One of the arguments against the existence of a nationwide housing bubble is that “real estate is local.” That is, houses aren’t pork bellies that trade on centralized exchanges. They exist in hundreds different markets, each with its own employment, income and price issues. At any given time, some are up and some down, so there will never be an across-the-board bust.

This is classic rear-view-mirror thinking, of course. Real estate might have been local once, but as the major banks and homebuilders have gone national, and the mortgage-backed bond machine has tapped into the global credit markets, U.S. housing has been nationalized. But let’s accept the real-estate-is-local argument for a minute and think about what it means for someone trying to understand the bubble: If we have a bunch of individual, only tangentially-related markets, then it makes sense to focus on these local markets to see if together they tell a coherent story. For this, you follow the local media, which is what I do for the breaking news section of DollarCollapse.com. And right now (surprise!), the news is consistently bad across just about all the formerly-hot markets. Here are some snippets from just the past few days:

"Foreclosure activity skyrockets in East Bay; building boom at Bay Area's perimeter drew unstable buyers" – San Francisco Chronicle, 10/14 The number of homeowners in foreclosure has soared in Solano and Contra Costa counties in the past year, giving the East Bay counties the dubious distinction of having the third and fourth highest foreclosure rates in the state. Foreclosure activity in Solano County increased nearly fivefold, while in Contra Costa County they almost quadrupled, according to the RealtyTrac research firm. The two counties helped give California the No. 1 ranking among states with the most foreclosure filings in September. "These are all the fast-growing regions in terms of home building, where a lot of first-time home buyers were getting into the market,'' said Christopher Thornberg, a principal at Beacon Economics, a consulting firm with offices in Los Angeles and San Rafael. "These are the people who are most susceptible to a slowdown in market and these are the people who are the most overexposed." New construction attracted some investors who got in over their heads and buyers who relied on discount mortgages that are now resetting at higher rates, two factors that are pushing up foreclosure activity, said Leslie Appleton-Young, chief economist for the California Association of Realtors. "The foreclosures, at least for a while, are going to keep going up and up,'' Thornberg said. "This is going to feed on itself." "Debt woes in S.C. worst in nation" – The State, 10/15 South Carolinians are losing their homes and falling behind on their bills at a higher rate than the rest of the nation — part of the price of the state’s high unemployment rate and the rising number of high-interest loans. Unlike poverty, graduation rates and other measures that have put South Carolina in the bottom tier of states for generations, South Carolinians’ debt troubles are recent. From 1979 to 2001, S.C. residents kept up with their bills and mortgages much like the rest of the nation. But from 2002 to June 2006, the percentage of foreclosures and late loan payments in the state has been significantly higher than the rest of the nation, said Mike Fratantoni, economist for the Mortgage Bankers Association, a Washington, D.C. group that represents more than 3,000 U.S. lenders. Many families who turned to adjustable-rate mortgages in the past few years might not have realized the danger until interest rates climbed and their incomes dropped. Nationally, the number of subprime loans — higher interest loans made to borrowers with weaker credit histories — also began rising rapidly in 2003, a cause for concern to Fratantoni. Foreclosures typically peak three to five years after the first payment. The wave of refinancings that started in 2003 is just hitting that period, he said. Michael J. Cox, a Columbia lawyer who represents families in bankruptcy, said debt burdens are rising because of a host of predatory loans, including payday loans and adjustable-rate mortgages, or ARMs. “These ARMs are causing a tremendous amount of problems for people,” he said. “It’s going to get really bad before it’s over.” "Foreclosure rates stay high" - Palm Beach Post, 10/14 The foreclosures continue. The number of homes in some stage of foreclosure in Palm Beach County and the Treasure Coast soared last month compared with a year ago, while Florida posted the second-highest number of new foreclosure filings in the nation, according to RealtyTrac. The new report gives fresh evidence that local homeowners are struggling with budget-busting energy prices, adjustable-rate mortgages resetting at higher rates and a sluggish home-sales market. In Palm Beach County, 873 homes entered some stage of foreclosure in September, or one in every 637 households. That's a 46 percent increase from the 596 reported in September 2005, according to Irvine, Calif.