-family home in the upscale Crestwood neighborhood. In the meantime, Jimenez-Sepulveda, who had worked in the high-tech industry, quit her job to join her husband in the real estate business; he’s a loan broker, she became an agent. Now they encourage their clients to use the equity in their homes to buy investment properties.”

“‘It’s very easy, it’s very tangible for people to understand because they see their neighbors doing it; taking the money out, buying something else, or investing in starting a restaurant,’ she said. ‘It’s exciting to see people recognizing it and running with it.’ She argues that real estate assets are bound to increase in value over the years.”

“Nick Koufos, an attorney for the SEC, is 36 and has three children. He recently did a cash-out refinance on his Silver Spring home to build a house in Pennsylvania, to which he plans to retire someday. ‘I think it’s better to get it done sooner rather than later,’ he said. ‘I don’t see how I could lose money.’”

“‘Certainly as things retreat, you’ll have some households that find themselves with two sets of loans, one on their equity line and one on their primary residence, as well as their new property investment, and that could be a lot,’ said David A. Lereah of the National Realtors Assoc.. ‘Certainly we’re in a new world today.’”

Other market observers, May 2005: “It feels as if Playboy’s Playmate of the Month for May is speaking for the entire country. Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing. In the magazine’s May issue, Westenhiser poses, leaning on a computer desk next to a stack of books with titles including ‘All About Escrow’ and ‘Real Estate Principles.’ In her playmate data sheet, she writes that her ambition in life is to have a ’successful career in real estate.’”

“‘Everybody can’t sell all together,’ economist John Silvia said. ‘Somebody has to be buying. There’s absolutely a chance that a whole bunch of people will try to sell at the same time. The game can change very, very quickly.’”

”I’d want to sell while it’s still a seller’s market,’ said Kitty Bernard, an agent in Reston who has teamed up with several colleagues to invest. ‘I wouldn’t want to wait until it reverted completely to a buyer’s market.’”

“Laurie Kelly, whose North Raleigh house is on the market for $430,000, is optimistic that the new credit will help her both sell her house and buy one in Virginia. Kelly’s husband recently started a new job in Washington, and the family’s house has been for sale since the summer. The Triangle housing market has a glut of houses priced above $400,000.”

“‘We have a beautiful home,’ she said. ‘We just have so much other beautiful competition.’”

“In Washoe County, strong activity at the lower end of the market has helped area home sales consistently beat last year’s numbers each month. Many attribute the sales pick up for entry-level homes to the tax credit, including some folks who admit to normally being leery about such federal programs. ‘I don’t necessarily agree with (the tax credit),’ said Ken Wiseman, broker-owner of Reno Rancho Realty. ‘But I must admit that it’s been very important for us here.’”

“‘I don’t think the market would be able to function on a normal scale without it. The whole market is essentially being propped up by the tax credit.’”

“Congress delivered an early Christmas present to the real-estate industry yesterday. Local real estate agents said the congressional action could lead to a busier-than-normal winter for home sales in Massachusetts. ‘I know it sounds self-serving, but I truly see this as a great stimulus (for the economy),’ said Gary Rogers, president of the Massachusetts Association of Realtors.”

“Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies, said the nation’s housing market is now on ‘government life support,’ so it’s important that the credit program was extended until next spring. But he said that, sooner or later, the housing market has to stand on its own two feet.”

“‘Tax credits borrow demand from the future,’ he said. ‘At some point, the government has to exit the subsidies business.’”

“Not everyone likes the idea of new tax credits for housing, including University of Wisconsin-Madison economics professor Morris Davis. He said home prices were stabilizing without further intervention and that extending the first-time buyer credit will cost the government more money and only move up home sales that would have taken place anyway over time.”

“‘There’s just a fixed pool of potential first-time homebuyers. So that means if you incent them to buy today, they are not going to be available to buy tomorrow,’ said Davis, whose specialty is real estate and urban land economics. ‘It’s basically the homeowner equivalent of ‘cash for clunkers.’”

“Becky Bowles, president of the Palm Springs Regional Association of Realtors, said it was fabulous that Congress extended the credit opportunities. ‘The credit makes a big difference to first-time homebuyers with limited funds available,’ she said, citing a recent survey from the California Association of Realtors that said 39 percent of those buyers would not be in a home in 2009 if the credit did not exist.”

