Apr
29
U.S. Foreclosure Activity Increases 23 Percent In First Quarter
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Foreclosure Activity Up 112 Percent From Q1 2007
California and Florida Cities Account for 13 of Top 20 Metro Areas
IRVINE, Calif. – April 29, 2008 – RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its Q1 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 649,917 properties during the first quarter, a 23 percent increase from the previous quarter and a 112 percent increase from the first quarter of 2007. The report also shows that one in every 194 U.S. households received a foreclosure filing during the quarter.
RealtyTrac publishes the largest and most comprehensive national database of foreclosure and bank-owned properties, with over 1 million properties from nearly 2,500 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal’s Real Estate Journal.
“Foreclosure activity in the first quarter increased on a year-over-year basis in 46 out of the 50 states and in 90 of the nation’s 100 largest metro areas, demonstrating that most regions of the country are seeing more foreclosures,” said James J. Saccacio, chief executive officer of RealtyTrac. “In some areas there are also some unusual, non-market factors impacting the foreclosure numbers. For example, the city of Philadelphia in late March issued a temporary moratorium on all foreclosure auctions for April, and the city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt a loan workout plan that would prevent foreclosure.
“While we’re hopeful that programs like those in Philadelphia will have a positive long-term impact, they could be simply deferring another flood of foreclosures,” Saccacio continued. “And that could extend the length of time it takes the market to recover from this downward cycle, in which we’ve already seen seven consecutive quarters of increasing foreclosure activity.”
Apr
24
New Home Sales at 16-Year Low
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Government report shows sales of newly constructed homes fell 8.5% last month, while the median price drop was the biggest since 1970.
NEW YORK (CNNMoney.com) — New home sales fell in March to the lowest level in more than 16 years, according to a key government report on the battered housing market released Wednesday.
March sales came in at a seasonally adjusted annual rate of 526,000, the Census Bureau report showed, down 8.5% from a revised 575,000 in February and down 36% from a year earlier. It was the lowest annual rate since October 1991.
Economists were expecting new home sales to decline to 580,000 from the originally reported 590,000, according to estimates compiled by Briefing.com.
The median price of a new home sold in March was $227,600, down 13.3% from a year earlier.
The last time the median home price fell this sharply was July 1970, when it dropped 14.6%.
Thursday’s report “paints the picture that the downturn in the housing market continues,” said Scott Anderson, senior economist at Wells Fargo.
Despite a large cut in median home price the report showed an increase in the months of inventory.
The seasonally adjusted estimate of new houses for sale at the end of March was 468,000, which was down slightly from February’s 471,000.
However, at the current sales rate, it would take 11 months to sell the supply of homes on the market at the end of March.
The months-of-supply number has not been this high since September 1981.
Given the large number of homes on the market and the sluggish sales pace, Anderson estimates that home sales are not likely to pick up for several more months.
Apr
23
Many Americans want no part of a government-funded bailout for troubled mortgage borrowers.
NEW YORK (CNNMoney.com) — Why should American taxpayers have to pay to bailout reckless lenders and borrowers?
The website Angryrenter.com, launched just last week, has a vitiation demanding that Congress not pass any bailout programs that reward risky borrowing and lending. To wit: “Let the free market sort it out!”
The petition is gathering 40 to 50 signatures per hour, according to spokesman Adam Brandon, who adds that the site is already getting 15,000 visitors a day.
“There’s a huge segment of the country saying, ‘We don’t want our money used for a bailout,’” said Brandon.
AngryRenter.com is backed by FreedomWorks, the conservative, free-market Washington-based lobbying group run by former House majority leader Dick Armey.
“A third of the American public rents,” Brandon pointed out. “They’re saying ‘I’ve been saving for a mortgage for years. I could have jumped in on a subprime loan too. Now I’m going to have to pay for a government bailout.”
‘We wanted to buy too’
Many CNNMoney.com readers agree, expressing outrage at the idea of seeing their taxes used to keep people in homes they never should have purchased.
