On Wednesday, some mortgage brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.
"This is beautiful, oh my gosh!" said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. "This is a whole new game now. Hopefully it's going to give people some relief."
The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates -- the lowest since the 1960s and down from 5.3 percent Tuesday.
It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage.
"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."
Analysts say the Fed's moves to buy up mortgage debt are designed to reduce the an unusually large difference, or spread, between mortgage rates and yields on government debt.
In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and 30-year mortgage rates, but gap currently hovers around 3 percentage points.
Falling interest rates mean Americans could suddenly find billions of extra dollars in their pockets at a time when consumers have sharply cut back on spending amid rising unemployment and declining household wealth. But many experts believe that the interest rate cuts alone won't be enough to jump-start the economy.
Showing posts with label Housing. Show all posts
Showing posts with label Housing. Show all posts
Thursday, December 18, 2008
Wednesday, November 12, 2008
50% in CA Who Sold Homes in Past Year Lost Money, Zillow Saysin
what is causing deepening the housing recession ( keep house prices falling )
1) Stricter mortgage standards and ( 25% downpayment and 6% interest rate for 5 year ARM)
2) record foreclosures ( there are so many foreclousure home on sale at lower prices, genuine non-foreclousure seller is forced to lower his price to match 'foreclosure' price in-order to sell )
3) amid climbing unemployment. ( 6.3% , causing 'more sellers' and 'fewer buyers' even employed propspective buyer with decreasing confidence delays/postpones buying decision )
California had 14 of the 17 markets( like San jose, SF , LA ) where more than half of homes sold were sold at a loss, according to Zillow.
asr: meaning 50% sold are people who bought houses from 2005 to 2007 which resulted in loss in todays prices , other may be houses bought earlier that is prior to 2004 ..
U.S. payrolls fell for a 10th straight month in October and have dropped by 1.2 million so far this year, the Labor Department said last week. The jobless rate is at a five-year high of 6.3 percent.
The 30.2 percent of homeowners who sold at a loss at the end of the third quarter compared with 23.7 percent at the end of the second quarter, Zillow said. Almost one in five transactions were foreclosure sales.
California had 14 of the 17 markets where more than half of homes sold were sold at a loss, according to Zillow.
1) Stricter mortgage standards and ( 25% downpayment and 6% interest rate for 5 year ARM)
2) record foreclosures ( there are so many foreclousure home on sale at lower prices, genuine non-foreclousure seller is forced to lower his price to match 'foreclosure' price in-order to sell )
3) amid climbing unemployment. ( 6.3% , causing 'more sellers' and 'fewer buyers' even employed propspective buyer with decreasing confidence delays/postpones buying decision )
California had 14 of the 17 markets( like San jose, SF , LA ) where more than half of homes sold were sold at a loss, according to Zillow.
asr: meaning 50% sold are people who bought houses from 2005 to 2007 which resulted in loss in todays prices , other may be houses bought earlier that is prior to 2004 ..
U.S. payrolls fell for a 10th straight month in October and have dropped by 1.2 million so far this year, the Labor Department said last week. The jobless rate is at a five-year high of 6.3 percent.
The 30.2 percent of homeowners who sold at a loss at the end of the third quarter compared with 23.7 percent at the end of the second quarter, Zillow said. Almost one in five transactions were foreclosure sales.
California had 14 of the 17 markets where more than half of homes sold were sold at a loss, according to Zillow.
Tuesday, November 11, 2008
Gov't launches new loan aid effort
A record 1.6 million homes will be lost to foreclosure this year and
1.9 million more next year,
according to Celia Chen, an economist for Moody's Economy.com.
With home values plunging as much as 20% from their peaks, more than 12 million homeowners now owe more on their home than it is worth,
according to estimates by Moody's Economy.com.
Although history suggests that the vast majority of those homeowners will continue to make their payments, they are at increased risk of losing their home through foreclosure.
he program will start by Dec. 15.
Flawed plan, critics say
Critics said the plan had flaws.
The modification could leave some borrowers worse off than if they lost their homes now. Because the lender won't write down any of the principal and because home prices in some areas could keep falling for years, borrowers who accept a modification now could end up owing lots of money when the house is finally sold, said Dean Baker, co-director of the Center for Economic and Policy Research. "Unless you have serious writedowns you are probably aren't doing those people any favors," he said.