“‘I think it’ll make a big difference in the people who are sitting on the fence,’ she said. ‘Everyone has figured out that we’ve reached a bottom, and there are incredible opportunities for buyers.’”

“Patrick Veling, president and founder of Brea-based Real Data Strategies, said the action by Congress holds potential to improve the lot of sellers trying to sell their mid-priced homes. On the other hand, Veling said one could argue that the overall economic strategy of artificially boosting the demand primarily through government insertion into the process is delaying the natural bottoming of the market.”

“‘Time will tell,’ he said.”

“Over the past few weeks, Michael Groendyk has raced against the clock. He’s scrambled to close on a home in Laurel Lakes, hoping to take advantage of an $8,000 federal tax credit. Now, it looks like the credit will be extended until next year. But Groendyk and his wife, Rebecca, who are in the their 20s, didn’t want to take any chances, with the original deadline looming later this month. They are scheduled to close on their new home in North Naples on Friday.”

“The Groendyks recently graduated from Western Kentucky University. They married in December and moved to the Naples area from New Jersey in May. The couple searched for a house for five months. They visited more than 60 and put in four offers before finally getting a contract. Two times they were outbid by other buyers, and another time they walked away in search of a better deal.”

“They are buying a foreclosure. The home has three bedrooms and two bathrooms and they are paying $249,000 — the list price. ‘We were pushing everything as hard as we could to get it closed in November — as soon as possible, really,’ he said. ‘We snuck it in.’”

“It is difficult to generalize about any group because there are always readily identifiable exceptions to the rule. Even so, the old saw about a Democrat seeing a man drowning seventy five feet offshore throws him both ends of a fifty foot rope and hurries off to ‘rescue’ someone else, while a Republican throws him a fifty foot rope and tells him to swim for it, appears to be relatively accurate.”

“What a mess we are in. On one side we have the Republicans who pretty much have a tin ear when it comes to recognizing human suffering and whose general response to someone else raising the issue is ‘get a job you dirty hippie.’ And on the other side are the Democrats who have such acute antennae that they perceive a problem even before it exists and who are institutionally and intellectually incapable of finding an actual workable solution. Not only are they incapable of providing a workable solution, most often their solutions make the problems even worse. ”

“A large part of the current economic downturn is due to the fact that the Congress required financial institutions to lend money to people who had neither the means nor the intention to repay it. Congressional Democrats engaged in years of hand wringing that the nation’s poor were being left behind in the surge of home ownership – the American dream. (It is the moral equivalent about worrying about the fact that fish cannot play the piano – they have no hands and the poor have no money. Sewing gloves on the fish will not work any better than giving loans to those who cannot repay them.)”

“But the Democrats never learn from a ‘failed solution.’ In the name of ‘economic recovery’ the Democrat Congress is right back with the same solution. This time it is the Federal Housing Administration. Committee Chairman Barney Frank of Massachusetts insists that these mortgages are needed to ‘keep prices from falling too fast.’”

“Just as a reminder that is the same Rep. Barney Frank who, along with the Sen. Chris Dodd, buried an investigation into identical lending practices at FannieMae and FreddieMac, declaring them to be sound institutions.”

“Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the US government’s latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market. The initiative also would allow Fannie to keep inventory off already-saturated housing markets, and amounts to a bet the housing market would be stronger one year from now.”

“‘I’m sure Fannie is hoping that when they sell the properties, the values will be higher,’ said David Berson, chief economist for PMI Group, a mortgage insurer. ‘A year from now, we should be a year further into the economic recovery, and housing demand will be stronger.’”

“Japan is drifting towards a dramatic fiscal crisis. For 20 years the world’s second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending - and allowing it to push public debt beyond the point of no return. The rocketing cost of insuring against bankruptcy of the Japanese state is telling us the model has smashed into the buffers. Credit default swaps on five-year Japanese debt have risen from 35 to 63 basis points since September. Japan has decoupled from Germany (21 basis points), the US (22), and even Britain (47).”

“The IMF expects Japan’s gross public debt to reach 218 per cent of gross domestic product this year, 227 per cent next year and 246 per cent by 2014. This has been manageable so far only because Japanese savers have been willing - or coerced - into lending for almost nothing. The yield on 10-year government bonds has been about 1.30 per cent this year. The savings rate has crashed from 15 per cent in 1990 to near 2 per cent, half America’s rate. Japan’s $US1.5 trillion state pension fund (the world’s biggest) has become a net seller of government bonds this year, as it must to meet pay-out obligations. The demographic crunch has hit. The workforce been contracting since 2005.”

