Real-estate losers of 2008

1. People who lost their homes and the banks that made them the loans

This list would not be complete without an acknowledgment of the large numbers of people who lost their homes this year -- whether by their own bad financial decisions, dishonest brokers or job loss. The latest numbers show foreclosures were up 28% in November 2008 versus the same period a year earlier. And Credit Suisse recently predicted 6.5 million loans will enter foreclosure by 2012.

Financing was available for larger amounts than many borrowers could truly afford. Ditto for home equity lines. And some borrowers were sold variable-rate loans they shouldn't have settled for in the first place, analysts say.

Taken down by all of this risky lending were some of the country's largest banks, such as Lehman Brothers, Countrywide, Bear Stearns and Washington Mutual -- banks that should have seen the crisis looming, brokers say.

This greed took its toll in the layoffs of these companies' employees -- not the highly paid CEOs and other executives who lost their positions, but lower-level employees who were shown the door as the companies went under or were acquired.

2. Home builders

It's a make-or-break year for builders. New-home sales hit their lowest point in nearly 18 years in October, dropping off 40% from where they were at the same time a year earlier, according to the Commerce Department.

At the same time, the median price continued its downward slide, putting even more pressure on the bottom line. "This has been the worst year for the housing market in decades," says Celia Chen, senior director of housing economics for Moody's Economy.com. "Home builders are getting hit pretty hard on the revenue side."

Many are saddled with large amounts of debt, and with sales trickling in, they are low on cash flow to make their payments, Chen says. Already, three public builders have filed for bankruptcy protection and more could be coming, she says.

Hardest-hit are those catering to first-time buyers, a segment that was overbuilt in many markets. But even builders of higher-end homes are seeing their business dry up. "I think there are many who are at risk" of failure, Chen says.

3. Sellers

In most parts of the country, it was exactly the wrong time to put your house up for sale. With a flood of foreclosures pushing down prices by more than a third in some neighborhoods, those having to sell had to slash their price just to compete. And those who had just bought in the last few years often had to take a loss, as sliding prices ate up what little equity they had acquired.

Many who could not sell their property became reluctant landlords, taking on more expenses and risk to rent out their unsold house.

The national median price for an existing home dropped 11.3% in October from the same time a year ago. The only consolation to move-up buyers was that the hits they took on their property were sometimes mitigated by the discounts they received on their new place.

4. Real-estate agents

It doesn't take a rocket scientist to figure out that plummeting home sales do not spell success for real-estate agents. Most agents are working harder than ever to drum up business and spending more money to market the few properties they have.

Agents who did not build up the necessary reserves to weather this storm are now getting out of the business, says Steve Murray, real-estate consultant and editor of the Real Trends newsletter. And some real-estate brokerage companies are going under, such as Help-U-Sell, a 450-branch brokerage that filed for Chapter 11 bankruptcy protection this past summer after several of its regional operators went bankrupt.

But not everyone is suffering. Some experienced agents with a strong following are actually reporting increased business in 2008; a move Murray calls a "flight to quality" on the part of buyers and sellers.

5. Mortgage brokers

Another group that has seen its ranks dwindle substantially this year is mortgage brokers. Pummeled by slow home sales and dwindling credit, many are now leaving the field, says Holden Lewis, who covers the mortgage business for Bankrate.com. "The ranks of mortgage brokers has shrunk a lot," Lewis says, estimating that as many as one-third of brokers are no longer in the business.

Also to blame, says Jon Eisen, a San Diego mortgage broker, is a retreat by lenders that are now handling some of their mortgages in-house instead of farming them out to brokers. Analysts call this move short-sighted, pointing to a jam-up by banks in recent weeks when they couldn't handle the flood of applications that followed the sudden tumble in mortgage rates. When they were overwhelmed by the quantity of business, they raised their rates.

"They will have to build up this network again somehow," Lewis says.

Eisen says he lost his faith in the brokerage business this year. "If you were an ethical, upstanding broker who tried to do well for your client," you didn't share in the money-making spree, he says. "I had lenders basically telling me to lie on the paperwork," something he says he refused to do. "This whole thing has unfolded and basically screwed me. I'm bitter, you betcha."

6. U.S. taxpayers

And ultimately, San Diego mortgage broker Jon Eisen says, it was the taxpayers who lost big, as they shouldered the tab for the excesses of banks, mortgage insurers and others who at best failed to police their own industry, and at worst turned a blind eye to or encouraged fraud.

"I really think society is the big loser here," Eisen says, referring to the subsequent bailouts. "We keep rewarding failure."

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