The Housing Bubble

Good morning America! Keep on innovating, it makes for a better tomorrow! Look here, see what I mean:

“Besides snacks, beer and hard liquor, Khamis says he’s going to be teaming up with restaurants to deliver Philly cheese-steaks, Mexican food and pizza. There is a $4.99 delivery charge, and alcohol prices are marked up a bit, but the trade-off is worse, as is made clear by the company slogan: “Better Than a DUI.”

http://fastfood.freedomblogging.com/2009/10/07/new-food-and-booze-delivery-service-debuts-in-oc/36003/

I left a comment:
“Better Than a DUI.”
203,866 DUI arrests in Calif. 2007
Average cost to driver after arrest? > $5.00
or:
Delivery cost $5.00
So, Like Radical Rick says: “How tough is it?”

Run Hwy,…RUN!

Hurry up and overpay 50k so you get that tax credit from uncle sam:

http://www.cnbc.com/id/32893471

Breaking news: Free homes for all non residents!

Dear HBBers,

I want to punch every REICster I meet in the face. They are all the same. What is it about the “profession” that gives it such gravity to slime? Please help.

CCC

Last year and early this year I noticed the rail sidings in town were filled with dozens of empty box cars. This past summer almost all of those cars disappeared. I thought hmmm, a green shoot?

Guess what? They’re ba-aack! But this time it’s a bunch of rusted hulks with a name I don’t recognize instead of the rust-free CSX/Southern cars that were there before.
I guess they decided since they don’t need all their rolling stock they may as well use just the good ones.

“I pledge allegiance to America’s debt, and to the Chinese government that lends us money, and to the interest, for which we pay, compoundable, with higher taxes and lower pay, until the day we die.”

The dealership I work for put an ad in the paper for phone sales at 8$/hour. 2 days and 40 interviews later I’m so disheartened. People from all walks of life were in here, from 20 year professionals from other fields that can’t find work to desperate housewives trying to make ends meet with hubby unemployed. That said what shocked me was how many college educated youths with their 4 year degrees who have no job and no prospects in their chosen field.

Kids with big student loan back-monkeys fighting to make 8$/hour telemarketing for a car dealership. A LOT of them. 20 more interviews today, 2 positions to fill…… The recession is over, right?

Good morning everybody. We are thinking about putting in an offer on a foreclosed house. The listing agent informed us over the phone that the bank wants to deal with cash only buyers. This house was foreclosed by the bank for 400K about 6 months ago. The asking price is in the 599K and similar houses have been selling in the 420K to 475K. The houses that had been selling have a swimming pool and a tennis court. This property lacks a tennis court.

Does anybody have any advice on how to establish a cash price for properties being sold by the banks these days? Do you have any advice on this type of transaction as to what to watch out?

Thank you in advance.

The renewal of the first-time home buyer credit seems as certain as passage of TARP seemed last fall. This housing market cannot stand on its own two feet — the REIC must receive its subsidies!

* The Wall Street Journal
* OCTOBER 8, 2009, 2:02 P.M. ET

Home Builders Climb On Hopes For Buyer Tax-Credit Extension

By Shara Tibken
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Home builder shares jumped Thursday as government officials continued talks about extending the first-time home buyer’s tax credit and as mortgage rates fell further this week.

Builder stocks have been volatile as investors try to determine whether the tax credit, offering as much as $8,000, will be extended beyond Nov. 30. The credit lured buyers off the sidelines, and developers have reported increased traffic and deals as first-time buyers ink contracts. There has been great concern that the market will soften, with the weakness lasting into next year, should this credit end.

Wall Street Strategies analyst David Urani said the market recently has received conflicting information about the possible extension.

“It’s really what’s going to drive home builders until it gets sorted out,” Urani said.

He added that media reports have signaled House Speaker Nancy Pelosi, D-Calif., will consider extending - and possibly expanding - the tax credit to include more potential home buyers. Currently, only first-time buyers qualify.

In recent trading, the Dow Jones U.S. Home Construction Index jumped 6.9%. Lennar Corp. (LEN) climbed 8.7% to $14.33, while Ryland Group Inc. (RYL) rose 7.6% to $21.04. KB Home (KBH) increased 6.7% to $16.21, and Meritage Homes Corp. (MTH) rose 6.4% to $19.92.

Standard Pacific Corp. (SPF) climbed 11% to $3.51 as it announced the results from its debt-securities tender offer. More than $250 million in 2010, 2011 and 2013 notes were validly tendered.

Meanwhile, Freddie Mac (FRE) said Thursday that the 30-year fixed-rate mortgage average declined further to 4.87% for the week ending Oct. 8 from 4.94% last week and 5.94% a year ago. While rates remain low, an increase would make homes less affordable for some potential buyers.