“Japan’s terrible errors are by now well known. It failed to jettison its mercantilist export model in time. It resisted the feminist revolution, leading to a baby strike by young women. It acquiesced in a mad investment bubble (like China now) in the 1980s, stealing growth from the future. It wasted its immense fiscal firepower, scattering money for 20 years on half-baked spending projects to keep the economy afloat. The quantitative easing was too little, too late, and this is the lesson for the West.”

“Builder KB Homes falsely inflated appraisals by an average of $30,000 on each of the 20,000 homes it sold nationwide from 2006 through 2008, according to a lawsuit filed in U.S. District Court in Orlando on behalf of a Clermont homebuyer. The lawsuit alleges that the national builder worked exclusively with a Plano, Texas, appraisal company that handpicked appraisers who would ‘play ball’ and base their values on contract prices rather than the actual sales — a practice that helped KB Homes inflate home values at a time when they were actually falling.”

“The buyer who filed suit, Stephanie Sullivan, was unavailable for comment. She and her husband purchased a four-bedroom pool home in Clermont’s Southern Fields subdivision for $421,400 in October 2006. At the time, the house was appraised at $425,000, but a forensic appraisal performed later concluded it had been worth $360,000 at the time of the sale, the lawyer said.”

“Sullivan’s husband lost his job six months after the purchase and they were unable to make payments on the inflated mortgage, forcing them into foreclosure and bankruptcy, according to the lawsuit.”

“Frank Gregoire, former chairman of the Florida Real Estate Appraisal Board, said that, while he had not reviewed the lawsuit, he was aware of it. Some of the issues raised in the complaint were commonplace during the housing boom earlier this decade, the longtime Tampa-area appraiser said.”

“‘It was common practice for builders and subdivision developers to have pet appraisers,’ Gregoire said. ‘That was true not only for subdivisions but also for builders with a subdivision or development — and, in particular, for condo converters.’”

“As promised, federal authorities have amped up criminal mortgage fraud prosecutions. During the last week alone, cases were filed in U.S. District Court in Tampa against at least 11 people accused of lying to lenders and property appraisers to obtain millions in mortgage loans during the property boom that ended last year.”

“”Thirty of the defendants were charged in Tampa. The defendants include mortgage brokers, straw buyers and an unemployed day trader. The FBI sought an arrest warrant for Richard Likane, an unemployed day trader who authorities say had no income but managed to obtain two loans totaling more than $300,000.”

“According to court papers, he lied about his monthly income in obtaining a mortgage of $161,000 for 10808 Dragonwood Drive in Tampa in February 2006, a year in which he actually lost $3,000 trading stocks and had no salary or wages. In March 2007, he obtained a home equity line of credit for $195,000 on a property at 3857 Mariner Drive in St. Petersburg, falsely representing his annual income as $75,000 when it was zero.”

“In January 2008, Likane filed for bankruptcy and testified under oath that he had not been employed since 2000, and had been a day trader of stocks and a house flipper since then.”

“A group of at least 20 disgruntled former Trump Tower Tampa buyers plans to sue Donald Trump, accusing the New York tycoon of falsifying his role in the $300-million project that went bankrupt last year. Trump misrepresented himself as a tower investor when he was only lending his name to the project in a licensing deal with Tampa Bay developer SimDag Robel LLC, said Kenneth Turkel, a Tampa attorney hired by some of the condo buyers.”

“Scores of buyers plunked down 20 percent deposits on units that ranged in price from $700,000 to $6 million. Developers didn’t refund half the deposit money, and buyers aim to recoup losses from Trump though the courts.”

“During the Tampa unveiling in 2005, Trump told the St. Petersburg Times that he had a ’substantial stake’ in the condo tower. ‘I recently said I’d like to increase my stake but when they’re selling that well, they don’t let you do that,’ Trump told the newspaper.”

“Richard Golod, executive director for Van Kampen Investments said…’If the economy is going to get back on track, consumers are going to have to spend savings, or equity in their homes, or borrow.’”

“Golod was keynote speaker at the Economic Forum 2009 in Nampa Nov. 5. Golod said the turnaround has begun. In fact, it began in June and July, but few people recognized it, he said, noting that the federal government has been working hard to make certain the economy continues to move forward with few hiccups.”