“We are both working professionals who would have liked to buy,” said Matthew Haas, a community development organizer who moved to Los Angeles with his wife in 2003. They opted not to pay bubble prices, and are still renting despite ample income.
“Now we have hit [the alternative minimum tax] and are finding out our tax dollars are going to bail out others.” “Where is value, morally, as a country?” he said. “Is it taking taxpayer money and applying it to people who should never have bought, people who were flippers?”
Many people would prefer the government do nothing at all to prop up the housing market — especially those hoping to buy in a more affordable market.
Patrick Killelea has been blogging about the housing bubble at Patrick.net for four years from San Francisco, where it takes a not-so-small fortune to buy.
“Bailouts reward bad behavior. I’ve been diligently saving, denying myself lots of things so I can afford to buy, yet the government is saying we have to keep all these people in their homes,” said the Web site programmer and author. “Well, wait a minute! Why can’t I spend more than I can afford and have the government bail me out.”
Fat profits
StoptheHousingBailout.com is another newly minted site devoted to the bailout backlash. “I just got really angry,” said blogger Morgan Ward Doran, an L.A.-based attorney who isn’t professional involved with the housing industry. “Everyone I hear from is against the bailouts.”
Doran argues that lenders, brokers and home builders all made huge profits by overbuilding houses pushing through poorly underwriten loans, and now they want taxpayers to cushion their fall.
Indeed, there is a provision in the Senate bailout bill that would give extensive tax breaks to home builders, which has some people especially incensed.
The Laborers International Union of North America calculated recently that many of the largest builders, such as Pulte homes (PHM, Fortune 500) and Lennar Corp. (LEN, Fortune 500), could receive many hundreds of millions of dollars in tax rebates.
“The government thinks it should help the people who cheated and robbed us,” writes CNNMoney.com reader Jordan Fogal of Houston.
Most people who are against bailouts trust the market more than the government.
The fastest way to return to normalcy is to let the market work, according to Angryrenter.com’s Adam Brandon. He acknowledges that the impact on some homeowners will be devastating, but that things will get even more painful if we don’t let the free market work its magic.
“I feel terrible for people losing their homes,” said Brandon, “but the sooner we let the market sort this out, the sooner we can get back to growth. When the government gets involved, it can delay the inevitable.”
Apr
23
GE’s Immelt: Housing Great Depression
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General Electric CEO Jeff Immelt says the housing crisis is the worst since 1930s’ economic depression.
ERIE, Pa. (AP) — General Electric CEO Jeff Immelt said the U.S. economy is in the worst condition since the burst of the dot-com bubble and that housing hasn’t been in such dire straits since the Great Depression.
Less than two weeks after the conglomerate shocked investors with a profit warning and revealed that its first-quarter earnings had unexpectedly fallen 6%, Jeff Immelt said things could get worse for the U.S. economy.
Immelt told shareholders at the company’s annual meeting that because of current conditions, GE (GE, Fortune 500) will increase its planned cost cutting from $2 billion to $3 billion.
“We are in the toughest economy since 2001 and the worst housing crisis since the Depression,” Immelt said. “Banks have written off more than $250 billion… Days of easy credit have turned into months of no credit at all. While I am confident about the economy long term, we could see even more difficult times ahead.”
GE’s first-quarter earnings report triggered a plunge that wiped more than $46 billion from its market capitalization and saw the company’s stock fall nearly 13%.
Many investors felt broadsided because GE said as recently as March that the company would see profit and revenue growth of 10% in 2008. The company now projects earnings to be 5% or less.
Immelt said GE executives are making changes in the company’s operations and planning, including more internal forecasts, with Immelt reviewing the reports weekly.
“This will ensure that there are no time gaps between how we describe the company and what we deliver,” he said.
Immelt defended the company’s performance and brushed aside the mention of spinning off businesses from the industrial and commercial conglomerate.
