DSNews.com - Although the Obama administration has worked to suppress foreclosures, it appears these efforts may not be enough, according to Bank Foreclosures Sale, a foreclosure listing service.

High unemployment continues to plague the real estate market, and according to a recent article in the New York Times, an estimated 2.4 million foreclosed homes will be added to the list of 2010 foreclosures. As a result, Bank Foreclosures Sale predicts prices will decrease another 10 percent.

Simon Campbell, a real estate analyst for the company, said it appears the real estate market may see a surge of shadow inventory properties appear on the market. These are properties that have not been calculated into official inventory numbers and include homes repossessed by lenders through foreclosures and similar actions and homes where owners are 90 days or more delinquent on payments.

Unemployment remains at a record high, and congressional leaders continue to look for ways that millions of people who have lost their jobs will be able to stay in their homes. While current statistics show lenders may finally be closer to finding a solution for the home mortgage crisis, Campbell said the question now is about how fast these lenders can work to stem potential foreclosures.

“Until we see a reduction in the number of foreclosures, we cannot get too hopeful about restoring housing industry stability,” Campbell said.

LasVegasSun - As Las Vegas limps into a new decade, let us return to the now-hazy origins of our current sickness: 2005.

It would seem the entire Las Vegas Valley had been slipped a drink laced with a financial hallucinogen — a powerful narcotic that combined Ecstasy’s feelings of well-being with methamphetamine’s urge to be busy.

Even the city’s most accomplished business and political elites could not resist its influence. They were spaced out, convinced that the laws of the economic universe had been suspended, that housing prices could expand into space, that borrowing money was as holy as prayer.

“We thought we had a recession-proof economy, we thought we would grow forever,” says Elliott Parker, a UNR economist.

Parker describes an “illusion, that we could create wealth from nothing, that we could keep consuming beyond our income, that housing prices would keep rising, that investments could yield high returns without risk, since we were all so clever …”

If they weren’t addicted to the drug themselves, Las Vegas denizens acted as street corner touts — marketing the magical drug for a living — and were always shouting its wonders.

We were, in Parker’s words, “selling high roller fantasies to gamblers and expensive houses to people who sold their homes elsewhere for even more insane amounts of money. We thought it would continue forever, and we made no contingency plans for the alternative.”

Illusion. Fantasy.

When skeptics pointed out that perhaps a dangerous real estate bubble was forming, the crowd responded with mockery:

“The only bubble you’ll see in this market is in a Champagne glass,” a well-known real estate player said in our now fated year of 2005.

But in fact, here’s what was happening in the Las Vegas real estate market: After years of slow and steady growth, a mania took hold. Home values had increased more than 35 percent in 2004 alone.

It was a classic bubble by 2005, right up there with phony Silicon Valley technology companies 10 years ago, and phony Amsterdam tulip futures 375 years ago.

For a while, Americans could borrow unlimited sums of money against their rising home values to come to Las Vegas to spend money. So we built new resorts.

We needed construction workers to build those resorts. We needed other construction workers to build homes for the first construction workers.

Simple logic

This wouldn’t — couldn’t — go on forever. At some point, Americans would hit their limits and the growth of tourism would slow, and we wouldn’t need so many construction workers to build resorts, and then we wouldn’t need so many construction workers to build those houses for the first construction workers.

Once we didn’t need those construction workers, they would be laid off and stop making mortgage payments on their homes. And the sell-off would begin. Throw in all the subprime loans that borrowers couldn’t pay to begin with and you’d get a fire sale. Welcome to 2007.

It’s simple logic, really. Any college freshman who got suckered into a pyramid scheme could explain the illogical underpinnings of it all. It was an economic house built without a foundation on a sandy desert hillside. And there it goes, into the wash.

Sure, we had the resorts, and the wealth they created was real, but the Strip was living on borrowed time, larded with debt, a bad recession away from near collapse and in some cases, bankruptcy.

“A growth-addicted economy produced phony prosperity,” says Hugh Jackson, proprietor of the Las Vegas Gleaner blog and a policy consultant to the Progressive Leadership Alliance of Nevada, a liberal advocacy group.

Phony. Like the happiness of a drug.

This isn’t to say that the decade didn’t begin with hopeful signals — low unemployment and rising wages, and the tax revenue needed to improve schools, health care and social services. The Strip kept attracting more customers and building more hotel rooms to house them.