Sen. Charles Schumer, D-N.Y., said the plan ignores the elephant in the room: Most of the troublesome mortgages are owned by large pools of investors, or have been securitized in a way that makes a modification impossible. "The only viable solution, and it is one we will take up under President-elect Obama, is to modify the bankruptcy code" he said.
-----------------
The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with other government and industry officials, including Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, the housing finance agency's director. "We need to stop this downward spiral."
The plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program.
Officials hope the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage companies and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
1.9 million more next year,
according to Celia Chen, an economist for Moody's Economy.com.
With home values plunging as much as 20% from their peaks, more than 12 million homeowners now owe more on their home than it is worth,
according to estimates by Moody's Economy.com.
Although history suggests that the vast majority of those homeowners will continue to make their payments, they are at increased risk of losing their home through foreclosure.
he program will start by Dec. 15.
Flawed plan, critics say
Critics said the plan had flaws.
The modification could leave some borrowers worse off than if they lost their homes now. Because the lender won't write down any of the principal and because home prices in some areas could keep falling for years, borrowers who accept a modification now could end up owing lots of money when the house is finally sold, said Dean Baker, co-director of the Center for Economic and Policy Research. "Unless you have serious writedowns you are probably aren't doing those people any favors," he said.
Sen. Charles Schumer, D-N.Y., said the plan ignores the elephant in the room: Most of the troublesome mortgages are owned by large pools of investors, or have been securitized in a way that makes a modification impossible. "The only viable solution, and it is one we will take up under President-elect Obama, is to modify the bankruptcy code" he said.
-----------------
The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with other government and industry officials, including Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, the housing finance agency's director. "We need to stop this downward spiral."
The plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program.
Officials hope the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage companies and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
Forecast 2009: Your home
(Money Magazine) -- Forget the old saw that all real estate is local. What's pummeling housing prices in your nabe is the same thing that's hurting them around the country: the credit crisis.
Home prices in the nations 10 biggest metro areas are projected to keep falling in 2009, with Miami and Los Angeles suffering most.
------
Source:Moody's Economy.com
Notes: Prices are projections for the end of 2009. Change is from the end of 2008.
Metro area 2009 median home price 2009 change
Dallas $155,645 -1.0%
Houston 147,549 -1.8
Atlanta 150,092 -2.5
Chicago 239,359 -5.3
Philadelphia 201,151 -9.8
Boston 295,918 -12.5
New York 393,210 -13.7
Washington 261,411 -17.1
Los Angeles 269,614 -17.2
Miami 214,551 -18.8
---------------
You know the drill - banks' troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average, according to HSH Associates.
It's true that this rate is not historically high (rates often surpassed 9% in the early 1990s). But it's more than the 6.2% that the same borrower would have paid at the beginning of 2008.
The fact that mortgage rates have remained stubbornly elevated despite the government takeover of Fannie Mae and Freddie Mac leads some experts to believe that those rates are not headed down anytime soon.
Talkback: What's your forecast?
Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.
But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.
Home prices are down 20% nationwide since their peak in July 2006, according to the S&P/Case-Shiller home price index. Economist Nouriel Roubini of New York University, who accurately predicted the housing slide and credit crisis, expects another 20% decline in home prices next year. Patrick Newport of economic forecasting firm Global Insight projects a 15% drop.
The damage will likely hit even areas that have so far escaped many problems, such as New York City (see the chart on the previous page). "We don't see the market turning until late 2009," says Newport.
The wild card
* How much home values fall early in the year
If they go so low that investors can start renting out homes for enough to cover their mortgage payments, we could see a wave of people snapping up bargain houses in 2009 - which could push prices higher by the time the next 12 months draw to a close.
Lawrence Yun, chief economist of the perpetually optimistic National Association of Realtors, says he expects prices to rise 2.8% in 2009.
The action plan if you're selling:
* Wait it out
In 2010, real estate should be stronger, with fewer homes clogging the market. So if you can wait until then to sell, do it. "I would," says Barbara Brin, a real estate agent in Minneapolis. And if even realtors are saying that...
* Make your place shine
In many markets, sellers will face the toughest competition not from fellow homeowners but from banks and builders. Both will be willing to cut prices dramatically to sell a foreclosed or new home.