“In the last five or six years, I’ve sold $50 or $60 billion of business,” he told reporters Wednesday. “I’ve acquired $70 or $80 billion of business. This has probably been the most active portfolio change in the history of the company and it would be hard to find another industrial company that’s done anything close to what we’ve done.”
Under Immelt, GE sold off the company’s plastics and insurance businesses and has been increasing its market share in emerging markets, such as Asia and Latin America.
Immelt said he accepts criticism from analysts who said the quarterly results damaged his credibility. Until the earnings report, GE regularly met its targets.
“My track record over a long period in this company has been good,” he said. “I expect it to be good in the future. You don’t do a job like this if you can’t take a punch.”
Fairfield, Conn.-based GE is having its annual shareholders meeting in Erie, the site of its transportation business headquarters.
GE shares rose 29 cents to $32.62 Wednesday.
Apr
14
AP Poll: Mortgage Payments Worry Many
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WASHINGTON – One in seven mortgage holders worry they may soon fail to make their monthly payments and even more fret that their home’s value is shrinking, according to a poll showing widespread stress from the nation’s housing crisis.
In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money & Finance poll also found that 60 percent said they definitely won’t a buy a home in the next two years.
That was up from 53 percent who said so in an AP-AOL poll in September 2006. Only 11 percent are certain or very likely to buy soon, down from 15 percent two years ago.
In today’s economic climate, even holding onto what they already have is a challenge and source of distress for significant numbers of homeowners. Nearly three in 10 said they are concerned their home’s value will decline over the next two years, while 14 percent of mortgage holders expressed worry that they might miss payments in the next six months.
One nervous homeowner is Daniel Gallego, a warehouse worker in Stockton, Calif., who said in a followup interview that he may have to sell his house at a big loss.
“We may have to move in with my wife’s parents or my parents,” said Gallego, 30, who has two young children. “I could pay off some debt, then we could rent, and maybe buy another house in a few years.”
He said the rising cost of gasoline and other expenses have made his adjustable rate mortgage unaffordable. Because he doesn’t expect his home’s value to recover soon, he said he may be better off moving now before his rates rise.
One in 10 have adjustable rate mortgages, half the number who said so two years ago. These mortgages generally start at a low interest rate and are later adjusted to market conditions — which has often meant steep, unaffordable boosts that have forced many to refinance or even lose their homes.
The growing reluctance to dip into the housing market seems to stem partly from worry that housing prices will continue falling — good if you’re buying a house but bad if you have to sell one.
The number envisioning falling prices in their area has grown to one in four, while four in 10 think prices will rise, a decrease from two years ago. Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.
“This is a great time to buy, but not necessarily to sell,” said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children. He said he would love to purchase a larger home, but can’t because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago.
“We’re just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better,” said Jackson, 30.
Underscoring the public’s unsettled feelings, the number saying local housing prices are about right has fallen to 35 percent. Half say homes are overpriced — especially in the Northeast — while those saying housing is underpriced have doubled to one in 10. Midwesterners were likelier than those in other regions to feel this way.
Some areas of the country buck regional trends. Laurie Jensen, a single mother of three, struggles to make payments on her home in Whitehall, Mont., by working as a seasonal road construction flagger and at times collecting unemployment. She said she’d like to move outside of town, but the area is popular and prices have surged.
“Things are pretty crazy,” she said. “Places I don’t consider that great are really expensive.”
The public anxiety is in reaction to an economy that is veering toward recession and losing jobs even as the housing market sputters badly. Foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped.
Gus Faucher, director of macroeconomics for Moody’s Economy.com, a consulting firm, estimated that 9 million homeowners owe more on their home than its worth. He said his company believes home sales are at or near bottom and home values will continue to fall until early next year.
Even so, he said, many people bought their homes before the run-up in values that started around 2001 and remain in good shape.
“So the value of your house goes down temporarily,” he said. Unless the homeowner must sell now or can’t afford the payments, “that doesn’t have that much of an impact.”
The poll also found:
_The biggest worriers are those expecting to buy soon. Of that group 43 percent frets that their home’s value will drop in the next two years, compared with 25 percent of those not expecting to buy soon.
