Steve Owen

How Bloomberg Fabricates U.S. Housing Numbers

It's not hard to find:

realestate.msn.com/art...


On Nov 02 08:46 AM Dubious Brother wrote:

> Does anyone know which states represent the top 5 in foreclosures
> and what % of the total they make up?

The Intrinsic Value of Nothing, Part 1

Great essay, Paco... man, that's a funny name for an Austrian. You asked the question, does the dollar have value just because the government says so (or something similar)? I'll compound it... did the shells people were trading in 5,000 BC have value because their government said so... was there even a government to say so? The answer, of course, is "no." The dollar has value for the same reason the shells had value... because most, if not all, people are willing to accept it in exchange. There is some evidence that our forebears of the Neolithic ages made an effort to control the number of shells available for trading... the same way certain people control the availability of diamonds and gold today. Unfortunately, you are right. When the government loses it's resolve to control the availability of dollars, their intrinsic value can only decline.

Low Home Ownership Rate Hurting the Economy

Good article, and I liked the use of the graphs. However, I don't really believe one point is technically correct:

"If a household does not own its house, it has to rent. If 64% were home owners, then it logically follows that 36% were renters...."

I'm not sure that really follows. They might be living under a bridge, moving in with Mom and Dad, or going back to Mexico. The difference may not be statistically large enough to influence the rest of the points about renters, I just don't know. But, the use of a possibly flawed method of determining the number of renters casts some doubt on it.

As for the idea expressed by one commenter that not buying a house would cause families to increase their savings rate and get out of debt... wouldn't that eventually lead to buying a house? Still, overall, there were some very good thoughts expressed in both the article and following comments. I have grave concern about the possibility of sustained recovery without a healthy housing market and a lower unemployment rate.

Welcome to the New Normal

Great article. I have been telling folks for several years now to watch the employment data in relation to the housing bubble burst. I do not believe the pent up demand for housing will express itself in any significant way until a pent up demand for employees begins to express itself. It looks like that could possibly be some time off yet.

Economic Donkeys

Once again, you have hit the nail on the head. Econ 101: If you want more of something, subsidize it. Apparently we want more bad behavior from our banks.


On Sep 14 01:50 AM Moon Kil Woong wrote:

> You are 100% correct to mention Lehman's capital ratio was 11% going
> into this. The problem is not just capital adequacy but the fact
> that the government has been allowing the watering down of strict
> accounting for banks for decades to the point their real assets are
> a pale reflection of their real value. This hasonly gotten worse
> with the suspension of mark to market in some instances.
>
> We could say we set the groundwork for the derivatives meltdown by
> allowing off balance sheet accounting for banks after the 2001 meltdown.
> This only encouraged even further risk taking in derivatives. Rather
> than lessening risk it actually set the stage for CDS, CDO's and
> other derivatives to go from $1-2 trillion up to $400-500 trillion
> in a ten year period.
>
> Now with the protection of AIG insurers are learning they can bundle
> and sell derivatives of life insurance risk. Not only is this a bit
> grim since you're betting for or against specific people dying (even
> though they are lumped in a collective pool) it is just one more
> example of unrestrained and unnecesary risk taking on the part of
> financial institutions wanting to turn and burn existing risk. In
> reality these derivatives are zero sum games. It is creating nothing
> socially beneficial save redistribution of money from suckers to
> con men and a faster rotation of theoretical gains and losses (gambling
> is the same and does the same thing).
>
> If this is the way we build an economy no wonder ours is becoming
> such a mess. It's about time people figure out that we need productivity
> to increase our standard of living. Magic tricks and pick pocketers
> will never our economy better or more solid, even if the government
> pays some of the people spinning the illusions and reimburses some
> of those who lost their money.

While Retail Sales Decline, FHA House Sales Soar

The author's main point is well taken. Many multiple listing services do not report concessions. And, often those that do have skewed results because real estate agents try to hide things like personal property included in the sale, for various reasons. Depending on the amount of concessions that are typical, the market data is often over reported as to sale price. Whether or not we have reached bottom is debatable from several points, but if the example given in the story is typical in those areas with a lot of excess inventory, then we probably have not. Add to that the shadow inventory of vacant houses not actively on the market and rising unemployment rates. Add to that potential new problems coming from option ARMs and commercial real estate. Add to that the high probability of fraud in some markets. After all is said and done, the bottom for real estate in some hard-hit markets could quite likely be some distance further down.

S&P / Case-Shiller Home Price Numbers

That is right, Mr. Galt. Add to that the fact that housing markets are local. In some MSAs there was never any hot market run up and in some of those there has never been any major decline. People who try to judge the state of the housing market by following indices instead of doing solid local research are just fooling themselves.