-based RealtyTrac, which tracks foreclosures. "While lender activity is up, it's not all lender-related," said Jim Sahnger, vice president of Palm Beach Financial Network in Sewall's Point. "A lot of the foreclosure activity in our area is related to HOAs (homeowners associations) and contractors not getting paid." In fast-growing St. Lucie County, 190 homes entered some stage of foreclosure last month, or one in every 480 households. That compares with one in 1,030 homes in foreclosure across the nation. The September numbers for St. Lucie were up strongly from the same month a year ago, when 106 homes were in some stage of foreclosure, the report said. That's a 79 percent hike. Recent government reports indicate that Florida and Palm Beach County have high percentages of option adjustable-rate mortgages. These exotic mortgages, as they are known, allowed local buyers to afford homes in one of the hottest real estate markets in the country. "Foreclosures just 'tip of the iceberg'" - In Business Las Vegas, 10/13 The number of foreclosures in Nevada has more than tripled in the past year and jumped 83 percent since May, giving hints of what's to come in the housing market, observers said. Rising interest rates and stagnant or declining home values are driving the foreclosure numbers. Nevada recorded 2,016 foreclosures in August, the latest month available. That's well above the 568 foreclosures recorded in August 2005 and 1,103 last May. Foreclosures are rising at a faster rate in Nevada than the rest of the country, where they are up 24 percent since May. In California, foreclosures have risen 43 percent since May. The foreclosure rate shows no signs of slowing in Nevada with some predictions it could triple in the next six to nine months. Michael Krein, president of Nevada Real Estate Services, which handles foreclosures for banks, said he's seeing two to five foreclosures a day. He handled 12 in 2005. "This is the tip of the iceberg," said Krein, president of the national REO Brokers Association, which works with real estate agents specializing in foreclosures. "The funny thing is the number of people in default has not changed that dramatically, but what's different is that the market saved them before (through appreciation). It's not doing that now." The rise in foreclosures has been anticipated given that a large number of home buyers used a form of adjustable rate mortgages. Because of interest rate hikes, monthly payments will rise well beyond borrowers' ability to pay. Many mortgages are expected to jump by the end of 2006 and early 2007, pushing more people into foreclosures. Krein said he recalls one report that said as many as one-third of the homes bought in Las Vegas in 2004 and 2005 used adjustable rate mortgages. With more than 20,000 homes on the resale market and potential buyers waiting for prices to fall, many owners have been unable to sell their homes. The majority of properties foreclosed on are vacant, Krein said. More than 40 percent are owned by investors, who bought in late 2005 looking to flip the property but didn't even make a payment, he said. Some have rented out their homes, but others who have them for sale can't afford to cut their prices because it wouldn't be enough to cover their loans. Krein said. They lack the cash to make up the difference, he said. "Slumping home sales force prices lower" - Idaho Statesman, 10/13 Slumping Treasure Valley single-family residential real-estate sales have begun to affect the area’s once-skyrocketing housing prices, according to September industry statistics released Thursday. An Intermountain Multiple Listing Service report for September revealed the median price of a home sold in Ada County last month was $240,000, a drop of $8,900, or 3.5 percent, since July. That compares with $195,000 in September 2005 and $167,500 in September 2004. Boise State University economics professor Don Holley said an inventory of almost 7,000 unsold homes has created a market where homeowners have to slash their asking prices to compete for buyers. The housing slowdown is spreading to Nampa, too. The median home price has risen 2 percent in Canyon County since July. But the number of single-family building permits issued in Nampa during September was down 62 percent from the previous month, an indication that industry activity is slowing in an area previously buoyed by its affordable housing prices, according to a city official. According to the MLS September report, 1,165 new and existing homes were sold in the Valley last month, or 37 percent fewer than the same month in 2005. Sales in Ada County were off 41 percent from a year ago, while Canyon County saw a drop of 31 percent. Building permits — a harbinger of future construction — show that the housing slowdown has reached every corner of the Treasure Valley. Meridian, once the hottest real estate market in Idaho, issued 76 single-family home permits worth $17 million in September, compared with 280 permits valued at $52 million in September 2005. The number of permits has fallen short of triple digits in each of the last three months. Boise issued just 20 building permits worth $6 million, down from 77 permits valued at $16 million in the same month last year. Nampa, which had remained stable during the early months of the housing slump, issued 50 building permits in September, a 62 percent decline both from the previous month and from the same month a year ago. Most experts blame the downturn in housing on a construction boom that as of Thursday had left 6,897 unsold homes languishing on the market. However, Nampa real-estate agent George Tallabas, of ReMax Advantage, said the backlog would be even bigger if not for homes that have been taken off the market by owners frustrated by their inability to find buyers. Hubble said it could take six to 12 months to absorb the existing inventory of unsold homes, but only if employment growth remains strong in Idaho. “And we know that is not going to happen, because there are construction jobs being lost out there every day,” he said. “I think people better prepare themselves for 12 to 18 months before things get back to normal.”

Copyright © 2006 www.dollarcollapse.com