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.
Among the many other less-than-desirable features of the mortgage modification program known as HAMP (Home Affordable Modification Program) is the revelation that, according to this AP report, your credit score will probably be lowered soon after you apply for help.
For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.
David Rosenberg, Chief Economist at Gluskin Sheff, has recently given a couple of different views about the near term future for housing prices. These views are different only in degree: both are negative.
Home Prices May Drop 20% Further
Suppose that John Taylor is right: that prudent macroeconomic policy would have had the Federal Reserve begin to raise interest rates not in the middle of 2004 but in the middle of 2003, and raise them back to boom-time levels not in two years but in one year, like so[1]:
The stock market continues to grind higher in the face of skepticism. It is a familiar story. Nearly a year ago we highlighted the "wall of worry" concept. I wrote as follows:
Our Take
With the EU Summit scheduled for March 25-26, following a messy EU Finance Ministers meeting that has failed to provide concrete financial aid to Greece and has once again shaken investors’ confidence, the week ahead should unveil the next phase of the Greek debt drama and could prove crucial for the future fate of the euro.In preparation for the new trading week, here is a look at the most important economic events that every currency trader should pay attention to.
The video clips below provide a handy summary of the reports expected on the economic, financial and corporate front around the globe during the week ahead.
US: Health care, housing data Markets will be watching to see if health insurers will be able to sustain their rally after this weekend’s climactic vote to overhaul the nation’s health-care system. Data on existing- and new-home sales will also be examined.
David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, yesterday made the following observation:
To be sure, the Case-Shiller index has yet to roll over. But it has slowed, and being a three-month average, it may take time to show deflation again. The LoanPerformance home price index is down for four months running. Freddie Mac’s conventional home price index fell 0.7% in Q4. RadarLogic’s 25-city house price index is down for two months in a row and in four of the past five.
March Madness has begun, and as if on cue market volatility is evaporating. Despite a fair amount of economic data, stocks ended the day yesterday unchanged. Stocks have had a nice run, but seem extended; a period of time in which the attention of many investors is on the bracket is probably not the best prescription for an extension higher…
Bonds had a bit more action, with the 10y note finishing -8.5/32nds (10y yield at 3.67%), but of course CPI is more directly relevant for fixed-income. It is rather interesting that rates went up, and not down, on a day when inflation fears (the way people conventionally measure them) went into retreat. How much in retreat? Well, 1y inflation swaps fell 10bps (the yield of the April 10s, which is effectively a T-Bill after yesterday’s print, rose 93bps), and longer inflation expectations retreated 2-4bps. Declining inflation expectations are usually associated with declining rates, which means that real rates actually rose more than nominal rates yesterday.
While problems abound, we've always had problems, and both the U.S. and world are nevertheless rebounding from the depths of the financial crisis. If you're complaining about U.S. housing still being weak, well it should be.
Prices went far too high and far too many houses were built. As Warren Buffett said in his latest annual letter, low home prices mean cheaper homes, which isn't all that bad. He also sees a recovery on the horizon.
Good thoughts here from David Rosenberg on the price of real estate in the United States. Rosenberg points out that housing is still an excessively high percentage of household assets. If history is any guide, it could mean there is at least another 10% downside in housing:
“Chart 4 is the ratio of U.S. household real estate assets relative to the entire asset pie in the personal sector. At 26.7%, it is well below the bubble peak of 33.6%, but is still just back at the starting point of when the mania was just beginning (a decade ago). “
Nobel prize winning economist Joseph Stiglitz has warned that the Federal Reserve’s decision to end its $1.4 trillion mortgage debt purchase program this month is going to worsen the slump in the US housing market by driving up interest rates.
There has been no recovery in the US housing market this year, the biggest item of expenditure in the world’s biggest consumer market. New home and previously owned home sales are still falling. House prices continue to fall.
This is not very encouraging. If the Financial Crisis Inquiry Commission can't cross the Community Reinvestment Act (CRA) off its list of potential causes of the crisis after all this time and all the evidence that is clearly against this explanation, what does that say about the chances they'll get this right? (And if they aren't willing to say that the CRA wasn't the problem because of worries over a political backlash, i.e. that some on the right might get upset and complain, that is not a good sign either. There may be reasons to worry about how certain groups were taken advantage of in the name of increasing home ownership among the middle and lower classes, but this did not cause the crisis.):
What Caused the Financial Crisis? Still 22 Possibilities, by Stephen Gandel: The head of the Financial Crisis Inquiry Commission, Phil Angelides, stopped by the office this morning. ... Angelides' visit underscored just how hard his job is. Here's why:
Mortgage fraud was rampant during the housing boom. Regulators were asleep at the wheel during all of this. But now we are getting some indictments as WFAA News 8 in Dallas reports (hat tip Housing Wire). This television station did the dirty work for regulators and uncovered massive amounts of mortgage fraud.
Byron Harris reports:
Mortgage applications fell last week:
The Mortgage Bankers Association’s index decreased 1.9 percent in the week ended March 12. The Washington-based group’s purchase gauge fell 2.3 percent, while its refinancing measure declined 1.7 percent.
These are troubled times indeed… particularly for four regional housing markets where prices have literally fallen off the charts!
Prices for homes in Detroit, Atlanta, Cleveland and Las Vegas now sit at levels not seen in at least ten years.
The Federal Reserve has paid a yearlong bribe to the housing market to keep mortgage rates almost a full point below average. The $1.25 trillion payoff also known as the Mortgage Backed Security purchase program is about to end. Will the mortgage market stay bought?
Honest corruption is when a bribed official performs as promised without asking for more money or welshing on the deal entirely. It is a variant on Senator George Washington Plunkitt’s famous term ’honest graft’. Senator Plunkitt, a 19th century New York Tammany leader said it best,
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50% of all residential mortgage originations and tracks the average interest rate for 30-year and 15-year fixed rate mortgages, 1-year ARMs as well as application volume for both purchase and refinance applications.
The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.
From the recent Lender Processing Services report comes the chart shown below depicting the latest foreclosure trend - non-foreclosures. That is, where borrowers stop making mortgage payments but stay in the house.Does anyone know of any estimate of the impact of this extra cash on such things as consumer spending within the GDP data? Here's my back-of-the-envelope calculation for Q4:
Assuming these "homeowners" bought things with 75 percent of what they didn't pay in mortgage payments, this would account for about 2 percent of the increase in personal consumption during the fourth quarter - not really significant, but it sure didn't hurt.
Nationally, 24% of all mortgages have outstanding values greater than the current market value. The term for this condition of negative equity is "under water", hence the title of this post.
Michael Gerrity reports at the Real Estate Channel on the latest data from First American CoreLogic. In February, Nevada had 70% of mortgages underwater. Number 2 was Arizona, at 51%, followed by Florida at 48%. Another 3.8% of Florida homes were essentially flat to value, nearing submersion.
PenFed Realty, LLC 11864 Sunrise Valley Dr, Reston, VA 20191703-716-29001:40:33 PMFriday, November 02, 2007