With the tax-credit expiration looming, home builders and real-estate agents have mounted a lobbying campaign in Washington to push Congress to extend and expand the tax credit.
…

My county does foreclosure auctions online. Has anyone seen or tried this approach?

Rocket-docket Lee county is going to adopt online foreclosure auctions and it is hoping to attract world-wide bidders.

http://www.mainstreet.com/article/moneyinvesting/real-estate/online-foreclosure-auctions-unleashedhttp://www.mainstreet.com/article/moneyinvesting/real-estate/online-foreclosure-auctions-unleashed

“Developer Michael Mastro misled investors, state says”

http://tinyurl.com/yzen2vn
Over the years, Mastro raised more than $100 million from more than 175 investors he referred to as Friends & Family, using the money to buy and develop property and make loans to other developers.
The charging papers say he provided the investors with little information when they loaned him money, failed to adequately disclose risk, and kept them in the dark when his empire began to crumble last year.
Mastro’s 40-year real-estate career came to a halt this summer when three banks forced him into bankruptcy involuntarily, charging he was not paying his debts. After initially resisting, Mastro, 84, agreed to enter bankruptcy.
In documents filed with U.S. Bankruptcy Court last month, he reported $249 million in assets against nearly $587 million in liabilities, most of that owed to banks whose debt is secured by the properties that Mastro bought or developed with their money.

The PNW’s piker version of Bernie Madoff.

…I’m eagerly waiting for the day when whenever anyone admits: ‘I’m a developer’, that whoever is standing near them simply back-hands ‘em briskly across the face as a matter of course.

Ben, do you remember Leslie? The transvestite who hangs out scantily-clad downtown and at events? Seems like he had a stroke and is in serious condition.
after the slashes:
austinist.com/2009/10/09/leslie_cochran_suffers_fall_believe.php

I was awake at 3 am this morning kicking myself (figuratively) for missing the rally this year. I had the right idea and got in equity funds for awhile but bailed too soon. Seems like I’m always better off if I just don’t look at what’s happening and stick to DCA.

I wonder if the great inflation is starting already with Wall St & should I get back in, or are we in for another leg down.

Surprise, surprise, surprise: Uncle Sam is Megabank, Inc’s b!tch.

How can America throw off the banking industry parasites and get our country back?

Saturday Oct. 10, 2009 07:11 EDT
On the government’s owners

The most revealing political quote of the last year came, in my view, from the second-highest ranking Democratic Senator, Dick Durbin, who told a local radio station in April: “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” The best Congressional floor speech of the last year on the financial crisis was this extraordinarily piercing five-minute revelation from Rep. Marcy Kaptur of Ohio on the Wall Street bailout and how the Congress is subservient to their dictates. And the single most insightful article on the financial crisis was written by former IMF Chief Economist and current MIT Professor Simon Johnson in the May, 2009 issue of The Atlantic, when he argued that “the finance industry has effectively captured our government” and detailed how the U.S. has become very similar to failed emerging-market nations in both its political and economic culture.

All of that came together last night on Bill Moyers’ Journal program, as Johnson and Kaptur together discussed the stranglehold which the financial industry exerts over the federal government and how that has produced a jobless recovery in which the only apparent beneficiaries are the bankers and other financial elites who caused the financial crisis in the first place. The discussion began with reference to this Associated Press article from last week, which examined Timothy Geithner’s calenders, obtained through a FOIA request. Those documents show that Geithner spends an amazing amount of time on the telephone with the CEOs of Goldman Sachs, Citibank and JP Morgan: “Goldman, Citi and JPMorgan can get Geithner on the phone several times a day if necessary, giving them an unmatched opportunity to influence policy.” Other than the President, virtually everyone else — including leading members of Congress — are forced to leave messages. Kaptur and Johnson begin by discussing what that signifies in terms of the ongoing financial crisis and how government works.
…

Hey Combo, good to see you posting again.

—————-

Nana arrived yesterday to help out with the fam. I’m doing much better but the littleman is still ill. We’re waiting on the doc’s answering service to see if we need to go the hospital.

I’m fortunate that Tampa has one daily direct flight from Rochester. This is the kind of scenario that keeps Kunstler, and occasionally me, awake at night. How do you slowly unwind a culture where a guy calls in his mom to backstop his sick family 1,400 miles away? I called at 9pm and she was here by lunch the next day. My wife has family here but none of them could afford a sick day.

I see the bubble being related to our mobile culture somehow, I just can’t articulate it.

Wall Street cadre has Geithner on speed dial:
When these men call, Treasury boss answers

* By Matt Apuzzo and Daniel Wagner, Associated Press Writers
* On 4:26 pm EDT, Thursday October 8, 2009

WASHINGTON (AP) — As the federal government propped up the housing market and braced for the collapse of General Motors this spring, Treasury Secretary Timothy Geithner capped a busy week with phone conversations with three men.