But the 9/11 terrorist attacks should have provided a clear warning that a dip in tourism could pummel the city. When tourism quickly resumed, however, that warning went unheeded.

Plus, debt was accumulating, in households here and among potential customers around the world, and on corporate balance sheets.

It should have been a portentous time, a ripe time for Cassandras.

“The decade began with a facade,” Jackson says of those go-go years.

A facade. Soon it was a Potemkin village of steel and stucco, massage parlors and pawn shops.

So wrong

In the reality-based world, many people knew the intensifying speculative bubble in real estate wasn’t sustainable and tried to warn others. Bill Robinson, a UNLV economist, sold his house in 2005, patiently explaining to neighbors the laws of economic reality and the coming crash.

“Everybody who was independent of all this saw it coming,” Robinson says. Meaning everybody sophisticated enough to understand economic data and not a paid representative of the resort or development industries.

(And, in fairness, some people from those industries tried to pull the fire alarm early on.)

What is striking about our real estate player, the one who sneered about there being no bubbles except those in Champagne, isn’t that he turned out to be so wrong. After all, people are wrong all the time. The sun revolved around the Earth for centuries after Ptolemy, and many smart and well-meaning people, even the high priest of laissez faire capitalism Alan Greenspan, were wrong about the housing bubble.

No, what’s striking is the tone of triumph and arrogance, like he’s pulled one over on the stupid herd.

It turns out, our addiction’s true power was so much like that of other drugs: It gave the user great powers to deceive.

We were good at deceiving others.

“Hardly anything we did this decade was upfront,” Robinson says.

Illusion has always been part of Las Vegas’ appeal — that we would not succumb to mathematical certainty at a card table; that we could come here and remake ourselves into glamour gods; that buildings that look like the New York City skyline can approximate the feeling one would get from actually being in New York City.

Illusion is one thing.

Deception, done with malice and for the most selfish ends, is something else.

Deception in Las Vegas took many different forms this decade.

Easy to con

On the Clark County Commission, four members would eventually be convicted of what amounted to dishonest service for taking bribes. Erin Kenny told us she was acting on the community’s behalf when she pushed approval of a CVS drugstore at Desert Inn Road and Buffalo Drive. Really, it was for a $200,000 bribe.

From the sensational to the prosaic: The real estate loan officers who extended money to people knowing they couldn’t repay, demanding no documentation, employing no safeguards or due diligence.

So, waddya make last year?

Oh, that’s good enough.

“Stated income,” we called these loans, employing our bottomless ability for euphemism.

Or, our lenders weren’t straight with borrowers — many who didn’t speak English — about what would happen to their monthly payment in a year or two after a “reset.”

On the other side of the ledger, there were speculators and plenty of average people who took out loans they had no intention of repaying.

“The easiest con for a con artist is another con artist,” says Mike Green, the Nevada historian. “If you want to believe you’ll always be living on the Big Rock Candy Mountain, then it’s easy for someone to sell you another piece of worthless land.”

Once things started to collapse, a whole new set of scam artists — “loan modification specialists” — preyed on vulnerable homeowners, promising to keep them in their homes but running off with cash instead.

For so many — and at great expense to the rest of us — the decade was a giant con, a bamboozlement, a flimflam.

“We have a history of benefiting from all that flimflamming,” Robinson notes.

“It’s kind of our culture. So at some point it was inevitable that if there was an easy-money climate, we would fall prey to it,” he says.

Which brings us back to another kind of deception, perhaps most damaging of all — self-deception.

“It’s easy to delude yourself into believing something you want to be true. And here we are,” says Mike Sloan, a gaming consultant and former state senator.

We were deceived, we were narcotized, because we wanted to be deceived.

I have a rental property that went into foreclosure after I had my debts discharged in bankruptcy.  The lender still holds a first position even though the debt was discharged.  The IRS also has a lein on the property and this lein caused the lender to remove the property from the scheduled sheriff sale.  

Nobody is going to buy the property because the house is no longer worth the lein values.  If someone bought it, they would have to accept both leins. 

How can I get the bank to release the lein so I can sell the house to pay off the tax lein?  Is it legal for me to offer the bank some money to release the lein. 

Maybe I can just buy the house from the bank for a cash amount.  I am the only one willing to buy it with the IRS lein on it.  Will the IRS sit there forever holding that lein? 

Thanks.  I feel stuck in limbo.  I want to get on with my life.

