Smalltownbanker

Delinquent Mortgages Equal to Three Times the Balanced For-Sale Inventory

Common sense tells me that a high percentage of those homes listed for sale have delinquent mortgages. There is also consideration that a percentage of mortgages are always delinquent but do not always end in default. There lots of assumptions in that chart and it results in figures that look much worse than reality.

This Is What a Housing Recovery Looks Like?

There have been a lot more guilty parties than CNN & ABC. It seems that their philosophy is one of hope for a self fulfilling prophesy. It we say it, it will happen. I think there is an entire administration in Washington who believes in this philosophy. The fact is things are tough. There are still opportunities out ther but we have to work hard to get the business that is out there. Caution is the number one issue in banking today. You have to be careful or you end up with a visit lots of Federal Employees of Sheila Bair late on a Friday afternoon.

Home Purchase Tax Credit Extended: Is This Wise?

Reason #1 False. The tax credit comes back to the consumer after they buy a home. This money is going to be used to furnish the home and make improvements such as landscaping, painting, upgrades, etc. in most cases because that is what first time buyers do when they buy a home. The infrastructure projects expenditures are simply moving projects up which needed to and would have been done anyway eventually. The tax credit stimulates sales on the low end resulting in move up sales and thus rejeuvenates a market that was virtually dead.
Reason #2 False: They do not receive the money at closing and cannot use it to defer downpayment, closing costs or other expenses unless some fool non-profit organization makes a loan to them to enable this. Regarding home prices. When land value as a percentage of home price falls to Zero how much more real price depreciation can occur? The answer is none because once recovery begins prices will rise to a level that supports the cost to build plus a profit or homes will not be built.

By the way Case/Shiller index is not an accurate measure of market activity today and does not reflect the true total fall in market value because it excludes foreclosure sales. Real prices have fallen farther than it indicates.

I disagree with all of your conclusions on this measure. "Feel Good" give me a break. $6 Billion is a gross underestimation of the true impact and $32 Billion diversion is absurd. The tax credit may in some cases increase the buyers willingness to bid but I have seen no cases where it has led them to bid up a price and I do mortgages for a living. My market is primarily move up buyers and lots of them are coming our way now since the credit has led to the sale of their previous residence.

If the credit were available at time of close it could be inflationary but in 99% of all cases it is not monetized to be used at closing. Therefore I do not believe this credit is impacting the quest for a bottom to pricing.

Property Values Set to Fall 43% from Current Depressed Levels

By the way. The 43% figure is way too high and will not happen. Call that a predicition if you like...

Property Values Set to Fall 43% from Current Depressed Levels

Two invalid assumptions.
One is that Case Shiller's index accurately measures a market like the current market where such a high percentage of sales are foreclosure activity. Clue: It does not.
Two is that the second chart shows an increase in government lending acitivity. Lending funded by private securitization has virtually disappeared but the total lending has significantly declined also. Granted the percentages have shifted dramatically towards government backed programs but it would be interesting to see this correlated to a total lending volume by agency chart. I think the biggest shift you would find is the increase in FHA is coming from a decrease at Fannie / Freddie and not from the private securitization arena. Credit policy changes have eliminated the market that was served primarily by private securitizations.

Housing Litmus Tests: Good News, Bad News, and a Black Swan

Are there any published statistics on what percentage of current sellers, who are the beneficiaries of the tax credit subsidized sale, are actually re-investing in another home. In Georgia we have seen very limited growth in move up buyers who have managed to sell to an FTF. (First Time Fool)

The New Warren Commission

notso - I believe there is plenty of guilt to go around. I also believe the notsosmart's of the world who want to blame the banks for the actions of people who signed loans they knew they could not pay are too numerous to mention.

Neither of these comments address the substance of the article which is what happens to the toxic assets. My understanding was that TARP funds would be used to purchase these assets at a marked to market price and the assets would then be held until such time that a market returned for them. (This was the proverbial smoke blown where it did not belong because some of these assets had no value and never will. Altogether they are probably worth 10-20 cents on the dollar of the value they are being held at on the books of the big banks).

These so called assets are still showing up as "off balance sheet assets" for many of the large banks and accounting standards were changed to make them look less toxic or worthless in more common language. The banks were allowed to simply borrow TARP money, use it to shore up their capital positions while continuing to hold worthless assets off the balance sheet, and then pay back the borrowed funds and keep the garbage assets.

Nothing has been fixed and the banks will eventually pay the piper.

Housing Bust: Speculators Sounded the First Alarm, Not Government

In fact a proposal to eliminate the downpayment was under consideration by Congress as late as early 2008 at the same time they were outlawing seller funded downpayment assistance. As the market continued to decline is was pulled back the downpayment was actually increased to 3.5% where it stands today, but they did increase the size of the loans they will insure significantly effectively weakening the program.