“He said the housing and construction industry may never hit its norms. While some parts of the country are seeing a bottom, others are still in freefall. In the Treasure Valley there may be a 15-month supply of homes on the market, but places like Tampa, Fla., Las Vegas, Nev., Scottsdale, Ariz., and parts of California are seeing a five-year supply of homes.”

“Unemployment in Mohave County where Bullhead City is located is around 10 percent. The median house price here has fallen from nearly $190,000 in January 2006 to less than $93,000 now, a drop of more than 50 percent. Not so long ago this town on the Nevada border was in full boom mode. It was a magnet for people coming to work in the casinos across the Colorado River in Laughlin, plus Californians looking to retire here or have a second home at a fraction of the cost in their own state. Construction workers flocked here to build homes and roads. All told, successive booms turned Bullhead City from a fishing village just a few decades ago to being a city of more than 40,000 people.”

“John McCormick of McCormick Development helps run a number of family businesses – a water company, a construction company, a land development company and a real estate broker’s office – and says that many of the people walking away from homes here are either speculators or Californians who bought a second home here.”

“‘If they end up in trouble, it’s so much easier to walk away from a second home than a primary residence,’ he said.”

“Millions of American homeowners are ‘underwater’ on their mortgages - owing more than the value of their homes - and would be better off walking away. That is the suggestion Brent T. White, a University of Arizona associate professor of law, makes in his newly released working paper, ‘Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.’”

“White, whose article will be published in this month’s issue of Arizona Legal Studies, said fear, guilt and shame are what keep many homeowners from making rational economic decisions. ‘These emotional constraints are deliberately cultivated by the government and lenders who self-servingly tell borrowers that they have a moral and social obligation to pay their underwater mortgages,’ said White.”

“‘Meanwhile, lenders ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility,’ he added.”

“A federal judge rejected a request by Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp, to dismiss a U.S. Securities and Exchange Commission lawsuit accusing him of securities fraud and insider trading. In a Tuesday court filing, U.S. District Judge John Walter in Los Angeles also rejected requests by David Sambol and Eric Sieracki, respectively Countrywide’s former chief operating officer and former chief financial officer, to dismiss related SEC fraud charges.”

“Countrywide had been the largest U.S. mortgage lender before liquidity dried up in summer of 2007. The insider trading charge concerned Mozilo’s alleged exercise in 2006 and 2007 of more than 5.1 million stock options and sale of the resulting shares, leading to more than $139 million of profit.”

“According to the complaint, Mozilo set up the plan shortly after admitting in an email to colleagues that Countrywide was ‘flying blind’ as to the quality of its loans.”

“Real estate investor Barry Sternlicht is betting the Greenwich housing market is making a comeback. Sternlicht raised the asking price of his 5.8-acre estate on Round Hill Road to $5.95 million, although the town is headed for its worst year for property sales in more than three decades.”

“It was first listed for sale in June 2008 for $8.25 million, according to the Greenwich Multiple Listing Service and his broker. The price was reduced three times from September 2008 to April of this year. Sternlicht bought the place in November 1994 for $2.93 million, according to the Greenwich Assessor’s office.”

“‘We increased it because we felt like we were giving it away,’ and there was interest in the property, Sternlicht’s broker, Jean Ruggiero, said in an interview. ‘Just because people are lowering their price doesn’t mean it’s right, because he’s not a desperate seller.’”

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Concord Monitor in New Hampshire, May 2005. “Whatever happened to the $150,000 home? Not too long ago, you could buy a nice house for that kind of money. Today? Not in Concord. ‘Today, $150,000 is typically a very run-down ranch on a very small lot outside of town,’ Jim Knowlton, an agent in Concord said. ‘You’re looking at an old farmhouse that’s ready to fall down in Andover, a New Englander in Franklin. There’s a Grizzly Adams home on 40 acres in Danbury that sold for $110,000.’”

“‘It’s really a game of patience, being alert and ready when the house comes up,’ said Brenda Perkins Anukem, an agent with Kathleen Gallagher Family Realty. Anukem said at least three of her recent homebuyers decided to use an 80/20 mortgage. ‘That’s becoming more and more common. I’ve only seen it for the last year and a half. It’s just an option that keeps their payment cost down so it helps them afford a little more house. Not that it doesn’t scare me.’”

