May
28
Despite an absolute dearth of ARM resets, the number of severely delinquent Alt-A borrower continues to grow, according to a report released late last week by Clayton Holdings, Inc. (CLAY: 5.85, -0.68%). The number of troubled Alt-A borrowers in the 2007 vintage rose an eye-popping 26.5 percent from March to April alone, nearly reaching 17 percent of loan volume.
May
27
Realtors Settle Case with U.S.
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Real estate agents were accused of illegally blocking posting of home listings and limiting competition from online brokers.
WASHINGTON (AP) — The Justice Department gave a boost Tuesday to online real estate brokers – and potentially their clients – by forcing new industry policies to give Internet-based agents access to home listings they were previously denied.
The tentative settlement, which still requires court approval, could save consumers thousands of dollars when buying a home.
Online real estate agents often charge discounted commission fees and allow buyers to review listings at their own pace.
For years, however, Internet-based brokers were blocked from accessing more than 800 multiple listing services nationwide affiliated with the National Association of Realtors. An MLS is a database of properties for sale.
In a September 2005 lawsuit, government lawyers said such policies discriminated against online brokers. The settlement, filed in U.S. District Court in Chicago, opens the MLS databases to online and traditional residential property agents.
“It really does free brokers generally to engage in whatever they feel is the most efficient and effective way to compete,” Deputy Assistant Attorney General Deborah A. Garza of the Justice Department’s antitrust division told reporters.
She said the settlement “should lower the cost of the transaction for buying a house.”
In 2006, for example, consumers saved up to 1% on the price of a home by using an online broker, Garza said. That year, the median home price amounted to over $225,000, with median commissions of more than $11,000.
Real estate agents earned $93 billion in commissions in 2006, she said.
In a report last year, the Justice Department and Federal Trade Commission found that limits on discount brokers’ access to Web listings of for-sale properties have prevented consumers from receiving the cost savings and other benefits that online competition has brought to other industries.
The report found that more consumers use the Web when house hunting than rely on “For Sale” yard signs.
Even so, online brokers who were locked out of the MLS databases were unable to compete with real estate agents, government attorneys said. In at least one case, in Emporia, Kan., an Internet-based agent was forced out of business after the local MLS denied his access to any property listings in the local market.
Tuesday’s settlement will not take effect until late summer at the earliest, or 60 days after it wins court approval. It would be in place for 10 years.
It neither imposes a fine on the National Association of Realtors, nor does it force the group to acknowledge any liability.
The group represents 1.2 million real estate agents and other members in more than 250,000 active office locations and branches nationwide.
In a statement, Realtors President Richard F. Gaylord said the Chicago-based association is “focused on what matters most to consumers – re-energizing the housing market.”
“Competition is alive and well in the real estate industry,” Gaylord said. “In fact, the competitive nature of our industry is even more apparent in times of market turmoil like those we are currently experiencing.”
May
27
Welcome to the ‘Recession’
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A slight ray of hope?
Buffett says we’re there. Greenspan says we’re likely so. It may not be official, but the question is: How long will the funk last?
NEW YORK (CNNMoney.com) — It’s getting harder and harder to deny that the economy is in recession.
Warren Buffett, the world’s most famous investor, proclaimed this weekend that “we are already in a recession.”
Former Federal Reserve chairman Alan Greenspan told the Financial Times on Monday that there is a greater than 50% chance of a recession.
May
27
Home Prices Slide in March
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Link to source at HousingWire.com
The pace of dropping U.S. property values quickened during March, reaching a record 14.1 percent decline during the first quarter of 2008, according to data released by Standard & Poor’s on Tuesday morning. The record drop was recorded by the S&P/Case-Shiller U.S. National Home Price Index, which covers sales spanning all nine census divisions for the past 20 years.
May
27
Standard & Poor’s/Case-Shiller study shows record decline for housing prices in first three months of 2008.
NEW YORK (AP) — U.S. home prices dropped at the sharpest rate in two decades during the first quarter, a closely watched index showed Tuesday. It’s a somber indication that the housing slump continues to deepen.
Standard & Poor’s/Case-Shiller said its national home price index fell 14.1% in the first quarter compared with a year earlier, to its lowest level since its inception in 1988. The quarterly index covers all nine U.S. Census divisions.
The narrower indices also set record declines. The 20-city index tumbled 14.4% during the quarter, the lowest since that index was started in 2001. The 10-city index plunged 15.3%, a record in its 20-year history.
