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Housing Time Bomb Goes Tick Tock Tick Tock
Housing Time Bomb Goes Tick Tock Tick Tock
Courtesy of Lee Adler of the Wall Street Examiner
A couple of data points reported today marked a tick and a tock on the housing market clock. The Mortgage Bankers Association Mortgage Applications Index release was weak but not explosive. The FHFA (Federal Housing Finance Agency) monthly data on home sale prices was up, but meaningless.
The FHFA data is after the fact price data using paired sales of properties previously financed through Fannie and Freddie, which recently resold and were again financed by them. Given the lag in the reported data, the FHFA data is slightly more useful than the Case Shiller data, which suffers from use of moving average smoothing, but less timely than the NAR data, which has validity issues, and even less timely than real time listings data.
FHFA reported that sales prices in June were up 1.4% from May. That's very nice, but that was June, and this is late August, and we already know from more timely listings data (see Housingtracker.net) that prices probably peaked in July, as they normally do each year.
We also know from more than 5 years of historical data that while listing prices are typically about 10% above selling prices, they appear to accurately reflect the direction of the trend and changes in trend. Their biggest advantage is that they are available in real time. The other advantage is that the aggregated listings data is not smoothed, seasonally adjusted, or massaged by an organization that may have motive to make the numbers look better than they really are. It is simply an independent compilation of raw, individual listings data available publicly and updated daily on the internet through the NAR's website.
Applying simple trendline analysis, and considering the fact that the usual seasonal peak is now behind us, we can see that the downtrend in house prices has yet to be broken. The next significant point will be this winter when prices normally hit their seasonal nadir. If prices in January hold above last January's level, then we'd have a basis for calling a potential bottom in housing prices. However, a higher low would not be sufficient for a change in trend. Prices must break the downtrend line, and make a higher seasonal high before we can be confident that the lows are behind us.
The other data released today that's also useful because it is so timely is the weekly purchase applications data from the Mortgage Bankers Association. On a seasonally adjusted basis, which is the only thing that the MBAA reports publicly, the index reached a record low for the week ended August 19. In actuality, applications were well above the record low, but about 7.3% below the levels of August 19 a year ago. To that extent, it was a record low for this date.
The fact that the NAR reported that cash sales now make up about 29% of the market is partly offset by the fact that 16% of NAR members report sales falling through as a result mortgage applications being rejected by lenders. Considering the offset, purchase mortgage applications may slightly understate current market demand. On the other hand, many cash buyers are investors, not owner occupants, and investors do not remove supply from the market. Considering all those factors, purchase mortgage applications are probably still a reasonably good indication of current effective housing demand.
The actual, not seasonally adjusted, data suggests that the momentum of declining sales has leveled off. However, in order for the oversupply in distressed markets to be absorbed, that's not enough. Sales must increase. That is largely dependent on household formation, which in turn is dependent on growth in full time jobs. And that's not happening.
I connect the dots of all of the key housing and related economic data in the Wall St. Examiner Professional Edition. An understanding of the US housing market is important not because the industry is important to the US economy, although that's part of it. It is especially important because the financial system is so dependent on housing collateral, which neither the banks, nor the government owned GSEs, nor the Fed with its trillion dollar MBS portfolio, have even begun to mark down to market. They extend, pretend, and hope prices turn up before it's too late. This is a time bomb that without a housing recovery, will keep right on ticking.
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Considering the Federal Reserve, FNE, FRE and the US Treasury hold most of the mortgages in the US, I wouldn't count on them getting rid of the BAD debt and letting the market dictate prices.
Expect more propping of this bogus hoiusing market until who know's when.
Mark to market is such old school. sarcasm.
hey, Ilene, psst...i've got something for you:
http://www.youtube.com/watch?v=kSCFjsSVrtk
yours,
janus
The medicine this country needs is called deflation - write off bad debt - bring prices down - a reset.
The Bernank is obsessed with not allowing our country to get it's medicine... Because, ya know, it would hurt our 5 big fucking banks.
the real estate market may be turning into the regional market it is suppose to be. hawaii seems to have come out of recession if sales and other taxes are to be believed as a real time measure of economic activity. the real estate market is beginning to reflect a bottom. does anyone else see similar indicators in their area?
I live in Eastern Pennsylvania and just purchased a single family home last week. Home prices continue to trend downward, although there's been a leveling off this summer. What I've seen is that there's a real demand differential b/w existing homes built before and after about 2000. Newer existing homes continue to move briskly when put on the market. Homes built in the 1970's, 80's and 90's tend to languish. The home I purchased falls in the newer category and is in a nice area. Even still, I'm pretty much convinced that prices here could drop by another 15%-20%.