Mel (more…)

Yahoo News – Can’t pay the mortgage? You still might be able to stay in your home. Government-controlled mortgage company Fannie Mae is going to give borrowers on the verge of foreclosure the option of renting their homes for a year.

The change announced Thursday could give a temporary break to thousands of homeowners, but critics question whether it will only add to the mushrooming losses at the company, which has received billions in taxpayer money.

The new “Deed for Lease” program will allow homeowners to transfer title to Fannie Mae and sign a one-year lease, with potential month-to-month extensions after that. It also helps save money because the lender does not need to complete the often lengthy and time-consuming foreclosure process.

The program helps “eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower’s credit record.

“It shows that you put your best effort to work out a solution,” said Gabe del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. “The preferred option is allowing people to retain ownership,” he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don’t qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

The plan is expected to be particularly attractive in places like Phoenix or Orange County, Calif., where homeowners are stuck paying large mortgage bills on properties that are now worth far less than they originally paid. At the same time, rents have been falling in those areas. So by renting the same house, former homeowners could wind up paying far less every month.

In Orange County, for example, the average monthly rent for all apartments was about $1,450 in September, down nearly 8 percent from a year earlier, according to research firm MPF Research. In Phoenix, the average renter paid about $720, also down about 8 percent from last year.

Still, the effort is likely to attract a relatively small number of homeowners.

In the first nine months of the year, Fannie Mae took ownership of nearly 2,000 properties through a process known as a deed-in-lieu of foreclosure. That pales in comparison to the 90,000 foreclosed properties the company repossessed in the period.

Deed-in-lieu works like the new program, allowing homeowners to turn over title to Fannie Mae, but rather than renting, the owners simply walk away.

While Fannie Mae executives say the company’s motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. That’s folly, says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

“Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded,” he said. “It’s going to cost a fortune.”

The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.8 billion, including $883 million in dividends paid to the Treasury Department.

Pessimists like Schiff say the recent stability in the housing market is just temporary, and argue that there is a huge backlog of foreclosed homes that haven’t gone on the market. Refusing to sell those homes, they say, only prolongs the problem.

But other experts say that Fannie Mae’s new policy could make sense, even if prices don’t rebound quickly. The company will get rental income while avoiding costly foreclosure expenses.

It will also help to safeguard the homes, which are less likely to be vandalized when occupied.

“There are a whole lot of costs you avoid,” said Thomas Lawler, a former Fannie Mae economist. “You don’t necessarily have to believe that home prices a year from now will be higher than today.”

Fannie Mae’s sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be completed and only allows month-to-month leases. Freddie Mac declined to detail how many borrowers have participated.

The two companies purchase loans from banks and sell them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, about half of all U.S. mortgages. They have been badly hurt by the housing bust and have required $111 billion in federal aid since being seized by government regulators 14 months ago.

___

To find out whether your home loan is owned by Fannie Mae or Freddie Mac, try these Web sites:

Fannie Mae http://loanlookup.fanniemae.com/loanlookup/

Freddie Mac: http://www.freddiemac.com/mymortgage

You can have any kind of a home you want. You can even get stucco.

Oh, how you can get stucco.

The Cocoanuts (1929)

Bloomberg - Wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California.

More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leave them unable to refinance or sell properties when they drop below the value of the mortgage, said Chicago bankruptcy attorney Joseph Baldi.

Chapter 11 is more expensive and time-consuming for debtors and creditors than a Chapter 7 liquidation of assets. Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine, a credit-counseling and research group.

“You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.”

Listings of homes for sale worth $1 million or more increased 27.3 percent in July from October, according to Zillow.com, a Web site that tracks real-estate transactions. The number of homes sold with a value between $1 million and $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. There was a 21-month supply, up from 16 months last year.

Expensive Real Estate

Actor Stephen Baldwin sought voluntary Chapter 11 bankruptcy protection in July after lenders began foreclosure proceedings. Baldwin, 43, listed $1.1 million in assets and $2.3 million in debt in documents filed in U.S. Bankruptcy Court in White Plains, New York. His home is valued at $1.1 million and the banks sought to recover about $1.2 million in mortgage loans, according to court papers.

“There are a lot of people with real estate, and they can’t afford it,” said Baldi, the Chicago attorney, who is scheduled to speak to the American Bankruptcy Institute on Chapter 11 next month. “They can’t make the payments, and they can’t sell the house.”