“But for many starting out, getting a home for less than $200,000 isn’t simply a goal - it’s a must. While median home prices grew nearly 14 percent between 2001 and 2003, salaries only inched up 1.4 percent, according to a statewide report on affordable housing. Mary Downes, director of education at the Concord Area Trust for Community Housing, said the $150,000 threshold is an important one because it’s what most average working people can afford. To make the jump from $150,000 to $200,000 means an extra $300 a month in mortgage payments.”

‘Caught in the gap, Downes said, are ’single-income families, whether they’re married with one person staying home, or a single mom and young people.’ ‘More and more people are being shoved out of the market, which means people in the market are paying more than they should in terms of their monthly budgets,’ she said. ‘Then people start making not-so-smart decisions about the kind of mortgages they get.’”

The Boston Herald, April, 2005. “Dorchester and Roxbury homeowners defaulting on mortgages rose 35 percent over the past year, said Anderson, of The Real Estate Analyst. And Dorchester single-family and condo prices are falling after record highs last year. Dorchester single-family home prices dropped during the same period to $320,000 from $370,000, while condo prices slid to $245,000 from $265,000.”

“An economist from the University of Massachusetts at Boston, documented in a recent study that found a 60 percent rise in so-called subprime lending in Boston neighborhoods. ‘There is a whole confluence of factors,’ said Anderson, a longtime Dorchester homeowner. ‘We’ve hit the wall.’”

Newsday in New York, May 2005. “Barbara Corcoran is even more of a symbol of the city’s obsession with real estate now. She’s on ‘Good Morning America’ and the ‘Today’ show advising people how to buy and sell. By September she hopes to host a weekly real estate show on national television. A newsletter from a group of Prudential downtown Manhattan brokers said recently, ‘You heard it here first: The market is slowing down and pretty significantly too.’ One of those brokers says people are reducing ‘really extreme asking prices’ for high-end apartments but that the market’s still strong.”

“Corcoran concedes there are periods when housing markets drop. Over a 3 1/2 year period beginning in 1987, city prices dropped about 32 percent. She admits there are some people who risk getting hurt badly in this housing boom.’Is it dangerous to be a flipper if you don’t have an educated eye? It’s ridiculous,’ she says.”

“Her advice? If you’re a seller, underprice your property by 10 percent and you’ll set off a buying ‘frenzy.’ If you’re a buyer, overbid to get the property you want, and the rising tide of the real estate market will protect you.’”

From Curbed.com in New York. “i just spent more than 24 hours camping out on the street to buy a condo…that’s what it takes this days to buy a condo pre-construction. i showed up at 9:30am on saturday morning for a sunday 11:00am..offering and was the THIRD person on the line…i had gone to walk around the neighborhood to reassure myself it was ok to buy so lost a spot on the line….crazy stuff happend through thte night too. we got eggs thrown at us from peole at 147 front street (where the sales office is located).”

“hundreds of people asked ‘what are you doing in sleeping bags on the sidelwalk in the middle of the day?’ and then laughed at us.”

The New York Post, March 2005. “Investors are so eager to get their hands on New York City commercial real estate that they’re driving up prices beyond what the rent rolls would justify…Average asking rents in office buildings were $47 a square foot last year, compared to $59 in 2001..there could well be some element of speculative buying.’”

“WRONG-WAY GREENSPAN STRIKES AGAIN…’These rate hikes are really a joke anyway. Even as he’s pretending to tighten credit through these rate increases, the Fed has actually been allowing the nation’s money supply to grow rapidly at more than 5 percent over the last year. If all that money is available, it’s going to be put to use — creating the next bubble.”

“The winner, I think, will be the housing bubble. If all these rate hikes finally take hold over a short period of time they will deflate home prices just in time for Greenspan’s Farewell Apology.”

The bad:

Indy Eastside in New York, May 2005. “George Simpson of Suffolk Research Service said, ‘Just close your eyes, buy some vacant land anywhere out here, and you can make an almost unbelievable profit. You can’t make one-tenth of this kind of return on investment with any other speculation.’”

“Chris Chapin of Prudential in East Hampton: ‘When you have people who don’t care what they have to pay for a parcel of land, they just want it, that affects prices.”

“Realtor Joe Kazickas; ‘What percentage of property owners do you know who can afford to buy the houses they live in now? I would guess the answer is about 30%. What’s going to happen in 20 years when the baby boom generation starts dying off? What happens when we are on the backside of that bubble? No one knows. But there won’t be the buyer base then that there is now.’”