_Fifty-nine percent think now is a good time to buy.
_Half think this is a very tough time for first-time buyers, an increase from two years ago. Nearly two-thirds think it’s harder for first-home buyers than it was five years ago.
The AP-AOL Money & Finance poll was conducted from March 24-April 3 by Abt SRBI Inc. It involved telephone interviews with 1,002 adults nationwide, for whom the margin of sampling error is plus or minus 3.1 percentage points.
Included were interviews with 769 homeowners, for whom the sampling margin of error is plus or minus 3.5 points. The margin of sampling error for other subgroups was larger.
Apr
12
Fitch Ratings said Friday that it expects the housing contraction to last through 2008 and into 2009, contrasting with expectations of some industry groups — most notably the National Association of Realtors — that expect the back half of this year to represent a rebound in key U.S. housing markets.
Read the rest…
Apr
8
Washington Mutual Raising $7 Billion, Exits Mortgage Origination Business
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Washington Mutual, Inc. (WM: 11.81, -10.19%) confirmed Tuesday morning that it would raise $7 billion via a direct placement of securities with an investor group led by an affiliate of TPG Capital; that number is $2 billion greater than the $5 billion that had been reported earlier by the Wall Street Journal, ahead of the deal’s formal announcement. Read the rest…
Apr
8
U.S. housing prices and rising delinquencies on mortgage payments could lead to aggregate losses related to the residential mortgage market and related securities of about $565 billion, including the expected deterioration of prime loans. Adding other categories of loans originated and securities issued in the United States related to commercial real estate, the consumer credit market, and corporations increases aggregate potential losses to about $945 billion. Read the rest…
Apr
8
(Bloomberg) — Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years. The margin may erode further in coming weeks. Credit ratings on $704 billion of bonds have been cut this year following the collapse of the U.S. housing market. Sheila Bair, chairman of the Federal Deposit Insurance Corp., said last week that downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalized. Read the rest…
Apr
8
Pending Home Sales at All-Time Low
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Realtors’ group says its index of homes under contract to sell fell sharply in February.
NEW YORK (CNNMoney.com) — An index of homes under contract for sale fell more than expected in February, reaching the lowest level since the index’s 2001 debut, according to a report released Tuesday.
The National Association of Realtors’ (NAR) Pending Home Sales Index fell to 84.6 in February, down 1.9% from a revised reading of 86.2 in January and down 21.4% versus the same period last year.
Economists were expecting the index to decline to 85.2 for the month, according to a consensus estimate compiled by Briefing.com.
“The slip in pending home sales implies we’re not out of the woods yet,” said Lawrence Yun, NAR chief economist, in a statement.
The Pending Home Sales Index is considered a more forward-looking indicator of home sales than the NAR’s more closely watched existing home sales report, which tracks sales at the time of closing, typically a month or two after a sales contract is signed.
The Pending Home Sales index was launched in 2001, and a reading of 100 is equal to results that first year. Before the housing market began to deteriorate last summer, the steepest decline in the index’s history came in September 2001, when the 9/11 terrorist attack sent the index down to 89.8.
The Realtors revised their forecast slightly for existing home sales, projecting first-quarter existing home sales to decline 23.1% versus the same period last year after saying in March they would decline 23.2%.
For the full year, the NAR predicted existing home sales to be 4.7% lower than in 2007, after saying in March they would be down 4.8%.
Existing home sales for March will be released April 22.
“February was another poor month for housing, with pending sales down in most of the country,” said Mike Larson, a real estate analyst at Weiss Research.
Larson thinks tight lending standards and the absence of speculative buying are to blame for the weakness in the housing market.
The NAR also lowered its forecasts for first-quarter and full-year real GDP growth, the broadest measure of the nation’s economic strength. It also cut its expectations for nonfarm job growth in the first-quarter and full-year periods.
Yun thinks that the economy will not grow in first half of the year, but he is optimistic about the second half.
“The combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half.”