Subprime Christmas Housing and lending woes have put a damper on holiday retail sales, gift giving.

ASSOCIATED PRESS

Jackie Castleberry won’t be playing Santa Claus this year.

She usually buys her grandchildren, nieces and nephews lots of gifts around the holidays — bicycles, educational games, clothes — but this year she is just struggling to keep her North Las Vegas, Nev., house.

The interest rate on her four-bedroom home loan shot up in October and she is $6,000 behind on her payments. She now owes $168,000 on her home, which once was worth $220,000 but is now worth about $150,000. In the past, when times were tough, she would borrow against her home’s equity — that’s no longer possible.

“I was always seen as the person that’s giving, but it’s kind of affected this year,” said Castleberry, a former casino buffet supervisor who now makes $11 an hour, 30 hours a week, supervising children before and after school. “This year, I can’t see anything right now as far as gifts.”

Castleberry is just one of thousands of homeowners nationwide who can no longer finance their spending by tapping into their once inflated, now depreciating home equity. Others can no longer afford their higher monthly payments due to a reset in their adjustable-rate mortgages and have been foreclosed.

The crisis is taking a toll on consumer spending, particularly in areas that have been hit hardest, such as Florida, California and Nevada. And it is one of the biggest factors behind what is expected to be the weakest holiday season in five years.

Nevada, California and Florida have posted the highest foreclosure rates in the country for the past several months, according to Irvine, Calif.-based RealtyTrac Inc. In October, Nevada reported one foreclosure filing for every 154 households; California’s rate was one for every 258 households; and Florida had one for every 273 households — up nearly 165 percent from October 2006’s total.

Mark Zandi, senior economist with Moody’s Economy.com, said the housing downturn is “weighing increasingly heavily on retailers and will play a significant role during the holidays.” In the second half of 2006 and the first quarter of 2007, mortgage equity withdrawals were at a peak of $850 billion on an annualized basis, Zandi said. But in the third quarter of 2007, that number had fallen to $550 billion.

Nevada’s overall sales tax revenue was down 4.7 percent in August from a year earlier — marking the first drop since right after the Sept. 11, 2001, terrorist attacks.

“The decline in house prices and homeowners’ equity is making it difficult for homeowners to pull out equity for their homes, and therefore they don’t have the cash to spend as aggressively,” Zandi said.

And that’s also hurt people employed in the real estate and mortgage businesses.

Last year, Leo Rojas could spend liberally on Christmas gifts for his 7-year-old son and 14-year-old daughter and the employees at his Miami-based mortgage company, which was processing 50 home loans a month. He bought a video game system and a slick toy all-terrain vehicle for his kids and Movado watches, expensive pens and Walt Disney World trips for his workers.

But this year, his company is processing five loans a month. He has closed offices, laid off employees and is selling cell phones to make ends meet. He estimates he’ll spend about a quarter of what he spent last year on gifts, with his children getting a phone, clothing and perfume or cologne.

“We’re finding ourselves going back to the basics,” Rojas said. “We made a decision that we’re only going to give to our immediate family, as opposed to last year when we gave to all our family and our friends and our friends’ kids.”