“There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path,” said David Blitzer, chairman of S&P’s index committee.
Nineteen of the 20 metro areas surveyed reported annual declines, with 15 of them posting record lows. Six metro areas lost more than 20%.
Las Vegas had the worst quarterly performance, falling 25.9%, followed by Miami and Phoenix. Only Charlotte, N.C., stayed above water, gaining less than 1% over the previous year.
May
24
The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investor Warren Buffett said in an interview published in German magazine Der Spiegel on Saturday.
He said the United States was “already in recession” and added: “Perhaps not in the sense that economists would define it” with two consecutive quarters of negative growth.
“But the people are already feeling the effects,” said Buffett, the world’s richest man. “It will be deeper and last longer than many think.”
But he said that won’t stop him from investing in selected companies and said he remained interested in well-managed German family-owned companies.
“If the world were falling apart I’d still invest in companies,” he said.
Buffett also renewed his criticism of derivatives trading.
“It’s not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health.”
Buffett complained about the lack of effective controls.
“That’s the problem,” he said. “You can’t steer it, you can’t regulate it anymore. You can’t get the genie back in the bottle.”
May
23
“Real Estate Owned” Climbs
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Link to source at HousingWire.com
Traditionally, REO properties aren’t exactly the sort of thing most buyers would call their dream home; lower-priced properties, often in run-down neighborhoods, or in some state of disrepair, aren’t usually the sort thing that appeals to more affluent real estate buyers.
But that was before the housing bust.
May
23
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Courtesy of www.housingdoom.com
May
22
Gov’t Home Price Index Posts Largest Drop in 17-year History
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A home-price index considered to be the most comprehensive reading of the U.S. market posted the sharpest quarterly decline in its 17-year history, and analysts say housing has yet to bottom out.
WASHINGTON (AP) – A home-price index considered to be the most comprehensive reading of the U.S. market posted the sharpest quarterly decline in its 17-year history, and analysts say housing has yet to bottom out. Rapidly falling home prices in California, Florida and Nevada skewed the national results.
The Office of Federal Housing Enterprise Oversight said Thursday that home prices fell 3.1 percent in the first quarter compared with last year.
It was only the second quarter of price declines since the index started in January 1992. The price index first declined on a year- over-year basis in the final quarter of 2007, when it dropped 0.45 percent.
Another widely followed reading, the Standard & Poor’s/Case-Shiller index, has shown larger declines for major U.S. metropolitan areas. But analysts say the government index provides a more comprehensive reading of nationwide housing market.
That’s particularly true for midwestern states, where prices never skyrocketed and have been less affected by the real estate downturn.
“Most people don’t live in a Miami condo,” said Michael Englund, chief economist with Action Economics in Boulder, Colo.
Still, declines in the government index, which focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year, show the depth of the housing market’s troubles.
Prices fell in 43 states, with California and Nevada showing the biggest declines. Home prices dropped by more than 8 percent in those states.
The government index also fell 1.7 percent from the fourth quarter of 2007 to the first quarter of 2008, the largest quarterly price drop on record.
“The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation,” Patrick Lawler, the agency’s chief economist, said in a prepared statement.
The government index is calculated by tracking mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac.
Wall Street analysts have tended to focus on the S&P index, an update of which is due next Tuesday, as a way to measure the value of securities backed by subprime mortgages and loans to borrowers in big metropolitan areas.
Earlier this month, economic forecasters surveyed by the Federal Reserve Bank of Philadelphia projected the government index would show a 5.4 percent annual decline in the fourth quarter of 2008. The survey projected the reading would not recover until early 2009.
Adam York, an economic analyst with Wachovia Corp., said Thursday’s data was unsurprising. “It was pretty widely expected that we would see declines this quarter and for some time to come,” he said.
The housing market is facing numerous troubles as buyers stay on the fence and rising mortgage defaults dump more homes on an already glutted market. In addition, many banks have raised their lending standards in response to the surge in mortgage defaults.
Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 5.98 percent this week. That was down from 6.01 percent last week and the lowest level in five weeks.
May
22
6 Signs of an Economic Rebound
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Every cycle has its wild cards, but history shows there are some clues to a recovery that are pretty reliable.
(Money Magazine) — By now you’ve had enough of the endless gloom in today’s economic news: record oil prices, slower home sales, deepening loan losses, disappointing corporate earnings. What you’re really looking for at this point are a few signs of hope.