To convince buyers that your house is worth paying up for, make sure that it's in move-in condition (foreclosures almost certainly won't be). Point out unusual qualities like wide-plank floors or stained glass that cookie-cutter new construction lacks.
* Price it below market
Go to Zillow.com to see how much nearby homes fetched recently. Once you've figured out what a buyer might pay, price your house 5% below that.
Sound painful? A recent study by a New Jersey appraiser found that houses priced below market ended up selling for more than similar houses listed above market. That's because lower prices attract more buyers.
If you're buying:
* Look for homes that have been sitting around
In many areas of the country, such as Phoenix, San Diego and Washington, D.C., it's common for perfectly good homes to linger on the market for six months or more. So start your search by looking for properties that have been up for sale for at least three months: At that point most sellers will be willing to deal.
Drive a hard bargain when you find a house you're interested in. Sellers know you have a lot to choose from. They also know that if they wait they will probably get less. So offer less now.
Barry Miller, a buyer's agent in Denver, suggests you make your first offer as much as 13% below the seller's asking price. "You might not get the house for that, but it's a good starting point," he says.
* Improve your credit score
More than ever, that three-digit number could cost you. Lenders have begun imposing fees for everyone who doesn't fall into the top tier of credit - and that's a whole lot of people.
"Let's say 680 got you the best rate on a mortgage 24 months ago," says John Ulzheimer, a credit expert with Credit.com. "Today you need to shoot for 780 to 820 to get the best deal."
Boosting your credit score from 660 to just 740 can lower your mortgage rate by a quarter of a point. To improve your score, focus on paying down debt, which will bring your crucial debt-to-credit ratio down. To top of page
Home prices in the nations 10 biggest metro areas are projected to keep falling in 2009, with Miami and Los Angeles suffering most.
------
Source:Moody's Economy.com
Notes: Prices are projections for the end of 2009. Change is from the end of 2008.
Metro area 2009 median home price 2009 change
Dallas $155,645 -1.0%
Houston 147,549 -1.8
Atlanta 150,092 -2.5
Chicago 239,359 -5.3
Philadelphia 201,151 -9.8
Boston 295,918 -12.5
New York 393,210 -13.7
Washington 261,411 -17.1
Los Angeles 269,614 -17.2
Miami 214,551 -18.8
---------------
You know the drill - banks' troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average, according to HSH Associates.
It's true that this rate is not historically high (rates often surpassed 9% in the early 1990s). But it's more than the 6.2% that the same borrower would have paid at the beginning of 2008.
The fact that mortgage rates have remained stubbornly elevated despite the government takeover of Fannie Mae and Freddie Mac leads some experts to believe that those rates are not headed down anytime soon.
Talkback: What's your forecast?
Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.
But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.
Home prices are down 20% nationwide since their peak in July 2006, according to the S&P/Case-Shiller home price index. Economist Nouriel Roubini of New York University, who accurately predicted the housing slide and credit crisis, expects another 20% decline in home prices next year. Patrick Newport of economic forecasting firm Global Insight projects a 15% drop.
The damage will likely hit even areas that have so far escaped many problems, such as New York City (see the chart on the previous page). "We don't see the market turning until late 2009," says Newport.
The wild card
* How much home values fall early in the year
If they go so low that investors can start renting out homes for enough to cover their mortgage payments, we could see a wave of people snapping up bargain houses in 2009 - which could push prices higher by the time the next 12 months draw to a close.
Lawrence Yun, chief economist of the perpetually optimistic National Association of Realtors, says he expects prices to rise 2.8% in 2009.
The action plan if you're selling:
* Wait it out
In 2010, real estate should be stronger, with fewer homes clogging the market. So if you can wait until then to sell, do it. "I would," says Barbara Brin, a real estate agent in Minneapolis. And if even realtors are saying that...
* Make your place shine
In many markets, sellers will face the toughest competition not from fellow homeowners but from banks and builders. Both will be willing to cut prices dramatically to sell a foreclosed or new home.
To convince buyers that your house is worth paying up for, make sure that it's in move-in condition (foreclosures almost certainly won't be). Point out unusual qualities like wide-plank floors or stained glass that cookie-cutter new construction lacks.
* Price it below market
Go to Zillow.com to see how much nearby homes fetched recently. Once you've figured out what a buyer might pay, price your house 5% below that.