The first was Lloyd Blankfein, the CEO at Goldman Sachs Group Inc.

The second was Jamie Dimon, the CEO at JPMorgan Chase & Co.

The third was President Barack Obama.
…

How do you through off the shackles of Megabank, Inc when they have the top economic leadership in the US under their financial and political control?

Economy
May 2009 Atlantic

The Quiet Coup
by Simon Johnson

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

A billion here, a billion there, and soon you are talking about real money!

State’s revenue falls $1.1 billion short
Wyatt Buchanan, SF Chronicle Staff Writer
Saturday, October 10, 2009
(10-10) 04:00 PDT Sacramento - –

California appears headed for another ugly budget deficit as revenue coming into the state coffers was $1.1 billion short for the first three months of the new fiscal year, state Controller John Chiang said Friday.

That announcement came as lawmakers continued intense negotiations over a plan to overhaul the state’s water system, which would come at a multibillion-dollar cost, and as Gov. Arnold Schwarzenegger came closer to acting on more than 700 bills on his desk.

Lawmakers and the governor ended face-to-face talks early in the evening, even though Schwarzenegger had declared, “Today is the day to get this done once and for all,” at a statehouse rally earlier Friday. But later in the evening the governor backed down slightly from that ultimatum, and a spokesman said Schwarzenegger would wait until meetings conclude today to decide if he would follow through on his threat of a mass veto.

The budget gap has grown since July, when lawmakers finished work on the year’s spending plan, and appears to be expanding at a quickening pace. A month ago, total general fund revenue was down by $237 million. That grew by $863 million over the past 30 days, according to the controller.

“I urge lawmakers and the governor to prepare for more difficult decisions ahead,” Chiang said in a statement.
…

W’oh Woh!

http://www.marketwatch.com/story/as-bank-earnings-begin-a-warning-from-the-occ-2009-10-09

Thinking the worst is behind the industry, investors began looking to 2010 and 2011 when banks should be a lot healthier, according to Richard Bove, an analyst at Rochdale Securities. Third-quarter results will make that leap of faith harder to maintain, he said.

“Third-quarter earnings for most banks, particularly the regional lenders, will be extraordinarily negative,” Bove said.

He estimates that about 60% of banks will report losses in the period as nonperforming assets continue to grow and charge-offs remain very high. Lenders will also have to increase reserves because they didn’t bolster them enough during the second quarter, Bove added.

Loan growth will likely remain sluggish and net interest margins won’t increase much, partly because funding costs have already dropped so much that they can’t fall much further, the analyst explained.

“None of this bodes well for the third quarter,” Bove said. “Once the market is faced with the reality of how bad the earnings are, it will be interesting to see whether investors will be able to hold on to these stocks at these price levels.”

What’s another $1 bn a month in bailouts so long as it appeases the REIC lobbyists who direct funding to Congressional campaigns?

* The Wall Street Journal
* OCTOBER 7, 2009, 2:31 P.M. ET

UPDATE: Industry Makes Case For Home Buyer Tax-Credit Extension

By Jessica Holzer
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–A slate of representatives from sectors that thrive on the construction, sale and upkeep of homes made a strong pitch for extending the $8,000 first-time home buyer tax credit in a U.S. House hearing Wednesday.

The home builder, realtor, construction, title insurance and architecture industries argued that the credit has helped to stabilize the housing market and also boost the broader economy. Some of the groups are pushing to increase the size of the credit and expand it beyond first-timers.
…
Extending the credit enjoys scattered support from members of both parties in Congress. However, it could meet resistance from lawmakers looking to repair their fiscal bona fides after the costly bailouts of the financial and automobile sectors and legislation to prop up the economy.

The price tag for merely extending the credit will be high: It will cost nearly $1 billion per month, according to an estimate from Congress’ Joint Tax Committee. A Senate proposal to boost its size to $15,000 would cost much more.

House Democrats are also likely to demand measures to offset the cost of any extension, forcing proponents to compete for the limited “pay-fors” available to cover the cost of spending measures.

Industry groups contend that not extending the tax credit could jeopardize the fragile housing recovery, creating more costs for the government down the road. They point to an oversupply of homes on the market and the threat of another wave of foreclosures to argue that the credit is still needed to prop up demand.

“The threats of more foreclosed property coming to the market, combined with the mortgage rate resets and growing unemployment are simply too great to take a wait and see approach,” Joseph Canfora, a real-estate broker from East Islip, N.Y., said in prepared remarks on behalf of the National Association of Realtors.
…

* The Wall Street Journal
* OCTOBER 6, 2009, 11:04 P.M. ET

Fed’s Hoenig: Monetary Policy Still Stimulative At Higher Rates

By Michael S. Derby
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–The Federal Reserve could start raising interest rates and still remain supportive of economic growth, even if the output gains were modest, a veteran central banker said Tuesday.