It’s a certainty that the economy, the housing markets and the stock market have to bounce back sooner or later. If you could see that rebound coming, not only could you rest easier about everything from your job to your retirement, you could move forward confidently on all those financial plans you’ve put on hold until the way seemed clear.
You could, maybe, take a chance in the job market. You could think about trading up to a bigger home or downsizing to a place that better suits your needs. And even though you’ve stood unwavering by your investment strategy as the stock market tumbled – and you have, haven’t you? – you could feel good once again about putting your money in something besides a chickenhearted money-market fund.
So what are the surefire signs that we’re bouncing back? The only honest answer, of course, is that there are no 100% surefire signs. In every cycle there are wild cards that can trump even the best predictions.
On the other hand, history shows that some hints of renewal are far more reliable than others. At least one of them is worth watching in every market that matters to you, from stocks to real estate to jobs. Read further to find out where you’ll find these harbingers of economic spring, why they work and how you can make the best use of them.
When will the economy get out of a rut?
* Watch: Business sentiment
* Current read: Recession’s still on
While we won’t know for certain whether we are in a recession – defined as a decline in gross domestic product for at least two quarters in a row – until later this year, most economists believe we are.
For starters, GDP growth slumped to an anemic 0.6% in late 2007. What’s more, the measure that has been eerily prescient in the past decisively flashed “recession” just as the housing market peaked.
We’re talking about the yield curve – or the relationship between short- and long-term interest rates. Long-term bonds usually pay more than short-term ones to compensate investors for locking up their money. When that relationship flips and produces what’s known as an inverted yield curve, you can be pretty sure a slump is coming.
Since 1960, every time the yield curve, as measured monthly, has inverted (except once), a recession has followed. The last time this happened was July 2006. Unfortunately, the yield curve can’t help you see the recovery that’s bound to be over the horizon. What can?
What to watch: The most important clue may lie in the minds of business leaders, says Nariman Behravesh, chief economist at Global Insight. The more upbeat companies feel about their prospects, the more likely they are to expand and hire, which in turn lifts consumer confidence, sparks spending and boosts economic growth.
To get a read on business sentiment, Behravesh suggests looking at the Institute for Supply Management’s nonmanufacturing index, a monthly survey of conditions in the service sector, which accounts for 80% of jobs. A reading below 50 is typically regarded as a recession signal; the lower it goes and the longer it stays down, the more severe the slump. Once it returns to 50-plus territory, a rebound is likely.
During the brief recession of 2001, the index dropped below 50 just as the slowdown started and hovered between 45 and 50 for most of the next eight months. A month before the recession ended, the index rose sharply to just under 50 and soon stabilized in the low 50s.
For a second opinion: Look to the real estate market. “Housing is what got us into this recession,” says Gus Faucher, director of macroeconomics at Moody’s Economy.com. “In terms of what’s going to get us out of it, we’re going to be looking for a bottom in the housing market.”
How do you spot that? Brush up on supply and demand. Historically, the inventory of homes on the market – particularly how many months it would take to sell it off – has soundly predicted home prices. Six months of inventory appears to be the sweet spot. In 1996 inventory fell below six months and dropped for much of the decade – and prices climbed steadily.
What they’re saying now: A mixed outlook. For March the ISM nonmanufacturing index stood at 49.6 – up from the precipitous drop to 44.6 in January but still below 50 for the third straight month.
“If the index goes to 40 and stays there, we’re looking at a much deeper recession,” says Behravesh. “If the number goes back up to 50 and remains at those levels, that’s definitely a signal that things are going to get better.” Housing inventory, however, has recently hit nearly 10 months’ worth – bad news for prices and growth.
To keep track: The ISM nonmanufacturing index is released on the third business day of every month. It’s widely reported in the press; or you can find the releases in the ISM Report on Business section of the Institute for Supply Management’s Web site.
As for the real estate inventory yardstick, the National Association of Realtors puts out the data monthly (usually between the 22nd and 25th).
The wild cards: As Federal Reserve governor Kevin Warsh recently quipped: “If you’ve seen one financial crisis, you’ve seen one financial crisis.” Indeed, this slowdown has seen a massive credit crunch, a free-falling dollar and record oil prices. At the same time, exports to China and India are helping U.S. businesses offset weakness at home. Any or all of these factors could cloud the rebound picture.