Sound painful? A recent study by a New Jersey appraiser found that houses priced below market ended up selling for more than similar houses listed above market. That's because lower prices attract more buyers.
If you're buying:
* Look for homes that have been sitting around
In many areas of the country, such as Phoenix, San Diego and Washington, D.C., it's common for perfectly good homes to linger on the market for six months or more. So start your search by looking for properties that have been up for sale for at least three months: At that point most sellers will be willing to deal.
Drive a hard bargain when you find a house you're interested in. Sellers know you have a lot to choose from. They also know that if they wait they will probably get less. So offer less now.
Barry Miller, a buyer's agent in Denver, suggests you make your first offer as much as 13% below the seller's asking price. "You might not get the house for that, but it's a good starting point," he says.
* Improve your credit score
More than ever, that three-digit number could cost you. Lenders have begun imposing fees for everyone who doesn't fall into the top tier of credit - and that's a whole lot of people.
"Let's say 680 got you the best rate on a mortgage 24 months ago," says John Ulzheimer, a credit expert with Credit.com. "Today you need to shoot for 780 to 820 to get the best deal."
Boosting your credit score from 660 to just 740 can lower your mortgage rate by a quarter of a point. To improve your score, focus on paying down debt, which will bring your crucial debt-to-credit ratio down. To top of page
Friday, October 31, 2008
20% of U.S. Homeowners Have Mortgage Higher Than House Is Worth
Oct. 31 (Bloomberg) -- Almost 20 percent of U.S. mortgage borrowers owed more on their loans in the third quarter than their house was worth as foreclosures depressed prices and the economy weakened, according to First American CoreLogic.
More than 7.5 million properties already have negative equity and another 2.1 million will follow should home prices decline another 5 percent, Santa Ana, California-based First American, a seller of economic and real estate data, said in a report today. Six states account for almost 60 percent of homes with negative equity, led by Nevada and Michigan.
Nevada had the highest share at 48 percent, followed by Michigan at 39 percent, Florida and Arizona each at 29 percent, California at 27 percent, Georgia at 23 percent and Ohio at 22 percent, First American said.
New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Mo
``As long as job losses continue and people face resets on their mortgages, the housing market will be under severe distress,'' Sam Khater, a senior economist at First American in Tysons Corner, Virginia, said in an interview. ``We've created an entire class of homeowner that is very sensitive to price changes.''
asr: very true, we created this new class.
Home prices fell in August in all 20 metropolitan areas measured by the S&P/Case-Shiller home-price index, which dropped 16.6 percent from a year earlier and has fallen every month since January 2007. U.S. foreclosure filings rose to a record in the third quarter, and will probably increase as the economy worsens and the availability of financing shrinks, RealtyTrac Inc., a seller of default data, reported on Oct. 22.
The number of houses with loans higher than the property's value may increase to almost 25 percent should prices keep falling, First American said.
More than 7.5 million properties already have negative equity and another 2.1 million will follow should home prices decline another 5 percent, Santa Ana, California-based First American, a seller of economic and real estate data, said in a report today. Six states account for almost 60 percent of homes with negative equity, led by Nevada and Michigan.
Nevada had the highest share at 48 percent, followed by Michigan at 39 percent, Florida and Arizona each at 29 percent, California at 27 percent, Georgia at 23 percent and Ohio at 22 percent, First American said.
New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Mo
``As long as job losses continue and people face resets on their mortgages, the housing market will be under severe distress,'' Sam Khater, a senior economist at First American in Tysons Corner, Virginia, said in an interview. ``We've created an entire class of homeowner that is very sensitive to price changes.''
asr: very true, we created this new class.
Home prices fell in August in all 20 metropolitan areas measured by the S&P/Case-Shiller home-price index, which dropped 16.6 percent from a year earlier and has fallen every month since January 2007. U.S. foreclosure filings rose to a record in the third quarter, and will probably increase as the economy worsens and the availability of financing shrinks, RealtyTrac Inc., a seller of default data, reported on Oct. 22.
The number of houses with loans higher than the property's value may increase to almost 25 percent should prices keep falling, First American said.