Why House Prices Will Resume Their Fall

Case Shiller numbers are meaningless today. Look at the rule set for his calculations and you will see that he ignores foreclosure sales in his calculations. As a result the real numbers are far more in line with the inflation adjusted norm you refer to.

Case Shiller Index is no more accurate than publicly released figures on unemployment.

Banks Are Unwilling to Solve REO Problems

I think we have already seen the impact of artificially low rates and incentives to "qualified" buyers. 100% financing is not the solution. Acceptance of reality is the solution. All of your suggestions will serve to prolong and deepen this market correction.


On Apr 12 09:07 PM WaltB wrote:

> Bill Bost is completely correct. The huge oversupply of homes and
> the foreclosures to come are a far worse threat than 100 percent
> financing to credit worthy buyers. Homes need to be made more affordable
> by lower rates not lower prices. In the last 2 years, here in mid
> Florida $450,000 homes are now $250,000 and even qualitied owners
> are ready to dump their loser homes back to the banks that destroyed
> their investment, personal balance sheets and net worth by indiscriminate
> dumping. Homes were never intended trade wildly like stocks.
>
> Why should a new buyer step up in a declining market? Why join the
> pain? Buyers need a major incentive and that is easy financing for
> QUALIFIED buyers. Try 2 percent for 5 years and no or little money
> down. We have millions of homes that need to sell now and only an
> extreme measure will cause the extreme number of sales we need. (Tighter
> lending practices can later be adopted after we have saved the ship
> from sinking.)
>
> In the Depression home prices dropped by 80 percent in many areas.
> We are already down 40-50 percent. Further adjustments to price to
> rent parity could destroy the nation. Banks need to agressively lower
> rates on foreclosures and refinance their current borrowers on the
> same basis.

Banks Are Unwilling to Solve REO Problems

"The reason that the homes are not selling is that loans are not available to a wide swathe of Americans who can and want to purchase a home either to live in or as an investment. One hundred percent financing at reasonable rates could solve the problem."

What are you smoking? The reason we are in this mess in the first place is 100% financing for people who do not have the common sense to save for what they want.

The banks are holding these properties because they believe they will have more value at some point in the future. They have the right to do that and are being prudent with their assets. They will not dump them on the market because that would diminish the gains they hope to achieve by holding them. They could later dump them if they are wrong about the market but it is doubtful that they will all decide to do so at the same time.

"If banks were to sell the homes with seller financing, buyers would take care of them to avoid further depreciation. Prices in these seller-financed transactions would be significantly higher than in other types of transactions."

More comments from smoking the same substance. Home buyers with no skin in the game could care less about maintaining a property. If it falls apart they walk away. This is one of the primary lessons learned from all of this mess. In addition, when they walk away they take the appliances, the fixtures, and anything else that is not nailed down. What you suggest is not a solution but a catalyst to perpetuate this problem and insure that we will return to the same problem again in the future.

Top 25 U.S. Housing Markets

The cumulative value of the markets identified is insignificant even if the figures shown were positive which in large part they are not. What does it mean when the top 25 Real Estate markets in the US probably represent less than 1% of the US population and 15 of those 25 markets show declines in value?

Someone was looking awfully hard for a silver lining.

Once the Job Market Comes Back, The Housing Market Will Cure Itself

First you must acknowledge that the homeowners who are losing their homes to forclosure are unable to return to the market and qualify for a mortgage for a minimum of 3 years since subprime lending is essentially gone. Assuming that the housing market will recover as soon as the job market recovers is naive.

In order for the job market to recover housing must begin to stabilize and that will not happen until the people who cannot afford their homes have lost them or their mortgages have been successfully modified by the servicers. I expect to see housing stabilize in about 12-18 months followed by a recovery in jobs.

I also expect that new home construction recovery will be slow and that there will be significant differences in what is built. Smaller, more efficient homes will replace a significant portion of the McMansions.

Housing Weakness Looms Large Over Market

In order to build a recovery in housing you must have qualified buyers. Those who have lost homes to foreclosure will have to wait a minimum of 3 years to become eligible to purchase again. That is assuming that they recover immediately after the foreclosure and start rebuilding their credit.

These dynamics are not there. That means the recovery for housing is going to be slow and there will be a significant shift in the type of housing demand. Smaller, more functional, more economical, more efficient homes with reasonable and sustainable pricing. The new construction market will not return to significant levels for at least 5-10 years.

Record 1.7% Home Price Index Increase in January

These numbers are only a partial picture. Ginnie Mae continues to grow as the rising majority issuer of bonds and new mortgages through FHA & VA loans and they tend to be more dominant in the lower priced homes.
The original stimulus package included higher loan limits for the agency which expired 12/31/08 and the OFHEO data is purchases by Fannie & Freddie which occur 20-45 days after the close of the loan. This means that you are probably looking at a surge of purchase activity before the loan limits droppred by more than $100,000 in January. I wouldn't get too excited until you see a trend.