Oh, they will drop more than 15% or 20% further - unless you measure in hyper-inflated dollars. You'll be kicking yourself soon enough. The entire USSA is headed down the toilet, and will never return. The predators-that-be and predator-class will make sure of that. This is the punishment they and their families of predators have been carrying out for over 200 years for the USA even DARING to float the idea that individual humans are sovereign and own their own lives. They have been working diligently for over 200 years to enslave america and snuff out any and every teenie tiny vestige of honesty, liberty and individualism. They know full well, if they can do that to the USA, the rest of the world will be an abject slave pit too. And they are certainly on the verge of total success, and almost zero chance of stopping them exists today, since the majority of humans, including americans, are abject morons with no appreciation whatsoever for the value of honesty, justice, liberty or individualism. As a species, and with few exceptions, human beings are an abject failure, and when they vanish themselves from existence, the universe won't notice a thing. Good riddens, homo-stupidis.
Not in mine.
A rural county with a Lot of old money, hereabouts they mostly pretended the first phase of the depression away – "Extend and Pretend" actually worked here, for a while. But now the for sale signs are multiplying. I have destitute neighbors on either side of me, hitting me up for money (which never happened before here – folk here are usually too proud).
the larger problem is shadow inventory which will eventually corrode the remaining vestiges of bank solvency and continue to plague supply and demand....then there is the legal fraud of the banksters and mortage servicers....i don't see health returning to housing until the lying crap is removed from bank balance sheets....
ooops, but that would mean letting too big fail...
Tumbling Oz House Prices will magnify this Global Depression:
"Melbourne's median house prices stood at $551,056 over the July quarter, a fall of 0.9 per cent from the $555,958 recorded in the April quarter."
Dontcha just love 'em?
So prices weren't flat. It turns out house prices - go on Age, you can say it - fell.
They're a funny bunch, housing spruikers... unable to admit what we can all see with our own eyes.
Even the supposedly rock-solid Sydney market is feeling the pinch. Another Age article states, "Sydney's median house price fell from $646,806 over the April quarter this year to $639,484 over the July quarter, a decrease of 1.1 per cent."
It doesn't sound much. But it is.
Because don't forget, the housing market is super leveraged... and leverage magnifies falling prices.
The Aussie housing market is more than three times the size of the Aussie stock market. So falling house prices are bound to have a bigger impact on individuals' wealth than falling share prices."
from: The Daily Reckoning
I am a fairly pesimistic individual as a was a real estate developer and now am a real estate statistic.
That being said I find it hard to a supporting factor to the real estate market. "People like to own fucking homes....period"
I don't care who I talk to not one has stated they do not want to own their own home, "not saying its not out there" just saying my direct experience in Phoenix or Seattle. It is almost human nature.
Where can I sign up for my 6 figure, 2x sticker price home loan, to purchase a leveraged "investment". Maybe in 10 years I can borrow MORE against some gained value like ma and pa did!
By the way, there should be pleny of available homes for sale in the Seattle area, I've seen no less than 3 Tent Cities throughout the seattle area. These are multiple homeless families living under large tents next to churches. Kinda reminds me of those shanties outside of large cities in 3rd world countries only, made from vinyl.
How about we forget all this data and just use data from actual recorded deed transfers at the courthouses. The courthouse deeds will also give some insight into just how many deeds your favorite bank is stuck holding.
Didn't that get circumvented by MERS?
As Blarney Franenstein said: lets wait and kick the can a little longer;
Berfluky will look up from the sky and rain no doc loans, and the
hooker realtors will get em all under contract, 1: 10 closing
because there are no appraisals hitting the sales price, none.
and the POLS will scream, housing, its not a a place to live;
diversity, the analysts said so, its is its : an investment in the future:
like studient loans at $ 1 trillion 1/2 defaulted.
down payment, use your foodstamps:
for Spare change, you can believe in?
Eat your house California, Vegas, Az, Florida....eat it 1/3 under
water and 15% in foreclosures; thats 7 M homes
lets see you mark that to market, Warren? LOL
Real estate? hope you enjoy the ride down.
What about the second tsunami wave of foreclosures coming from alt-A and prime mortgage recasts?
Why is no one talking about this issue that will be going on till the end of 2012?
That is one reason the Bernanke monster "promises" to keep rates at rock bottom zero for at least 2 more years... the notion that the resets will end up giving these hopefully fools LOWER interest rates that will then free up lots of economy-saving-money (and votes for Obama) when they are forced to get a new loan.
However, about 70% of these poor suckers won't qualify for a new loan given the new "prudent" rules the banks have formulated! Which means you are correct, the crash will be huge, and felt and heard around the world. Amazingly, the poor fools who are just hanging onto the anchor around their necks waiting for their resets... have no idea they will sink like the titantic and get ejected from their homes when their resets hit.
Well. I'm talking about it. But the 30 chickens, 2 Koi, 1 golden retriever and countless wild birds give me blank stares when I describe what is happening around us. And we think they are stoopid?