Thursday, October 23, 2008
Self-Employed Forecaster Tops Big Banks With U.S. Housing Call
The survey covered 10 quarters starting in January 2006 and ending in June '08. During that time, homebuilding plunged, subprime-mortgage defaults infected banks and the Fed cut rates at the fastest pace in two decades.
Oct. 23 (Bloomberg) -- Joel Naroff was visiting Arizona in September 2005 when he had an epiphany. Phoenix-area realtors were looking for home prices in the metropolitan area to surge about 40 percent for a second year.
``That was an indication to me that the market had gotten out of control,'' he recalls.
Naroff's concern about a housing bubble paid off three years later: He's the top forecaster of the U.S. economy in a period that included the start of the global credit crisis, according to data compiled by Bloomberg. Naroff, 59, was the most accurate for his combined predictions for gross domestic product, unemployment, the consumer price index and the Federal Reserve's benchmark interest rate.
The survey covered 10 quarters starting in January 2006 and ending in June '08. During that time, homebuilding plunged, subprime-mortgage defaults infected banks and the Fed cut rates at the fastest pace in two decades. Since then, banks have failed, President George W. Bush has signed a $700 billion rescue bill and the Standard & Poor's 500 Index was poised for its poorest annual performance since 1937 as frozen credit markets threatened the worst worldwide recession in a quarter century.
Stock markets rallied on Oct. 13 after the U.S. government agreed to buy stakes in banks and the Fed led a push to flood the global financial system with dollars. As of Oct. 22, the S&P 500 had tumbled 39 percent this year.
``It's a world we've never seen before,'' Naroff says.
Far From Chaos
Unlike most of the 126 forecasters Bloomberg rated, Naroff makes his predictions far from the chaos gripping Wall Street. He's the self-employed president of Naroff Economic Advisors, working at home either in the Philadelphia suburb of Holland, Pennsylvania, or at his New Jersey shore vacation house.
``I walk or I go outside,'' he says. ``That's how I do my thinking, by moving or by being active.''
Naroff also uses his home offices in his role as chief economist for TD Bank Financial Group's U.S. arm, TD Bank, which has headquarters in Cherry Hill, New Jersey, and Portland, Maine.
In January, Naroff correctly estimated unemployment would rise to 5.1 percent at the end of the first quarter of 2008, the highest since September 2005. He accurately predicted 0.9 percent GDP growth for the 2008 first quarter, a plunge from 4.8 percent in the first quarter of 2006, as the housing slowdown took a toll.
He forecast 12-month inflation at 3.9 percent through March 2008, which turned out to be slightly less than the actual 4 percent rate.
As credit flows remained clogged in early October, Naroff forecast the economy shrank at a 0.8 percent rate in the third quarter and will contract at a 0.4 percent pace in the fourth. He says growth will rebound to a 1.6 percent rate in the first quarter of 2009.
Oct. 23 (Bloomberg) -- Joel Naroff was visiting Arizona in September 2005 when he had an epiphany. Phoenix-area realtors were looking for home prices in the metropolitan area to surge about 40 percent for a second year.
``That was an indication to me that the market had gotten out of control,'' he recalls.
Naroff's concern about a housing bubble paid off three years later: He's the top forecaster of the U.S. economy in a period that included the start of the global credit crisis, according to data compiled by Bloomberg. Naroff, 59, was the most accurate for his combined predictions for gross domestic product, unemployment, the consumer price index and the Federal Reserve's benchmark interest rate.
The survey covered 10 quarters starting in January 2006 and ending in June '08. During that time, homebuilding plunged, subprime-mortgage defaults infected banks and the Fed cut rates at the fastest pace in two decades. Since then, banks have failed, President George W. Bush has signed a $700 billion rescue bill and the Standard & Poor's 500 Index was poised for its poorest annual performance since 1937 as frozen credit markets threatened the worst worldwide recession in a quarter century.
Stock markets rallied on Oct. 13 after the U.S. government agreed to buy stakes in banks and the Fed led a push to flood the global financial system with dollars. As of Oct. 22, the S&P 500 had tumbled 39 percent this year.
``It's a world we've never seen before,'' Naroff says.
Far From Chaos
Unlike most of the 126 forecasters Bloomberg rated, Naroff makes his predictions far from the chaos gripping Wall Street. He's the self-employed president of Naroff Economic Advisors, working at home either in the Philadelphia suburb of Holland, Pennsylvania, or at his New Jersey shore vacation house.