“I would not support a tight monetary policy in the current environment, but my experience tells me that we will need to remove our very accommodative policy sooner rather than later,” Federal Reserve Bank of Kansas City President Thomas Hoenig said.

“Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy,” he said.

Hoenig noted that at its current level of effectively zero percent, monetary policy is rather stimulative of growth. He explained a “neutral” rate for the economy is not zero, and “equally obvious to me is that a rate of 1 or 2 percent is not tight monetary policy - it is still very accommodative.”
…

Are the California Used Home Sellers expecting a jobs recovery next year? If not, where do they believe the demand will come from to fuel a home price increase?

I suppose if, in retrospect, the recent price increases prove to be a dead cat bounce (as I expect), the REIC experts can always resort to saying, “Nobody could have seen it coming” when prices resume their stomach-churning drop towards the ground.

Lansner on Real Estate
OC Register

Calif. home prices forecast to rise 3.3%
October 7th, 2009, 11:00 am
posted by Jeff Collins

California home prices hit bottom early in 2009, and now are projected to continue rising right through 2010, the chief economist for the California Association of Realtors said.

Leslie Appleton-Young issued her annual forecast today, projecting that the median California house price will rise 3.3% next year driven by sales of distressed homes – foreclosures and homes selling for less than their home-loan debt.

Sales will decline by about 2.3% next year, however, as joblessness and the slump continue to be a drag on the economy.

In a sense, the housing market outlook for 2010 is more of the same from 2009, the forecast says. The tale of two markets that emerged this year will continue to unfold in the next.

Affordable prices and available credit from federally backed sources are driving sales at the low end. At the high end, however, financing with “jumbo” loans is considerably scarcer.

“The distressed markets are booming. Demand exceeds supply,” Appleton-Young said. “The statewide median has been going up since April.”

But, she added, “At the high-end of the market, you have not seen much price-softening. A little bit, but nothing like you’ve seen at the low end of the market. You have a lot of sellers who are keeping their homes off the market because they don’t have to sell right now.”
…

Is it time to add the Wall Street bear to the endangered species list?

* The Wall Street Journal
* OCTOBER 10, 2009

Bears Retreat on Big Board, Nasdaq
By BRIAN HERSHBERG

Short-selling fell at the New York Stock Exchange and the Nasdaq Stock Market in the second half of September.

In the exchanges’ latest twice-a-month statistics, this time for the period ended Sept. 30, the number of short-selling positions at the NYSE not yet closed out, known as short interest, fell 3.4%. The positions stood at 13,061,828,730 shares from a revised 13,515,436,991 shares in the period ended Sept. 15.

On Nasdaq, short interest fell 1.4% to 6,337,597,288 shares from 6,426,391,344 shares, in the same period.

“Although the most recent decline was modest, the longer-term trend has been down,” said Eric Newman, portfolio manager at TFS Capital in West Chester, Pa. This is the fewest number of shorted shares since the end of 2007, he noted, suggesting an unwillingness to take bets against what has been a generally rising market.
…

Just in case anyone is interested, here is a speech on bubbles which BB gave before he took over as Fed Chair.

Can anyone who understands the nuances of English better than I do plesase explain why “Bubbles” needed the double quotes?

Remarks by Governor Ben S. Bernanke
Before the New York Chapter of the National Association for Business Economics, New York, New York
October 15, 2002

Asset-Price “Bubbles” and Monetary Policy

I am very pleased to have this opportunity to address the National Association for Business Economics. Thank you for inviting me.

My talk today will address a contentious issue, summarized by the following pair of questions: Can the Federal Reserve (or any central bank) reliably identify “bubbles” in the prices of some classes of assets, such as equities and real estate? And, if it can, what if anything should it do about them?
…

Is it really that the Fed fails to understand asset price bubbles, or more that an admission of understanding would be tantamount to an acknowledgment of culpability?

I personally find it quite hard to conceive how so many posters here, many apparently without advanced training in economics or finance, could see the bubble which somehow seems to still remain hidden from view of the Fed.

The New York Times
Economix
Explaining the Science of Everyday Life

October 9, 2009, 5:09 pm
The Fed Doesn’t Really Understand Asset Bubbles
By Catherine Rampell

The Federal Reserve doesn’t really understand asset bubbles.

Unfortunately, neither does anyone else.