About 4.3 percent of U.S. homes, or one in 25 properties, were in foreclosure in the second quarter, according to an Aug. 20 report from the Mortgage Bankers Association in Washington. That’s the most in three decades of data.

Go to Zero

“Real-estate is an incredible thing on the downside,” said Jason Green, a bankruptcy attorney based in Washington. “Equities can only go to zero. Property can go well below zero,” because of ongoing expenses such as property taxes, insurance and maintenance on primary residences, vacation homes and investment properties.

Congress amended the bankruptcy law in 2005 making it harder to file for Chapter 7, which allows debts to be completely discharged. Chapter 11 gives individuals time to make a plan to reorganize their finances.

Approval for National Football League quarterback Michael Vick’s Chapter 11 plan took almost 14 months of legal wrangling with creditors who submitted over $19 million in claims. His bankruptcy docket, beginning in July 2008, includes 795 entries for motions, requests for hearings and transcripts. The plan includes a promise to pay approximately $2 million to his legal team and to devote a portion of Vick’s future NFL earnings to pay creditors.

The debt levels in the 2005 law prevent many higher-income people from filing Chapter 7, said Green. “They’re locked out of Chapter 7, because they make a lot of money, and it’s a disaster,” Green said. “They’re in a netherworld, just hanging out there.”

Multiple Steps

Unlike Chapter 7, which may be resolved in a single hearing, Chapter 11 takes multiple steps, all of which can be contested, said Stephen Kass, a New York tax and bankruptcy attorney.

The process begins with the debtor’s request for court protection preventing lenders from seizing assets, Kass said. The plan to repay a portion of the debt during bankruptcy is also usually contested, he said.

There are meetings with the U.S. Trustee, which oversees the case, the judge and creditors. When a debtor moves to sell an asset, a motion must be filed and is likely to be contested, Kass said. An operating report is prepared each month, including the debtor’s activities, remaining debts, ongoing income, projections for the future and negotiations with other creditors, Kass said.

Chapter 7 cases may cost between $1,300 and $6,000 in legal fees, Kass said. Chapter 11 cases generally start at $15,000 and can easily grow to twice that amount.

“It’s a lot of hearings, a lot of paperwork,” Kass said. “Chapter 11 is really geared for the big boys.”

Credit Counseling

Before filing for bankruptcy, all consumers must see an approved credit-counseling agency. An individual applying for Chapter 11 protection has 120 days to file a plan to repay a portion of debt, according to the Web site of the U.S. federal courts.

Rebuilding credit after a bankruptcy may take as much as five years of good payment history, said Ken Lin, chief executive officer of CreditKarma.com, a San Francisco-based Web site that allows consumers to monitor their credit scores. A secured credit card, which requires an upfront deposit, is a good way to start, he said.

Scores may actually improve because of the discharged debts, Lin said, but credit will still be difficult to get and will be more expensive, because most companies do a separate search for bankruptcies as part of their underwriting.

‘Penalty Period’

“There will be a penalty period where you’ll be under extra scrutiny,” Lin said. “A consumer should be prepared to be declined a lot.”

If consumers are using credit cards to pay utilities or groceries, it may be time to speak to a counselor, said Dianne Reichl, group manager at Greenpath Debt Solutions in Detroit. Other signs of trouble: taking numerous cash advances; paying one bill one month, another the next month; and falling behind on basic needs, such as housing and utilities.

“We’re seeing people who historically never would consider they were having a problem seeking help,” said Mike Croxson, president of Care One Services, a credit-counseling company in Columbia, Maryland.

Las Vegas Sun - A Las Vegas real estate agent who landed a prominent role in a Time magazine cover story is being scrutinized by state licensing officials because of her comments, has left her employer and is lying low.

The story by Joel Stein in the Aug. 24 issue, “Less Vegas,” is a high-spirited and high-altitude view of the troubles facing Las Vegas, which he calls both “our most American city” and “an entire city of John Dillingers.”

In the story, Brooke Boemio — “a bouncy, sweet, recently remarried 31-year-old mom” — is cast as one of the Dillingers. She helps Stein break into a foreclosed home and brags about helping clients who are underwater on their mortgages buy a second house on the cheap and stop making payments on their first mortgages, pressuring the bank into selling the houses for a loss. Everybody’s doing it, she says in the story. In fact, she said, she did it herself.