The New York Times, May 2005. “‘In the last five years it seems like everyone wants to be a broker,’ said Diane Saatchi, a senior vice president for Corcoran . ‘There’s not enough time on the part of the senior brokers to really do the proper training because many of us are too busy making money.’”

“The National Association of Realtors says its membership has swelled to 1.1 million now from 766,560 in 2000, a rise of 46 percent. In Manhattan the number of brokers and sales agents has jumped 42 percent, to 26,220, in the same period.”

The Journal News in New York, April 2005. “The inability of buyers to afford houses appears to increase the demand for lower-priced condominiums and cooperative apartments, pushing those prices up as well. That’s what happened in Orange County. As potential buyers were priced out of what they wanted, they bid up lower quality homes. It really is just a mind game to convince yourself that the $300,000 house is now ‘worth’ $500,000.”

“The affordability of co-ops led Kyana Kelley to bid on a one-bedroom apartment for $90,000. She said she hoped to close in the next few weeks. Kelley, age 30, figures to sell the apartment and trade up in a few years on continued price strength. ‘It’s going to keep rising,’ she said.”

“Agent Bobby Palazzo said demand in Putnam was being fueled by people moving up from the Bronx, White Plains and Yonkers. ‘You can still get something decent up here for under five,’ Palazzo said, meaning $500,000. ‘Unfortunately,’ he added.”

The Boston Globe, March 2005. “Between 1997 and 2004, homeowners under the age of 25 jumped 11 percent; and now these youths make up one-quarter of all property owners in the Northeast. ‘I am young and property values are soaring,’ said 19-year-old Rayford Kelley, who bought a $560,000 fixer-upper in Roxbury with no money down. He had trouble leasing several units after he forced out tenants who refused to pay rent. Kelley agreed to lease one apartment to friends…He’s already worried about the number of visitors coming through the house, into which he has put more than $10,000 in repairs, but doesn’t want to say anything to his friends.”

“25 year old Paul Phadungchai said he probably overspent with $50,000 in renovations that include a whirlpool tub and granite kitchen countertops. ‘For a kid like me who had college taken care of and was able to save money a lot of the time, not being able to save money ever is really a life change. It’s all gone and now all I’m stuck with is a huge mortgage. You have to really think about that.’”

From CNBC, April 2005. “He’s a roofer and she owns a hair salon, and now Paul and Caren Matera are applying their entrepreneurial skills to New York’s red-hot housing market. After attending a $3,000 real estate seminar, last July the Materas bought a little bungalow on Long Island. They sold it two months later and made a 50 percent profit. Since then, the couple has taken equity from their own home and invested in a half dozen properties now worth over $1 million — much of it pre-construction properties in red hot Florida developments.”

“So far, Paul and Caren Matera haven’t seen any slip-ups in their real estate investments, but that doesn’t mean the roofer isn’t losing sleep over his retirement dreams. ‘Every time you close on a deal, you lie in bed worrying at night,’ said Paul Matera. ‘I don’t know how my wife sleeps at night. She sleeps pretty soundly while I’m lying there awake.’”

“Most of these Californian real-estate investors are looking for investments beyond the Golden Gate. Group member Tessie Cuy says she can buy real estate outside California for less than in her own home town. And Doug Boggs, another investment club member, says he is focusing on investments in the Sun Belt region: The southern and southwestern states of the U.S. ‘Florida, Arizona and Vegas — that’s where everybody else is going too. It’s kind of like the stock market, really,’ said Boggs.”

“That sort of attitude worries William J. Poorvu, a former Harvard Business School professor . ‘If you think you’re just buying a lottery ticket and putting down the amount of money you’re willing to lose, that’s one thing,’ said Poorvu. ‘If you’re investing your savings in something like this, I think you are making a mistake.’”

Market observers, the best: “Appraisers say there is pressure on them to inflate home values, and there is concern that if people pay too much for their homes it could lead to more foreclosures if housing prices tumble. A recent survey of 500 appraisers found that 55 percent of them personally feel pressured by sellers, agents, and even lenders to inflate home values by 10 percent. And one-third of the appraisers surveyed said they fear losing business if they don’t comply.”

“Jonathan Miller, CEO of an appraisal company in Manhattan, said he thinks 75 percent of appraisals are inflated. ‘The people who are paid on commission probably won’t be there when those problems come in the future.’”