Donald L. Kohn, the vice chairman of the Fed, said in a speech today:

‘A better understanding of asset prices, the credit channel, and their interaction also would seem to be critical for successfully carrying out some of the tasks central banks and other authorities are being urged to take on in the future. Discussions of macroprudential regulation of financial institutions have noted the tendency for financial crises to be preceded by bubbles spurred by financial liberalization or innovations, and how the most pernicious crises have been associated with disruptions to credit provision that resulted from excessive leverage. And increasingly, central banks are being encouraged to “lean against the wind” in the face of asset price bubbles. As researchers, we need to be honest about our very limited ability to assess the “fundamental value” of an asset or to predict its price. But the housing and credit bubbles have had a substantial cost — and the final bill is not yet in. Research on asset prices, credit and intermediation should help to identify risks and inform decisions about the costs and benefits from a possible regulatory or monetary policy decision attempting to deal with a potential asset price bubble.’

A colleague points out that this may be an early hint of the Fed’s broader rethinking of the Bernanke/Greenspan philosophical view that you do not try to pop bubbles ahead of time, at least not through monetary policy.

Real Time Economics
Economic insight and analysis from The Wall Street Journal.

* October 7, 2009, 4:49 PM ET

Ron Paul Calls for Delay in Bernanke Confirmation

By Jon Hilsenrath

In a letter they will send to Senate Banking Committee Chairman Christopher Dodd this afternoon, Reps. Ron Paul (R., Tex.) and Alan Grayson (D., Fla.) will ask that the Senate hold off on Federal Reserve Chairman Ben Bernanke’s confirmation hearing until the central bank releases more information about its rescues. ( Read the full letter.)

It is up to the Senate and not the House to confirm the Fed chairman, and the congressmen’s letter might not carry much weight in the neighboring chamber. Still, it is a sign of the potentially hostile environment Mr. Bernanke could face when he returns to Congress in the weeks ahead to defend his policies in confirmation hearings. Mr. Paul has won broad support in the House for a bill that would subject the Fed to audits by Congress’s Government Accountability Office.

The lawmakers offer a long list of disclosure demands, including a call for more information on which financial firms have received emergency Fed loans in the past year and transcripts of Federal Open Market Committee meetings up to June 2009. Transcripts are released with a five year league. The Fed has resisted calls for information about firms receiving its loans for fear it will stigmatize them in markets and make them and others reluctant to turn to the central bank in a time of crisis.

Both congressmen have been sharp critics of the Fed.

“We are writing to ask you postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf,” the letter says. Senate confirmation hearings haven’t been scheduled yet.

The Fed declined to comment.

A strong US needs a weakened dollar
Published: October 9 2009 22:23 | Last updated: October 9 2009 22:23

Lawrence Summers, the director of President Barack Obama’s National Economic Council, has voiced his support this week for “a strong dollar based on strong fundamentals”. He was responding to the greenback’s recent feebleness: the US currency has depreciated by 13.3 per cent on a trade-weighted basis since its peak in March of this year. But this fall in value, while large, should neither be feared nor obstructed.

The immediate cause of this slide is not growing fear of inflation: market expectations for future inflation rates have been stable and low. Rather the decline in the dollar has been caused by the recent recovery in world economic confidence.

The weakening is part of the unwinding of the stampede to safety that, between August 2007 and the spring of this year, drove the value of the dollar up by 12.6 per cent as investors rushed to hold safe assets. The US currency is now roughly where it was as the crisis was emerging.

It would actually be rather helpful if the dollar were to weaken further. Politicians everywhere see strong currencies as national virility symbols, but the effect of a cheaper dollar would be to help American exporters while making imports to the US dearer.
…

Do you remember Flip That Yacht? It looks like I was right when I identified that story as a shoeshine boy moment at the time it hit the press.

Here is an update on the state of the yacht construction sector:

Debt Trips Up Hinckley, Venerable Yacht Maker

By GERALDINE FABRIKANT
Published: October 9, 2009

SOUTHWEST HARBOR, Me. — David Rockefeller Sr. ordered a new boat last year, a $3 million 55-foot powerboat.

Mr. Rockefeller, now 94 years old, may not have needed a new boat. It was, after all, the sixth he has bought from Hinckley Yachts in Southwest Harbor. But Hinckley Yachts and its workers certainly needed the order — and providing them with work was part of Mr. Rockefeller’s motivation, his spokesman said.

Hinckley — which has been making boats since 1928 and is known for classically designed, beautifully constructed sailboats as well as sleek, easy-to-maneuver powerboats — is under financial pressure. It has significantly reduced its work force — from about 625 employees at its peak in mid-2008 to 305 at the end of August. The layoffs, in turn, have affected Southwest Harbor businesses, some locals say.

Like other yacht makers, Hinckley lost substantial business when the economy turned sour. But Hinckley’s problems can also be traced to its sale to one, and then another, private equity firm over the last dozen years. With each sale, it took on more debt, which became onerous when business slowed. And the culture also shifted from a family-owned business to one controlled by outsiders.