Since the story appeared, Boemio and her employer have, in the words of Coldwell Banker Wardley Real Estate President Jeff Sommers, “parted ways.”

Sommers also said his company has conducted an internal investigation and has been unable to find any cases of Boemio engaging in the behavior described in the story. The buy-and-bail tactics described in the story, he said, are serious allegations and “really just in direct opposition to everything in our policies.”

In a further statement released online, Sommers said Boemio told him she had been misquoted and misrepresented by Time.

Boemio did not reply to the Sun’s telephone, text and e-mail messages.

When the story was published, it referenced a video on Time’s Web site titled “Breaking and Entering,” of Stein and Boemio entering an unoccupied home on the west side of town. Since then, the video has been removed from the Web site for what Time spokeswoman Betsy Burton described as “some sensitivity with various issues.”

A Metro Police spokeswoman said Stein’s description of his and Boemio’s entrance into the home appears to meet the definition of misdemeanor trespassing.

Boemio could face further trouble with the agency that licenses Nevada real estate agents.

The Real Estate Division of the Business and Industry Department is “aware of the article and is taking appropriate action,” spokeswoman Elisabeth Daniels wrote in an e-mail. Real estate agents are required to deal fairly with and disclose relevant information to all parties in a transaction and by statute must have “a good reputation for honesty, trustworthiness and integrity.”

Sue Naumann, president of the Greater Las Vegas Association of Realtors, released a statement Tuesday saying that although Boemio had applied for membership, she is not a member of the association. Officials with the organization said Boemio had not taken its ethics class.

Buy-and-bail real estate purchases may not be as common as it sounds in the Time story.

Darren Welsh, general counsel for Prudential Americana Group, said the practice was common earlier in the recession but is rare these days. Lenders, having been burned by buy-and-bail real estate purchases, are more cautious today and won’t sell a buyer a second home unless the buyer can afford both homes.

“They’re on to it,” Welsh said.

HousingWire - As of the end of June, more than 15.2m US mortgages representing 32.2% — or roughly one-third — of all mortgaged properties in the country had fallen underwater in a negative equity position.

The proportion of US mortgages underwater in Q209 came in slightly below the 32.5% seen at the end of March, according to data released Thursday by First American CoreLogic.

The top five states in terms of a proportion of underwater borrowers included Nevada with 66% in negative equity and Arizona with 51% negative equity. Florida followed with 49% underwater while Michigan and California rounded out the top five with 48% and 42% respectively.

“Negative equity continues to be the dominant driver of the mortgage market because it leads to foreclosures in the event a borrower experiences some kind of economic shock such as a job loss, illness or other adverse situation,” chief economist Mark Fleming says.

“Given that negative equity did not increase this quarter and home prices declines are moderating or flattening,” Fleming adds, “we may be at the peak of the negative equity cycle. However, until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated.”

The aggregate property value for loans in a negative equity position and at risk for default reached $3.4trn in June. California claimed the highest share of underwater loans valued at $969bn, followed by Florida with $432bn. New Jersey and Illinois each held $146bn while Arizona followed with $140bn.

Bloomberg - Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.

The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.

As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.

“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.

Seven markets in states with the fastest appreciation during the five-year housing boom — including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas — may find 90 percent of borrowers underwater, according to the report.

The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen.

Home prices will decline another 14 percent on average, the analysts wrote.

Chicago Tribune - After lowering the $4.2 million asking price of their Lake Bluff estate three times and by more than $1 million, Mike and Marti Palmer flirted with the idea of trading the still-unsold custom home for something smaller.

They own 70 percent equity in the 9,700-square-foot home perched on a wooded ravine near Lake Michigan, and are by no means “distressed sellers.” But they have been forced to think creatively about how to market the 15-room, English-style manse — now going for $3 million — amid a recession that has hit the upper bracket especially hard.

“Unfortunately, we put it up just before everything tanked,” said Mike Palmer, a financial consultant who is pragmatic about the competition. “Everything is on the table.”

Real estate agents say they have never seen prices drop so precipitously when dealing with opulent, often empty high-end homes along the North Shore that cost a small fortune to maintain and keep secure. Though homes in the $400,000-to-$700,000 range have weathered the financial storm better than expected, the glut of eye-popping mega-mansions has owners competing for the attention of a select few.