RE is getting flushed here now. Survive through 2012 and you will make it. The fallback since 2003 was always rental income. Have rental income.
A Good question.
The Real reason for the (perfectly justifiable) panic re resets earlier was not so much the actual reduction in cash flowm but the obvious impairment to capital positions of banks.
Since then, much of those loans have ben unloaded (some to the taxpayer), And, more importantly, Mark to Unicorn now allows them to hide the damage for awhile.
Even if a neighborhood had 23 sex offenders, was rat infested, and kids were getting sick from the local water that is infested by poisonous gas from the local gas company, the cunt realtors in the area would sell ithe homes to their mother and tell everyone they know that "it's a great time to buy".
My co op is raising the matinence for the 5th time since 2008, they are bankrupting the owners. I am underwater by 40% and never missed a payment on a 30 year fixed and there are no programs to help me. It's geting hard out here for a pimp.
Fuck the monthly maintenance fees - even with 5 increases in 3 years. They're do-able. I have two words that will terrify the living beJesus outa you if they haven't already. I own multiple condos. Yeah, I play "Landlord" in my down time. These two words, when eventually applied to you (and don't think you'll escape them) will cause grown men to cry and giants among us to draw up into a whimpering fetal position, drooling and moaning.
These are the words to fear:
"Special Assessment"
For it is (1) Indeed an "assessment", (2) and just "special" enough that nobody thought to put it in the budget - including you and your personal budget.
The first time you get The Letter - the one explaining the need for the "Special Assessment", and you look at the bottom line, you will cry. I guarantee it.
My first was $3,800(ish) - *per unit*, times xx units that I own. The second was $5,500. That one caused quite a ruckus - sort of a mini Civil War and Revolution combined amongst the owners and the Board.
Fear these words:
"Special Assessment".
You.
Have.
Been.
Warned !
Yeah, well we're a bit more careful before we sign any agreement. We've wanted a house for 20 years, but never purchased one. Why? Many reasons, but I can't tell you how many we passed up because they had "owner fees" or "association dues" or "special assessments". They are a TOTAL SCAM. A bunch of people and their relatives and friends are getting super-duper-hyper-insanely rich running these scams. Yet people everywhere avert their eyes to these fees.
When we see them, what do WE think? Three things, primarily. #1: We refuse to pay a bunch of predator slimeballs hundreds of dollars per month for near-to-nothing. #2: When we add the cost of the property to the cost of these fees to the yearly property taxes to "all other expenses", the prices is VASTLY too high - even now after the market has dropped 20% to 60% depending on where we look. #3: Our mortgage will be paid off in 30 years, but these frauduant "owner fees" last FOREVER. One million years from now, whoever inherits our property will STILL be paying these fees, assuming humans still manage to be alive on planet earth (fat chance). In other words, in the last analysis, these fees will cost INFINITELY more money than the cost of the property! To hell with that! #4: Every one of these fraudulant "agreements" allows the filthy scumbag predators who collect these fees to UNILATERALLY raise the fees. So anyone who signs an agreement like this has LITERALLY converted themselves into a slave... at least until they forfeit their ownership to the property. And even then, I read recently that someone who DID walk away from their 100% paid-for property (to escape these fees) has been served notice that they must pay them anyway... for the rest of eternity. Boy, as far as I'm concerned, this is the kind of stuff the second ammendment was made for.
Dear predators: You can take your "owner fees" and shove them wherever it hurts the most. We refuse. Up yours! This whole class of slimeball needs to have their plugs pulled, and damn soon.
Condos fucking suck. Do the math on what you pay in fees and how much that could buy you. Get the fuck out!
I'm in the same boat and have to wonder if I wouldnt be better off to tell the bank to get screwed, buy another home while my credit is still good and let the banking gansters take the hit?
You have to wonder about that?
I did in July 2009 and then by the end of the year called Chase to get a workout deal to stay put a bit longer, they said if I make the December payment they will put the missed payments that were "late" on the back end of the mortgage so my credit would no longer be getting ruined by late pays. I should have the paperwork to sign and return within a couple weeks they said, but do make that December payment. Those cocksuckers applied the whole 968 to late fees and interest and not a dime went to principal, also I never got any paperwork. When I called I was told by a different bank whore that they can't do a workout agreement with me because the USDA as guarantor of the loan would have to sign off on it and that would take at least six months.
I told them to go screw themselves, it felt good for a couple minutes, till I realized they just do not give a shit. I moved out March of 2010, and they promptly posted a foreclosure notice and changed the locks. After a year it was finally to be sold on the courthouse steps in April, postponed, then May, postponed, now when I asked in late May because I needed a copy of the notice to send to the IRS because they started hounding me about the first time home buyer tax credit the lawyers for Chase told me the foreclosure was cancelled. And they hit me with a $1,500 per year insurance policy that only covers their financial loss if the house is totaled.