Beginning early this decade, near the peak of demand, private equity buyers poured money into yachting, convinced — wrongly, it turned out — that the business could weather any economic storms because its wealthy clients would continue to buy. Several other boat makers have run into problems, including Ferretti of Italy and the MasterCraft Boat Company of Vonore, Tenn.
…

I guess I was not just imagining that I was seeing lots of “For Lease” signs at shopping centers everywhere I go…

U.S. Retail Center Vacancies Rise to 17-Year High, Reis Says
By Daniel Taub

Oct. 8 (Bloomberg) — Vacancies at U.S. shopping centers rose in the third quarter to a 17-year high as unemployment climbed, consumers cut spending and stores closed, real estate research company Reis Inc. said.

Vacancies at neighborhood and community shopping centers increased to 10.3 percent, the highest level since 1992, from 8.4 percent a year earlier, New York-based Reis said today. Vacancies at regional and super-regional malls rose to 8.6 percent from 6.6 percent a year earlier, a high for this decade.

“Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest,” Victor Calanog, Reis research director, said in a statement.
…

Nine investment homes for $132,000? That comes out to
$132,000/9 = $14,667 per home. Is Chicago turning into Detroit?

October 9, 2009 Southwest News-Herald - City

Walking Tour Among Ruins

Highlights Foreclosure Blight That Has Hit Marquette Manor

By NADA SHAMAH

Foreclosures in Chicago have been at an all-time high, and the Southwest Side has been no stranger to boarded-up and vacant homes.

According to a study done by National People’s Action, an organization that strives to strengthen communities based on equality in housing and lending, in the first half of 2009, there was nearly 10,000 new foreclosures filed.

Many homeowners were forced to leave all of their personal belongings after being forced out of their homes due to the economic crisis.

One Chicago neighborhood that has been among those hit the hardest is Marquette Manor.

From 61st and Fairfield to 62nd and Washtenaw, there are more than 10 homes that have sit vacant for months. Some of them have been sold to investors who have failed to keep up with maintaining the properties.

National People’s Action teamed up with Neighborhood Housing Services of Chicago, an organization that promotes community development by offering homeownership, lending and rehab services and brings the Chicago foreclosure crisis directly to the federal reserve by taking a tours of homes that have been foreclosed and unattended to.

Mike Reardon, neighborhood director for the NHS, led the Marquette Manor tour, speaking directly to federal reserve officials and giving a brief biography of each home that has been foreclosed.

The home at 6118 S. Fairfield Ave., for instance, was vacant for 16 months before being sold for only $23,000.

Home prices are at an all-time low, with banks settling with investors just to break even on a sale. One investor, who was not identified, was able to purchase nine homes from January 2008 to June 2009 for only $132,000.
…

Seems I am not the only one who suspects elephants remain hidden under the housing market’s living room rug. Too bad you have to look to the Great White North to get the unvarnished truth in a MSM story.

Foreclosures threaten U.S. house prices
Jobless recovery bad for banks, homebuilders

Levi Folk, Financial Post Published: Tuesday, October 06, 2009

After a three-year rout in the U.S. housing market, it is a big deal that house prices are rising for bank earnings and ultimately for consumer demand. Unfortunately, the housing market is too fragile to call a definitive bottom in the near term. Mortgage delinquencies continue to increase in the United States and foreclosures are gaining strength. Financial companies will remain hostage to the mortgage loans they made during the housing boom, as will consumer demand.

No bell rang at the peak of the housing market in November 2005 when houses were changing hands in the United States with high hopes and good intentions at a record 8.5-million annual pace.

Neither was there much fanfare at the start of the year when housing sales finally bottomed with roughly three million fewer sales on an annual basis — a contrast in numbers that sums up the complete devastation to the housing industry and to the American dream.

That tragedy is being captured by the latest creation from American toymaker Mattel. Witness “Gwen,” an American Girl doll who is both homeless and fatherless and forced to live with her mother out of the family car.

The US$95 pricetag for this cast-off from economic recession suggests that her target market is the declining number of American families with roofs over their heads and in gainful employment.

September’s rise in the U.S. unemployment rate to 9.8% means that it will be at least a year before Americans need more new homes to accommodate rising demand because there is a significant lag between the three stages of mortgage default, foreclosure, and resale.

Currently, nearly one-quarter of all subprime mortgages are delinquent so there is a significant pipeline of housing supply.