On Aug 25 12:09 PM John Galt wrote:

> Do people go house shopping when it's warm outside or do they go
> house shopping in snow covered January? Just look at the monthly
> closings of any home builder and you will see that there ARE seasonal
> factors.
>
> Keep in mind, even "if" housing prices inch up. They have gone down
> tremendously and are being proped up by free money (8k credit), historically
> low interest rates and other government programs. If you think housing
> is going to start marching right back up, you are in for a rude awakening.
>
>
> Perma bulls like the Realators love to talk about the pent up demand
> and "people waiting for deals who finally star to buy" but always
> fail to mention the free money. the foreclosures, the shaddow inventory/
> people who are waiting to sell but haven't yet listed their home
> yet.
>
> Just think of the guy in Atlantic City who'se down a lot of money
> that just wishes he could get back to "even". There are tons of
> people that are upside down on their home loan that wish they could
> get back to even.
>
> There is a glut of housing supply so think back to economics 101
> tells you that does to pricing? Yeah, "prices" might not be very
> far from the bottom, but on a time perspective, I don't see it getting
> "better" anytime soon.

Prime Mortgages Are Also Going Sour

You may not be an expert, but you are certainly astute. Note that I am no expert on this either, but I have seen examples of it play out. Not only is book value a reason for not proceeding with the foreclosure, it is also, sometimes, a reason not to sell after foreclosure. At foreclosure, a bank gets the property appraised... it will stay on the books at that value for some time, until they sell, at which time they may realize additional loss. Another factor is that it is usually more profitable to the bank to go into foreclosure than it is to do a work-out... at least on paper. That is at least part of the reason why the government's plan to save troubled mortgagees is failing. I believe that if Schiller, NAR, and other prognosticators were completely honest about the shadow inventory the existing home sales stats would look much worse than they do.


On Aug 20 09:26 PM Dialectical Materialist wrote:

> I am certainly no expert, but I have read that there are financial
> reasons for banks to delay. As the property sits in foreclosure,
> it's value is still subjective. Once it is sold in a distressed
> sale the loss on the mortgage is fixed. Also, it costs money to
> bring the process to fruition. So processing a lot of foreclosures
> is costly in two ways -- the losses realized and the money to process
> the sale.
>
> On Aug 20 07:36 PM Suncatcher wrote:

The Simplicity of Supportable Demand for Housing

Expat in China, those are very good questions. However, the real questions are, if the government continues to prop market demand, continues to not enforce its own lending regulations, and begins, once again to cook the books (a/k/a Fannie and Freddie) will we ever have a true market value?

The Simplicity of Supportable Demand for Housing

As an appraiser, I find your article eerily accurate. Appraisers were pushed for years by mortgage brokers and others with a vested interest. HVCC sought to put an end to that. Now appraisers are pushed by AMC paper pushers who only want faster and cheaper. Quality is usually not part of the equation, which is why I took my business in another direction, leaving secondary market mortgage lending behind more than five years ago.

You said: "Still, it came as a surprise to the whole financial world, even the regulated banks, and the regulators themselves; when the artificial Sales Prices began to crumble." But, it came as no surprise to appraisers, many of whom started blogging about the coming bubble burst as early as 2005.

When I said "eerily" I meant it. Many of those same appraisers signed a petition to Congress and regulators asking for relief from mortgage broker pressure. In various blogs, I have many times heard that the solution to the problem was something eerily similar to what Mr. Cuomo and Fannie worked out. The moral to the story is "be careful what you wish for."

AT&T: The iPhone's Achilles' Heel

Over the years I have had experience with several different providers. These include U. S. Cellular, Verizon, Trac Phone, Sprint, Cingular, and now AT&T. Of those, Cingular was the best overall and now that AT&T owns them, T takes my vote for best service. A big part of that is because they have the highest market penetration here. So, it could make a difference where you live.

Of course, another part of this may be that I use my phone to talk... not to take pictures, send e-mails, or surf the web. I believe it is highly possible that your problems with the service revolve more around the phone than the provider.

How Rational Discrimination Affects Unemployment and Foreclosure Rates

I have seen personal examples of exactly what the author is talking about. Individual calculation of which path is better economically causing the decision to be 'let the bank have it.' I used to believe that large numbers of foreclosures could only happen in an environment with sustained high unemployment, however, in the last few years I have several cases where people followed exactly this economic maxim. I have seen several others consider it and back away... there is still a strong work/repayment ethic in this part of the country. However, in places like California, Florida, and Michigan I believe the author has identified a significant, though small, segment of the foreclosure market. It seems evident that the foreclosures came first and unemployment increases followed, just look at the statistics... but whether that is cause and effect is subject to additional study.

Commercial Real Estate Is Plunging

Nice call. I've been watching the increasing vacancy rates with some concern. And, I started having that concern between about nine months ago and a year ago... it takes awhile to build up critical mass.


On Jun 26 06:08 PM geewow wrote:

> This is no surprise. Many of us writing about the economic meltdown
> have been saying that after the home mortgage collapse will be commercial
> real estate. We predicted that it was in June of 2009 that this would
> be seriously beginning. So, now, here it is.

The Truth About Unemployment Numbers

lynn conner brings up a valid point. If those of us who are self-employed see business drop off we are unemployed, but you will never see our ranks among the statistical data.

Weekly Unemployment Claims Still Indicating a Bottom

If unemployment statistics are not a leading indicator when they are on the way up, why would we think they will be a leading indicator when they stabilize or start down? Look at housing, manufacturing, deficit numbers, and consumer confidence and the big picture makes it appear that we have some ways to go. While it is usually difficult to predict either the start or the end of a recession until after the fact, I suspect that this one will not be over until housing prices and inventory stabilize.