You decide, May 2005: “The gap between income and Massachusetts home prices is the widest since the peak of the 1980s housing bubble, and that gap, intensified by rising interest rates, should cause home prices to dip later this year..declining about 3 percent. ‘It’s not going anything like the ’80s, but there’s going to be a correction,’ said Alan Clayton-Matthews, of the University of Massachusetts. ‘There has to.’”

“According to the Massachusetts Association of Realtors…the state’s median single family home price rose 11.9 percent to about $346,000 while the median condominium price rose 14.5 percent to about $265,000. John Dulczewski, spokesman for the association, said the group expects home sales to slow and prices to moderate this year, but not to fall. Even though mortgage rates are likely to rise, an improving economy and job market should continue to spark demand.”

“He added that supply remains tight. Last year, the state had only a 6.6-month supply of homes, compared to 8 months in a so-called balanced market when supply and demand are about equal. In 1996, shortly before the housing market began its recovery, the state had a 9.4-month supply. ‘We are still calling for price appreciation,’ Dulczewski said. ‘The supply just hasn’t kept up with demand.’”

“Economist Mark Zandi said, ‘The housing market is through the roof, way outside anything we’ve seen historically. The longer it goes on, the more significant a correction we’ll see.’ Zandi said the housing market, fueled by low interest rates, is becoming increasingly speculative in many metropolitan markets, including Boston. This means buyers, instead of basing decisions on fundamentals, are betting that prices will rise, leading them to stretch their finances and take out risky, short-term mortgages that are vulnerable to interest-rate increases.”

“In California, for example, two-thirds of mortgages in the first three months of the year were interest-only adjustable rate mortgages.”

May 2005, “Zandi said he’s worried about the vulnerability of the mortgage-backed securities industry, where hedge funds and other investors have made huge bets. That derivative industry funds many mortgages for home buyers, particularly for low-equity loans. Problems in the mortgage-backed securities market could result in a credit crunch for would-be home buyers.”

“‘If things continue on as they are for another year or even six months, the potential for price declines is that much greater and the risk to the economy is much more significant,’ Zandi said.”

“Yale University economist Robert Shiller, ‘I think this is actually the biggest [real estate] bubble in U.S. history and possibly even world history,’ he said in a telephone interview yesterday (May 23rd).”

by ahansen

The meat department at Vons hadn’t put the proper bar coding on the goose I had ordered, so the clerk and I had a five-minute wait while the frozen beast was properly inventoried and returned to the check-out stand. The store was eerily devoid of shoppers for a Friday afternoon—especially one before a major party weekend like Halloween. But it was the end of the month, and the town is mostly inhabited by retired civil servants and other people who receive a government check for a living, so I wasn’t all that perplexed by the lack of activity. The one lady in line behind me was cheery and chatty; we didn’t mind the wait, using the time to remark on what we were planting in our winter gardens.

What did catch my attention, however, was the checker’s agitation. He kept glancing first at his watch, then to the back of the store, then up the stairs to the manager’s office. Since my fellow shopper and I weren’t at all hurried, and the store was basically empty of customers, I asked what had him so concerned.

“This is really going to screw with my production numbers,” he said nervously. “They keep track of how fast we process customers through the line, and tally us up at the end of the month. This isn’t going to look good for me at all.”

He continued, “It would be different if we got a reward, or a raise or something for having faster check-throughs, but we don’t. Their machines rule by intimidation.”

I mentioned that surely “corporate” would take into account the fact that business might be cyclical in a small resort town full of seasonal workers and welfare recipients—especially at the end of the month when the summer tourist season is over. But, “No,” he told me. “It’s just more insanity for us to deal with. They pit us against each other and their waiting list of people who don’t mind working part-time. It works.”

In the last year or so, I’ve wondered why there was such turn-over in the store’s long-time employees, many of whom I’ve known by name after years of shopping there. I can’t imagine they’ve all left voluntarily during a period of such economic uncertainty. Lately it seems that every time I go into a familiar market, an entirely new group of people is working there. Now I am beginning to understand why.

When I got home, a rambling, rather plaintive telephone message awaited on my answering machine. A dear friend, now four years from retirement at the Jet Propulsion Laboratory, was recently downsized from the Mars project, and because he’s been identified as a “national asset” was given a consolation position working part time in another related division. Supposedly a 20-hour-a-week slot, he’s slowly driving himself even crazier trying to keep from losing this job too.