I am telling you, it is raining shit in America these days, the government and the bankers are circle jerking each other off and all are pissing on us. I would move back in and live rent free if the next door neighbors were not unemployed tweeker assholes (it is a zero lot line three story townhouse). Also, I bought in mid 08 after the prices plunged by almost half, guess what, within a year they plunged by another 40k, and the most recent sale was 68k for units that originally sold at a tad over 200k in late '06 early 2007. There is one listed now at $65,000. There is NO way I would consider owning a property I was underwater on by double the market value. Not at 1% interest.
Update, the IRS has gone back to my 08 tax filing and for unexplained reasons decided I was never entitled to the $7,500 first time homebuyer tax credit, they sent me a bill on my forclosed house for $8295.90 to recapture the credit. I can fight it but I am wondering if it is even worth bothering to take on this gigantic stupid bureaucracy when I could just go enjoy my waning years in a neutral island nation like Ireland. I have no idea why they did this, they decided I was eligible in 08, they sent me the goddamned check.
So I had to contact the lawyers representing Chase in the foreclosure to get yet another notice of trustee sale that was posted on my door when I left my house, and while I had the guy on the phone I asked why the house was still in my name, what was holding up the sale? He said Chase had cancelled all foreclosure sales in Oregon due to a couple of legal rulings they are "interpreting."
This is never going to end, I am so sorry I bought that house, but is there no way to get out from under? Do I really have to just chuck it all and leave the country permanently to get a little peace in my older years?
"House prices never drop"...I remember my RE salesperson told me.
Well they never did for about 30 years you stupic fuck. Oh and your fucking real estate agent was suppose to now all the goins on with the fed. You are a fucking ignorant fuck
But, but I thought charts are broken?
After September 5 a new dynamic will preside over the housing market. For those with mortgages that dynamic will be based on zirp+ 400bps no questions asked. For those trying to get a mortgage, don't give your landlord notice quite yet, instead wait for the details of the soon to be announced Fannie Fredie Rent America program.
If you are a first time buyer that needs a mortgage, good luck getting one, if you thought it was a challenge in the current environment, it will be impossible 4 months from now.
If you are a cash buyer the inventory of foreclosures and potential foreclosures is about to dry up, but be patient by this time next year builders will be giving away their inventory.
4% LOL !!!!!!!!!!!...........unless they make it ZIRP + ZIRP this will be another failure ..........people are 30%+ underwater and/or 2 years behind........what is 4% going to do ?
we are all better off to be ready and willing to fight the fraud of origination, assignments, robosigning, fraudclosures......
Are you referencing Oblama's jobs speech just after the 5th? I've also heard speculation that it will include some kind of mortgage monkey business beyond the Fannie/Freddie rent program you mentioned.
"For those with mortgages that dynamic will be based on zirp+ 400bps no questions asked"
What's that about?
Just means 4% mortgages essentially. But mortgages have always been based on the 10 year yields, plus a buck 50 or 200 bps. They are already scraping 4.0 now, I am betting we see the 3.5% before the end of next month. We had a flood Christmas 1964, our house was spared though damaged, the next door neighbors lost theirs, so we were stuck with a now shitty damaged house and they were handed a new one in town 2 blocks from the beach, $7,000 mortgage for 20 years at 3.5% 100% loan from disaster relief, we would call it FEMA now but I don't know what it was called then. They had payments $120 per month for a house on the California coast that was worth $359,000 at the top of the market. Now maybe $225k. But even then only disaster relief agencies gave out mortgages that low, this is really unprecedented in my lifetime.
9 yrs of inventory (NYT) will not dry up fast....especially in a depression.
Wait a few years...houses will be 40% less then they are now imo.
As long as the FHA continues handing out Zero down (and almost zero doan) houses, the RE market will never recover. As an aside, these bad zero down loans will all be funnelled thru to Fannie and Freddie and the taxpayers will be billed for them. Timmy has already guaranteed Fannie and Freddie's over $600 Billion in liabilities.
Warm and Fuzzy, yes?
GL!
I thought they used lawnmowers as collateral. Anywho this is the greatest kabuki theater in history: we all know the end it's just a question of how much wreckage "the inevitable preventers" cause while we wait for for JPMorgan to take over the bulk of the entire banking industry. Needless to say it might as well be gifted to them like the last time since the same idealogues are doing the exact same thing and like the very definition of insane humans are expecting a different result. Actually they might end up getting it if europe is any example.
Ugg
Recovery! As soon as banks release foreclosures! All will be sold! Recovery! not.
To who...the unemployed?? They need to start another program that allows the bums to choose a free house or wellfare for 2 years.
House! Then I can start my indoor "farm"!