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A Look at the Case-Schiller - No Good News
The April Case-Schiller report tells us very little. The 3.8% average
rise reflects the end of home buyer tax credit. Sales and prices have
evaporated since May 1. The CS index will tell us a much different story
when the data is released 30/60 days from now. While the April report
provides little insight as to where we are today there is some
interesting information that is worth noting.
Of the 20 cities the CS index tracks 18 showed price increases. The two
that fell were Miami (-.8%) and NY (-.3%). With that in mind consider
this chart:
The information is based on April data and is therefore consistent with
the CS report. Both New York and Florida are at the top of the list of
states with the longest period between initial default and final
foreclosure. For the nation as a whole the number of days has nearly
doubled over the past few years. NY and Florida are 31% and 21% higher
than the national average.
This is not a coincidence. This is cause and affect in action. I live in
metro NYC and own property in S.Fl. I see what is going on. There are
many middle to upper price homes on the market that have not seen an
offer for more than a year. A good number of these are already in
default. The borrowers are underwater and there is nothing they can do. A
HAMP style ReFi accomplishes nothing. I know people in both areas who
have contacted their lender and have been told to come up with an
acceptable short sale or deed in lieu transaction. The borrowers have
been told by the bank(s) that if they do not cooperate they will have
their credit wrecked and be subject to default judgments. So the
borrower puts the house on the market and hopes for an offer that is
acceptable to the lender. In the mean time they stay in the home for up
to two years and pay very little (if anything) on the old mortgage.
There is substantial evidence that these people are buying IPhones and
going on vacation with the money they are saving by not paying the debt.
Some thoughts:
-This “extend and pretend” at its worst.
-The lenders will not let this continue forever. The day of reckoning is
coming. It well be felt in all of the states. It will be felt hardest
in the states that have the highest days to foreclosure numbers.
-As a former owner is foreclosed they will be forced to rent. Given that
few in this category are paying any meaningful amount of their current
monthly mortgage it is likely that they will have less disposable income
post foreclosure.
-My conclusions:
(A) RE in Fl and NY is going to tank this fall.
(B) Consumer demand for things from clothes, gadgets and leisure is
going to suffer an out sized decline.
(C) The extend and pretend policy is catching up with us. This approach
was a “buy some time” idea in the hope that things would work out. They
have not worked out. We are about to pay the price for that failure.
If we revert to more traditional levels in the ratio of initial default
and foreclosure we are going to hit an economic wall. This is just one
more thing stacking up against us.
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Whatever Larry says, the opposite is true.
You'd have to clone him to make him any dumber.
Larry has had a few lucid moments in between derangements. Not many, though.
Larry "Green Shoots/V-shapred recovery" Larry? Cocaine is a helluva drug isn't it?
I'd had about enough of Goldilocks as well....
Larry is an idiot. He only sees what he wants to and loves the sound of his voice.
He's the only one who loves the sound of his voice. He's the male complement to Rachael Ray's screeching.
One of the few that interrupts himself as well as his
"guests." He got the Tax Selling part right...
Thanks for the analysis Bruce,
I'm not sure I buy your conclusion re: consumer spending. When the people quit living off the lamb, they will start paying rent. That rent consists of income to some real-estate investor somewhere. That real-estate investor will then have more money to buy consumer goods or buy another property and get it ready to rent.
It seems like a wash from a consumer goods demand perspective.
Though I would buy the notion that people in general will feel less rich as the true values of their homes become more apparant and they fall further.
Actually people with Macmansions are already renting out extra bedrooms especially empty nesters.
Tent cities...
That reminds me, I need to buy a new tent.
Oh, ditto. Cuatro De Julio is upoon us. Time to practice those soon needed camping skills
Nah mate, that "rent" is going to be used to pay said mortgage, condo fees, taxes. This will belt consumer spending.
Agree - money that is paid as rent is servicing debt by and large, as well as taxes. Before paying rent, the ne'er-do-well underwater homeowner was freely blowing his cash on baubles.
More of the "appearance of prosperity" that von Mises predicted when fiat money is pumped in to "stimulate" the economy.
The only spot I know of where prices are holding, is Bethesda MD - go figure?
If my local bank was the orginator and fannie the underwritter does that tilt the legal time frame towards the average or is it easier to foreclose?
Biden naval healthcare boom...
Ummm Naval healthcare at Bethesda didn't work out so well for the corrupt Rep. Murtha. At least his constituents replaced him with another DemocRAT.lol
Maybe Larry should pee into a jar.
who is larry kudlow?
......just an innocent question....kind of a phat phinger metaphore....
we know only TD and CD over here....
hiaha
He's one of the guys on CNBC who yells at people. CNBC likes to put people on the air who yell a lot and don't make any sense.
Larry Kudlow, or Crudlow as he is commonly known on the wrong side of the pond, is an ex-cokehead who pretends to be a financial journalist. Ignore him, he is not worth paying any attention.
Not Kudlow, Summers. He's the real junkie.