An “ever growing pent-up supply of foreclosures in-process” is the “elephant in the room” says Ivy Zelman, housing analyst at Zelman & Associates based in Cleveland. Between 5.1 million to 5.8-million mortgages are at risk to foreclosure in the United States, according to a recent report by Zelman, a number so big that it threatens to swamp the current pace of single-family existing home sales of 5.1-million units per year.
…

Tehran Times
Iran’s Leading International Daily
U.S. Treasury set to finalize home “short sales” plan

NEW YORK (Reuters) — The U.S. Treasury will soon finalize a plan to expand its incentives for mortgage companies to include “short sales” as a way to stem a rising tide of foreclosures, according to a Treasury spokeswoman.

“Short sales,” or sales of homes for less than the balance on existing mortgages, are seen as a key way to supplement other efforts such as loan modifications to steady housing.

Unlike most modifications, “short sales” eliminate the problem of negative equity that has become a big reason for defaults as home prices have plunged.

The incentives, first announced in May, would expand the government’s Home Affordable Modification Program that has seen limited success in lowering payments for hundreds of thousands of homeowners deemed eligible.

Just 12 percent of homeowners eligible have had their loans reworked, leaving millions more foreclosures to come, the Treasury said on September 9.

More short sales may alleviate fears that a raft of “shadow supply,” or foreclosures in the pipeline, will flood the market and deal a blow to the nascent rebound in housing seen over the U.S. summer months, analysts said.

The overhang of supply is currently about 7 million units, or 135 percent of a year’s of existing home sales, according to Amherst Securities Group.

“What they are trying to do is move some of these foreclosures in the pipeline, and bring them to a resolution before (foreclosure) happens,” said Lisa Marquis Jackson, a vice-president at Irvine, California-based John Burns Real Estate Consulting. “12 percent of these being modified isn’t enough to clean these up.”
…

Panel Says Obama Plan Won’t Slow Foreclosures
By PETER S. GOODMAN
Published: October 9, 2009

A day after the Obama administration proclaimed significant progress in its effort to spare troubled homeowners from foreclosure, an oversight panel on Friday sharply criticized the program and declared it would leave millions of Americans vulnerable to losing their homes.

In a report mild in language but pointed in substance, the Congressional Oversight Panel — a watchdog created last year to keep tabs on taxpayer bailout funds — said the administration’s program would, “in the best case,” prevent “fewer than half of the predicted foreclosures.”

The report rebuked the administration for failing to shape a program that addressed the most significant engines of the foreclosure crisis — soaring joblessness and exotic mortgages with low introductory interest rates that give way to sharply higher payments over the next three years. Many of those mortgages are too large to qualify for modification under the administration’s plan. People who lose their jobs often lack enough income to qualify for relief.

The administration’s plan appears “targeted at the housing crisis as it existed six months ago, rather than as it exists now,” asserted the oversight panel in its report. “The panel urges Treasury to reconsider the scope, scalability and permanence of the programs designed to minimize the economic impact of foreclosures and consider whether new programs or program enhancements could be adopted.”
…

6600 foreclosures per day occur at an annual rate of
365*6600 = 2.4 million. That sounds low to me relative to other figures I have seen.

International Property and Investments
US foreclosure supply ‘will increase’

Article Date : 09 October 2009

The supply of foreclosed properties for sale will not dry up any time soon, it has been predicted.

Homes in the country are currently receiving filings at a rate of 6,600 per day and the Centre for Responsible Lending has said the situation will deteriorate, reports Reuters.

Although this could be bad news for those losing homes, it may provide investors with many properties to buy at cut prices.

Those who do so may need to undertake a long-term strategy to make a significant capital return, however, as Celia Chen of Moody’s Economy dot com told the news agency it could take many years for prices to return to 2006 levels.
…

Friday, October 9, 2009, 12:33pm EDT
Foreclosure activity continues to rise in Tampa Bay
Tampa Bay Business Journal

There is little good news in a new foreclosure report from First American CoreLogic that shows more increases year-over-year in families losing homes. But the Tampa Bay region is doing better than Florida as a whole.

Foreclosure rates in August were 8.58 percent in the Tampa-St. Petersburg-Clearwater market, according to the CoreLogic report. That is nearly a 4 percent change from its rate a year ago where 4.65 percent of homes were in foreclosure.

Florida overall had a foreclosure rate of just under 10 percent in August, however, a 4.72 percent change from 2008 when it had just a 5.24 percent rate.

With foreclosures, the 90-day delinquency rate remains higher for the region, growing from 7.44 percent in August 2008 to just under 14 percent this past August. The state had a similar increase, expanding from 8.51 percent to 16.47 percent.

Both local and state numbers remain well ahead of national averages. The United States is reporting a 2.86 percent foreclosure rate in August, up from 1.65 percent the year before, while 90-day delinquencies are up from 4.18 percent to 7.1 percent.

