The New Housing Market
It’s Friday desk clearing time for this blogger. “The number of people who bought previously occupied homes fell in July for the third time in four months. This year is on pace to be the worst in 14 years for home sales. Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Declining home prices and super-low mortgage rates haven’t been enough to boost sales this year. The weak data show ‘the housing market will not save the U.S. economy,’ said Paul Dales, senior U.S. economist at Capital Economics.”
“During a campaign stop Wednesday in Illinois on his Midwestern tour, President Barack Obama said a housing rebound will require ‘consumers and banks and the private sector working alongside government.’ ‘It will probably take this year and next year for us to see a slow appreciation again in the housing market,’ he said.”
“LuAnn Lavine, a real estate broker in western Illinois’ Henry County, told Obama, ‘Every week I sit around the kitchen table of families that are here today and I listen to the stories of a lost job, upside down in their house.’ She saw a turnaround in May and June. ‘My phone was ringing. I was busier than all get-out.’ However, ’since the debt ceiling fiasco in Washington, the phones have stopped,’ even through interest rates are at a record low.”
“Obama in reply said his administration was pushing banks to do loan modifications; Lavine disagreed. ‘The loan modification system has been a nightmare. Short sales are a nightmare. And the lenders are so tight and you have to be so perfect, and it’s not a perfect world,’ she said.”
“Deborah Stockhammer was four months late on her mortgage when she applied in April for federal foreclosure prevention money through the Hardest Hit program. The Jupiter River Estates resident soon was approved for the assistance. But Stockhammer said her loan servicer has refused to accept the federal money to make her loan payments. She was served with foreclosure papers last month. ‘The money is there, it’s been allocated,’ said Stockhammer, who refinanced in 2007 and now has a loan serviced by Ocwen Financial Corp. ‘Why not use it instead of throwing people out?’”
“Most rejections were because the homeowner had racked up too many late payments - the program requires owners to be no more than six months delinquent - and because there was not an eligible hardship.”
“‘Had they started this two to three years ago it might have been helpful, but at this point, a lot of the water is already under the bridge,’ said Lynn Drysdale, a Jacksonville attorney and co-chair of the National Association of Consumer Advocates, who nonetheless is supportive of Hardest Hit. ‘A program is going to be good as long as at heart it’s there to help the borrowers.’”
“Not everyone supports mortgage principal reduction and the issue has divided Washington. University of Maryland economist Peter Morici said cutting principal is ;grossly unfair to everyone else who pays their debts.; That is seconded by Kim Luu, a principal in a financial management firm, who wrote in a blog posting that cutting principal ‘benefits few people and only for the short term. It does not fix the problem.’”
“Freddie Mac spokesman Brad German said if Freddie cuts principal, it will raise the cost of home financing. ‘We’re financing a mortgage with the expectation that principal is going to be repaid. If there is a new scenario where it may not be repaid, that increases the cost to us and that will be factored into the way we price credit,’ German said. ‘We’re pricing risk. If the risk goes up, the price goes up.’”
“Confidential documents obtained by the Free Press show Fannie Mae has told banks to foreclose on some delinquent homeowners. Local governments are trying to keep people in their homes and keep property values up, and here you have a government bureaucracy ripping (those efforts) to shreds,’ said Wayne County Executive Robert Ficano.”
“‘Fannie would rather foreclose all the bad and marginal mortgages now, even at very high loss rates, while losses are on the taxpayer, so that when it is once again a private company, these risky mortgages will be gone, and will not result in losses for its shareholders,’ said Alan White, a law professor at Valparaiso University and a leading national expert on the foreclosure crisis. ‘Treasury and Congress have given Fannie a blank check, but Fannie knows the checkbook will be taken away sooner or later.’”
“‘I think you’ve got a dam that’s ready to break. Delinquencies are piling up,’ said John Gianola, managing attorney at the Iowa Legal Aid Foreclosure Defense Project. ‘Our August numbers have really picked up.’
“Roger Goldsberry, the director of the HUD-approved Family Management Credit Counselors in Waterloo, helps delinquent homeowners restructure their loans. Like Giaonola, he’s concerned the nation’s foreclosure crisis is not on the wane. ‘It’s going to come back with a vengeance,’ Goldsberry said.”
“The flow of foreclosures in New Jersey is expected to speed up soon, forcing more distressed homeowners out of their homes and weighing down property values. ‘It definitely doesn’t help the market, I’ll tell you that,’ said Scott Zotollo of Zots Appraisal Services Inc. in Rochelle Park. ‘All things being equal, a person’s going to buy the lowest-price property.’”
“‘It’s going to decrease the value of properties because foreclosures are going to go for considerably less,’ said John Susani of Coldwell Banker Susani Realty in Paterson. In the cities, he said, banks will sometimes sell foreclosed properties for 50 percent off market prices, so they can unload them quickly, before they are vandalized. ‘They want to get in and out,’ he said.”
“Dane County’s Distressed Property Index in July was a record-high 36.8 percent. Keller Williams agent Dan Miller noted the index has been climbing because last year was a record year for foreclosures, and many of those foreclosures are hitting the market now. ‘Many of the units that are selling in this market are foreclosures — because they can compete aggressively on price,’ Miller said.”
“More Americans joined the unemployment line last week than a week earlier. And consumers were under even more pressure at the cash register last month than economists thought. When inflation is rising at the same time the job market is weak, the Federal Reserve has a more difficult time stimulating the economy, said Jack Ablin, chief investment officer at Harris Private Bank.”
“‘Every time the economy got the sniffles, we had the Federal Reserve standing by with tissues,’ Ablin said. ‘This time around, I think the box is empty, and we’re going to have to go through this alone. I think we can do it. It’s just not something we’re accustomed to.’”
“So the world has some debt problems. Is it any wonder? In our modern financial world, one person’s debt is another’s asset. The whole global economy is built on debt. Debt is fine as long as it is productive. That is, as long as the debt capital generates a return that is greater than its cost. However, when the return drops below its cost, it’s a signal that the debt has become unproductive.”
“The law of economics has caught up with this system and it is now in its death throes. Governments are struggling to understand what they have created. They blindly throw more debt at a problem created by too much debt in the first place.”
“Dear Action Line: Why are home equity loans so hard to get? We’ve put a lot of income into retiring the principal on our mortgage, planning to use the house as our bank later on. Now we can’t get a home equity line of credit. - S.R., Jenks.”
“Housing prices in Tucson should hit their lowest point by September, after plunging more than 30 percent since 2008, analysts for Fiserv Case-Shiller Indexes now predict. ‘The increased foreclosure sales are a positive indicator, as it will be necessary to get through the foreclosures before the new housing market begins,’ said John L. Strobeck of Bright Future Business Consultants. ‘I say ‘new housing market’ because I believe we will never again see the typical housing market that we became used to in the 1990s through 2005.’”