He estimates he puts in 60-70 hours a week on lab, often sleeping there in his cubicle or in his car in the parking lot. The poor guy has accumulated literally months of vacation time over the years, but he’s afraid to take any of it for fear that while he’s gone they’ll bring in someone who has been waiting in the wings for a spot on the project. With two kids in college, a cruddy little apartment to call home, and no 401(k) left to speak of, he’s essentially trapped in a job he hates. In what, to my mind, is a sure-fire losing proposition, he’s been trying to keep his sanity by proving Goldbach’s Conjecture in hopes of claiming the monetary prize that would salvage his retirement.

Even my longtime housekeeper—the kind of gem the organizationally-challenged would kill for—is frazzled and worried, as more and more of her clients reluctantly cut back or cancel their contracts due to budget constraints. She finds herself working longer hours at a faster pace just to keep the customers she does have from making the same decision.

With so many of us in danger of becoming unemployed, those who are left increasingly labor under a cloud of threat and intimidation—whether real or implied. Where we used to be motivated by raises, bonuses, options and promotions, our great motivator is now fear. And it’s not just fear of losing a source of income. For those who define themselves by their jobs, the loss of identity is often just as traumatic as the loss of a paycheck. Losing one’s sense of community—waking up one morning to the realization that the comforting familiarity of camaraderie and routine is gone—can be as debilitating a shock to the system as realizing one has just joined the ranks of the impoverished.

As Joni Mitchell once wrote, “…you don’t know what you’ve got till it’s gone….”

Which leads me to my point.

For five years, Ben Jones has, largely through his own tireless efforts and on his own dime, kept this blog online as a real-time archive of our thoughts on what has turned into a global fiasco. Years from now, historians will surely study what’s been written here about these events as they have unfolded, and perhaps will be wise enough to glean from them how to avoid repeating the blunders we’ve made.

Ridiculed and excoriated, even after his prescience has proved correct, Ben has plugged ahead with his chronicle, day after day, week after week, month after month—a latter-day Samuel Pepys recording a daily journal of his own plague years.

As SanDiego RE Bear so eloquently discussed last week, *Comment by San Diego RE Bear 2009-10-29 13:54:26 , HBB is home to a diverse, often impassioned community of contributors who really care about what happens to our Country and its institutions. The forum we have created and fostered here is unique on the internets, both in the caliber of its discourse and the civility in which it is presented.

Our words are read by people whose actions and decisions affect the daily lives of millions of folks around the world. What we post here matters.*

SO SEND THE HBB A BUCK A WEEK.

Surely you get 25 cents worth of enjoyment out of reading through the comments sections at the end of each digest? How many times a year have you come to HBB for information, or entertainment, or just the diversion of a good read? And if you want to see how often you’ve found a safe place to vent your spleen, where people actually take the time to consider what you have to say then give you honest feedback, go to lavi’s site, http://www.inksex.com/ and check out the number of comments you’ve posted to the blog since you joined.

How much have you saved on therapists, real estate attorneys, and unhealthy hobbies since you started reading HBB? More to the point, how much have you saved by NOT buying that overpriced piece of real estate you thought you just had to have; the one that everyone was nagging you to go out on a limb for?

Stop gloating and send in 1% of the money this blog has saved you.

For all of us Cassandras and haters, trolls and curmudgeons, having a place to post our crackpot observations has got to count for something. Where else can we say “I told you so” over and over everyday without someone finally smacking us in the kisser and calling the authorities? If that’s not worth a few bucks, I don’t know what is. HBB is a sanctuary for our collective angst. If the site goes away, you’ll probably want to choke something. Think of the legal fees. Think of the horrible doctor/vet bills you’ll incur. Think of the children— and dig deep, brothers and sisters, for the Good Work.

We may wake up one morning, look out at a beautiful day, put the coffee on to brew, pull up the puter, click on HBB and watch as the screen comes up blank. How discouraging would that be? And I don’t even want to think about turning in for the night without having read through what the cast of characters has had to say about the day’s events.

So c’mon, guys, cough up. Right now. If I can do it, YOU can do it. Surely you can scrounge $10 out of an old sock somewhere? It’s our blog and it’s what we make of it— but only if we chip in every now and then. The PayPal button is up there on your right. Use it.