CoreLogic’s foreclosure rates measure the percentage of loans in some stage of foreclosure, including delinquencies of 90 days or more through properties sold at auction. It does not represent the number of new foreclosure filings but rather the current inventory of loans in the foreclosure process, which it says offers a comprehensive view of foreclosure trends.
…

This guy’s point does not apply to North County San Diego, where home prices remain overvalued compared to local incomes.

I am curious at what point housing price stabilization became part of the Fed’s mandate, given that asset prices fall outside the scope of their definition of inflation?

Stabilization of U.S. Housing Prices
by: Walter Kurtz October 11, 2009

The direction of US home prices continues to be a hotly debated subject. The e-mail on our recent post on the topic keeps coming. Many Armageddon forecasters are too young to have remembered the numerous stresses the US economy and housing have undergone in previous cycles - so this crisis truly feels like the end of the world. And why would you buy a home if the world is ending?

There is no question that the housing market continues to be vulnerable in the short term, particularly given the uncertain employment outlook. And if the US government hasn’t been involved, one could argue the price declines have more to go. But the politicians and the Fed will go out of their way to stabilize the US housing prices.

More importantly, the prices may now be at the “pre-bubble” levels (at least with respect to the national averages) after a spectacular growth and a similarly drastic correction. The following chart shows the ratio of house prices to median household income.

It’s not likely we will see significant price appreciation from this point on, but for those who are buying a home instead of investing in property, it’s not necessarily a bad time to do so.

Posted on Sun, Oct. 11, 2009

Skeptics question housing recovery
Recent sales have been positive, but U.S. intervention, interest rates, and other issues still raise concern.

By Alan J. Heavens

Inquirer Real Estate Writer

Those with big stakes in the housing industry appear to be champing at the bit to declare the recession over and recovery just around the corner.

Not as convinced are economists and observers outside the industry, who do not see a few months of comparatively positive sales and construction numbers as a guarantee that the worst is behind us.

Several reasons appear consistently in the skeptics’ analyses: the tax credit for first-time buyers, interest-rate volatility, government intervention, continuing unemployment, and the steady stream of foreclosures and mortgage delinquencies nationwide.

In interviews, more than two dozen economists and experts elaborated on these points.

The $8,000 tax credit. Thus far, 370,000 home sales to qualified first-time buyers are attributed to this. But the incentive expires Nov. 30. Congressional leaders have pledged to extend it. The housing industry wants it extended, and expanded.

“The tax credit has clearly had a positive effect on housing demand,” said Joe Robson, the National Association of Home Builders’ chairman.

But some others said that, like “Cash for Clunkers,” the credit is merely tapping pent-up demand.

“If all you have done is shifted home purchases that would have occurred anyway from the future into the present, that is simply moving home sales around rather than increasing their overall level,” said economist Kevin Gillen, vice president of Econsult Corp. in Philadelphia.
…

The consequences of blatant financial engineering of higher home prices should not be attributed to psychology.

The New York Times
Economic View
A Bounce? Indeed. A Boom? Not Yet.

By ROBERT J. SHILLER
Published: October 10, 2009

THE sudden rise in home prices suggests that the psychology of the market has shifted substantially. But what should we expect in the months ahead? Not necessarily that we’re entering a new housing boom. To a large extent, where we’re heading depends on what home buyers are thinking.
…
We looked at both the long- and short-term attitudes of home buyers. In our survey, we ask, “On average over the next 10 years, how much do you expect the value of your property to change each year?” The average answer among 311 respondents in 2009 was an increase of 11.2 percent. The median response — with half above, half below — was 5 percent, also high. That sounds rather like bubble thinking.

For a home buyer who borrows 90 percent of the money to acquire a house, an appreciation rate of 11.2 percent offers an investment bonanza. By putting a small amount of money down, investors stand to make a large gain if home prices climb. That is the power of leveraging. Recently, however, home buyers have also experienced the unpleasant consequences of leverage when home prices fall. Investing in a home during the wild past few years has been like gambling in a casino: You can leave with riches or empty pockets.

In our survey data from one year earlier, when prices were falling at an annual rate of nearly 20 percent, buyers were still expressing long-term optimism. Then, the average answer to the question about expected yearly increases in home values was 9.5 percent a year, with a median of 5 percent — high figures indeed for that time. The bubble thinking is not new.
…

Looks like more cramdowns are in the works. Business week ran a story (October 19, 2009, P 052) on how “struggling homeowners” are getting the attention of Congress who are trying to find more ways to give handouts to specu-vestors.

As usual, I sent a letter (real mail, it has a better success rate) to Business Week (they’ve printed two of these over the years, I’m hoping for a third):

Dear Editor:

Reuven S******

(I had a letter printed in Business Week at the height of the bubble warning of a collapse, and stating that using the “value” of one’s primary residence when calculating household net worth was foolish. It made me feel smarter than some Nobel-prize winning economists….)