“It is a phenomenon we’ve never seen in our lifetime,” said real estate agent Jason Hartong with Rubloff Residential Properties, who has seen some multimillion-dollar price tags cut nearly in half.

Nationally, the scenario is much the same. The pool of people wealthy enough to afford such luxury already represented a small sliver of the marketplace. Home transactions priced at $750,000 or more made up 4 percent to 5 percent of transactions before the recession, said Lawrence Yun, chief economist of the National Association of Realtors.

Today, only 2 percent of housing transactions are taking place in the same upper-end price range, Yun said.

“Many of the wealthier people have their wealth tied to the stock market,” he said. “Given that the stock market is down 30 [percent] to 40 percent — even with the recent run-up — that has eaten into their financial resources.”

At the same time, lenders are hesitant to approve so-called jumbo loans that are necessary for some buyers to finance a million-dollar-plus property, said Terese Penza, president and CEO of the North Shore-Barrington Association of Realtors.

Developers, many now in bankruptcy, were caught by surprise, as well. Vacant and unfinished homes dot the Chicago suburbs, with for sale signs that tout the “New Price.”

For instance, a custom-built stone home at 750 Sheridan Rd. in Winnetka priced at $5.5 million in November 2007 is going for $3.3 million.

It’s enough to make builder Farhad Nikamal sick, as he describes the loving attention he paid to detail in planning the two-story reception hall with marble flooring, a Brazilian cherry staircase, hand-carved travertine marble fireplaces and a 1920s French chandelier.

“This has cost me almost $3.9 million,” said Nikamal, leading a tour through the house, protected with wrought-iron gates and a security system.

He believes that many potential buyers are bargain-shopping and have been brutal in taking advantage of the poor economy. “People should understand, right now, this is beyond a bargain,” Nikamal said.

He is considering raffling off the 6-bedroom, 8-bathroom luxury home, which sits across the street from Lake Michigan. “You are not going to see this again,” he said, shaking his head.

Less than a mile away in Glencoe, a renter occupies a 15-room white-brick monolith at 501 Greenleaf Ave. The home, owned by a developer and constructed in 2007, has dropped to $2.8 million from the original asking price of $4.3 million.

Like many other properties in its price range, it features a wine cellar and bar, exercise room with access to a sauna, heated marble bathroom floors and stainless-steel appliances.

“It’s been tough to keep deals together,” said Matthew Schneider, a real estate agent with Coldwell Banker, who slipped off his shoes before walking through the pristine house. “Buyers are really out for the best deal. There are definitely people taking advantage of the situation.”

The sluggish sales remind real estate agents of the last severe downturn in the 1980s, when inflation and interest rates that hit 16 percent contributed to a weak housing market.

Julie Morse with Griffith, Grant & Lackie Realtors views some leveling down of prices as a healthy adjustment after years of an upward spiral. “There has been a softness in the market coming up on two years,” she said.

The number of North Shore homes sold for $1 million or more dropped to 572 last year — down 39 percent from the 935 homes sold in 2005 — a peak year — according to statistics provided by the North Shore-Barrington Association of Realtors. As of June this year, only 154 homes in that category have sold.

Another affluent community, Barrington, has seen 17 homes priced at $1 million or more sell through June this year compared with the 55 sold during the same period in 2005, the data showed.

Those dismal figures could be welcome news for Sheldon Good & Co., a Chicago-based auction house that deals in upper-bracket home sales.

“As the market becomes more challenging, the sellers are more attracted to the auction,” said Michael Fine, executive vice president.

High-end, custom-built homes already are difficult to price because they can’t be easily compared with neighboring homes, he said. During a recession, other factors make it even tougher for sellers to figure out what the market will bear.

Over the last month, he said, he has fielded inquiries from home sellers on the North Shore and in the western suburbs, as well as from such vacation communities as Door County, Wis.

“I would expect we would do double or triple the numbers we have done the last few years,” Fine said.

As they try to sell their home in Lake Bluff, the Palmers are offering an added incentive — setting aside $20,000 for a buyer to help with the property taxes. The annual tax bill is now a whopping $60,000, but they believe that when the property is reappraised the taxes will be lowered, if appealed.

With only one of their four children still living with them, they are eager to downsize and move on with their lives. Meanwhile, they’re trying to be creative but realistic.

“Everyone is in the same boat,” said Marti Palmer, who has been looking at other homes. “You can’t buy if you can’t sell, so we’re open to ideas.”