This is one of the most comprehensive Housing feeds available. Although it is often quite negative, it is a good idea to balance this information with some skepticism, recognizeing, that negative information is only one point of view. We often see that it's never as bad as they proclaim, nor is it as good as they proclaim either.
Three years late, but better late than never, I guess:
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
As a country that earns its living exporting commodities, elevated prices have so far saved Canada from the kind of credit crunch experienced south of the border. In fact, for the last two years easy money has created a housing bubble. So, as the market begins to cool there’s growing speculation that it will be quite sharp – and one that would deepen if China’s rapid growth slows. This may be less of a concern for Canada’s banks, protected as they are by government guaranteed mortgage insurance, than its taxpayers.
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I don't often agree with John Carney. I believe that the community reinvestment act had less to do with the housing bubble than the repeal of Glass-Steagall, for example. A few subprime borrowers were nothing compared to banks being able to write swaps "insurance" on bad loans, then hide them with the blessing of Basel 2 off balance. But Carney has hit the nail on the head in a recent article published on the CNBC webpage. Carney is warning us of the perpetual requirement that Basel 3 plans to impose upon the US taxpayer. I have tried to explain the article on my blog, but I wanted to explore it for the benefit of Seeking Alpha as well.
What we’ve learned over the past three years, courtesy of the NYT:
When the housing bubble burst, one of the culprits, economists agreed, was exotic mortgages, including those that required little or no money down.
Record low levels of demand continue to haunt the U.S. housing market with July pending home sales re-confirming previous crash-level readings.
We often emphasize the importance of context when analyzing financial market and economic information. A given data point only has meaning when it is considered in terms of what has come before. Different time frames afford different perspectives, but, in general, it is best to view trends over weeks, months, years and even decades in order to develop a thorough understanding of the big picture.
The recent housing bubble in the US was an excellent example of extreme investor myopia in action as one hundred years of historical data were cast aside in favor of the ever popular (but always tragic) "this time is different" mantra. When home values initiated their parabolic rise early last decade, real estate quickly became the latest "can't miss" investment, spawning a speculative frenzy that drove prices to unsustainable extremes. We often refer to the resulting real estate bubble as the largest in US history, but in order to truly appreciate the magnitude of the move it is necessary to view it in terms of the long-term trend in home values.
The Obama administration is, if nothing else, persistent in its efforts to turn around the housing market. The WSJ has the details on the next tilt at windmills which they will roll out on Tuesday:
The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.
A lot of people have been quoting this passage from Chip Case’s op-ed on housing as an investment:
For people with a more realistic version of the American dream, buying a house now can make a lot of sense. Think of it as an investment. The return or yield on that investment comes in two forms. First, it provides what is called “net imputed rent from owner-occupied housing.” You live in the house and so it provides you with a real flow of valuable services. This part of the yield is counted as part of national income by the Commerce Department. It is the equivalent of about a 6 percent return on your investment after maintenance and repair, and it is constant over time in real terms. Consider it this way: when Enron went belly up, shareholders ended up with nothing, but when the housing market drops, homeowners still have a house. And this benefit is tax-free.
Karl E. Case, the lesser-known of the "Case-Shiller" pair has an op-ed in the New York Times that basically argues that it's a great time to buy a house.
Yes, the old American Dream -- having a house that appreciates 30% year-on-year -- is dead, as Case acknowledges. But that doesn't mean the math isn't compelling.
Adam Levitin and Susan Wachter have a new paper out which reckons it can explain the entire housing bubble by looking at the supply of private-label mortgage-backed securities in the market, and the information asymmetries embedded in them.
They do have a point: since the banks putting together these private-lable securities, or PLS, knew much better than the buyers (and, for that matter, the ratings agencies) what was going into them, there was an opportunity — grasped with both fists — to take advantage of those asymmetries:
By Dirk van Dijk, CFA
Total Construction Spending fell in July to a seasonally adjusted annual rate of $805.2 billion, down 1.0% from June, and down 11.7% from a year ago. The decline was greater than the 0.7% decline that was expected. In addition, June was revised down to be 0.8% below May rather than the 0.1% increase originally reported.
It was a rainy day this morning and traffic was bad, but nothing out of the ordinary. Or so I thought. After diving into some work, and engaging some clients, I decided to check up on the markets (something I had neglected to do last night and early this morning). What I saw literally blew my mind.
Dow Jones up nearly 2.5% at 10am EST? What? How? It turns out, there was a manufacturing report from the Institute for Supply Management showed an increase to 56.3 in August from 55.5 in July. China growth has apparently only been “moderating” as opposed to slowing down. This is marginally good news, of course, as any reading above 50 indicates growth. This, apparently, has turned bears to bulls and frozen the deepest chasms of Hell into winter wonderlands.
The yield on the 10-Year US Treasury continues to trade around my quarterly pivot at 2.495. A new monthly pivot is 2.562 with my semiannual risky level at 2.249. Gold is trekking towards its all time high at $1266.5 set on June 21st with my semiannual and monthly risky levels at $1260.8 and $1263.8. Crude oil has a new monthly pivot at $74.45. The euro remains below its 50-day simple moving average at 1.2789. The Dow shows a new monthly pivot at 10,164 for September with today’s value level at 9,876. The miss-interpretation of economic data.
Just when you thought the housing market couldn't get worse, it did.
New single-family home sales slumped 12.4% in July to a record-low annual rate of 276,000 units, as homebuyers shunned their realtors in the absence of government support. The consensus expectation was for a slight up-tick to a 333,000 unit annual rate, so I suppose it's time to throw out the models. Sales over the prior three months were also revised lower by 9,000 units.
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Both the Case Shiller 10 & 20 city Home Price Indices rose 1% in June on a non-seasonally adjusted basis. S&P cautions that their seasonal adjustments are probably being distorted by seasonal factors that’s why I prefer to look at the NSA numbers. 18 out of 20 Metro areas recorded price rises with only Phoenix and Las Vegas recording price declines. Whilst that sounds good, it should be remembered that the Case-Shiller indices are an average of 3 months, thus the latest report is an average of April, May and June, the last 3 months of the tax incentives. As S&P notes;
In the interesting exchange between Will Wilkinson and Matt Steinglass on Democracy in America, Matt writes:
Through the 1990s and early 2000s,Congress progressively raised targets it set for the GSEs to securitise loans coming from low-income neighborhoods. To the extent that I understand what Mr. Rajan is talking about, I think he may be talking about this. Mr. Jaffee argues that it wasn’t relevant, because the GSEs tended to ignore Congress’s targets, and when they did meet them it was because everyone in the world, including private securitisers, were falling over each other to buy up subprime loans, since everyone had convinced themselves they’d be profitable.
In June, home prices continued to rebound, but unevenly across the country. The Case-Schiller Composite 10 City index (C-10) rose 0.32% on a seasonally adjusted basis, and is up 5.02% from a year ago. The broader Composite 20 City index (which includes the cities in the C-10) rose by 0.28% on the month and is up 4.22% from a year ago. Of the 20 cities, nine posted gains on the month, while 11 saw prices fall.
Year over year, 15 metro areas saw gains and five suffered losses. There is a seasonal pattern to home prices, and thus it is better to look at the seasonally adjusted numbers than the unadjusted numbers. Most of the press makes the mistake of focusing on the unadjusted numbers.
PenFed Realty, LLC 11864 Sunrise Valley Dr, Reston, VA 20191703-716-29001:40:33 PMFriday, November 02, 2007