``I walk or I go outside,'' he says. ``That's how I do my thinking, by moving or by being active.''
Naroff also uses his home offices in his role as chief economist for TD Bank Financial Group's U.S. arm, TD Bank, which has headquarters in Cherry Hill, New Jersey, and Portland, Maine.
In January, Naroff correctly estimated unemployment would rise to 5.1 percent at the end of the first quarter of 2008, the highest since September 2005. He accurately predicted 0.9 percent GDP growth for the 2008 first quarter, a plunge from 4.8 percent in the first quarter of 2006, as the housing slowdown took a toll.
He forecast 12-month inflation at 3.9 percent through March 2008, which turned out to be slightly less than the actual 4 percent rate.
As credit flows remained clogged in early October, Naroff forecast the economy shrank at a 0.8 percent rate in the third quarter and will contract at a 0.4 percent pace in the fourth. He says growth will rebound to a 1.6 percent rate in the first quarter of 2009.
Monday, October 20, 2008
Southern California Home Sales Rise Record 65 Percent (Update2)
Oct. 20 (Bloomberg) -- Southern California home sales rose 65 percent in September, the biggest year-over-year increase in at least two decades, as buyers took advantage of foreclosures to purchase properties at discounted prices, MDA DataQuick said.
A total of 20,497 new and existing houses and condominiums sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. The rise from a year earlier was the biggest in MDA DataQuick's records, which go back to 1988, and September's sales count was the highest since December 2006, the San Diego-based company said today in a statement.
Sales increased the most in areas where rising foreclosures drove down prices, MDA DataQuick said. Half of all the homes sold in Southern California last month had been foreclosed upon in the previous 12 months, up from 13 percent a year earlier.
``The prices are low enough that people who would normally not be able to purchase are buying,'' said Stephanie Martin, owner of Champion Realtors, a San Bernardino-based residential brokerage.
A foreclosed home with three bedrooms and 2 1/2 bathrooms in Fontana, California, that Martin sold for Ocwen Financial Corp. this month attracted more than a dozen offers and sold for $25,000 more than its asking price, she said. ``The buyers are out there. They're looking.''
Sales of foreclosed homes were highest in Riverside County, where they accounted for 69 percent of the homes sold, MDA DataQuick said. Riverside also had the biggest increase in the number of homes sold, more than doubling from a year earlier to 4,551. San Bernardino had the second-highest percentage of foreclosure sales, at 63 percent, and had the second-largest rise in sales, at 88 percent.
`Steep Price Declines'
``Steep price declines, especially inland, have improved housing affordability quite a bit and may keep sales levels well above the record lows we saw late last year and early this year,'' said John Walsh, president of MDA DataQuick, a unit of Richmond, British Columbia-based MacDonald, Dettwiler and Associates Ltd. ``It will depend on the severity of this economic downturn.''
The surge in foreclosure sales, which tend to be discounted, pushed the median price down 33 percent from a year earlier to $308,500. The September median was 39 percent below the record $505,000 median reached in Southern California last year, said MDA DataQuick, which compiles its surveys using county records and supplies real estate information to public agencies, lenders, title companies and other customers.
Prices fell in all six Southern California counties the company tracks, dropping the most in San Bernardino and Riverside, down 37 percent in each, followed by San Diego County, which was down 30 percent to a median $328,000.
A total of 20,497 new and existing houses and condominiums sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. The rise from a year earlier was the biggest in MDA DataQuick's records, which go back to 1988, and September's sales count was the highest since December 2006, the San Diego-based company said today in a statement.
Sales increased the most in areas where rising foreclosures drove down prices, MDA DataQuick said. Half of all the homes sold in Southern California last month had been foreclosed upon in the previous 12 months, up from 13 percent a year earlier.
``The prices are low enough that people who would normally not be able to purchase are buying,'' said Stephanie Martin, owner of Champion Realtors, a San Bernardino-based residential brokerage.
A foreclosed home with three bedrooms and 2 1/2 bathrooms in Fontana, California, that Martin sold for Ocwen Financial Corp. this month attracted more than a dozen offers and sold for $25,000 more than its asking price, she said. ``The buyers are out there. They're looking.''
Sales of foreclosed homes were highest in Riverside County, where they accounted for 69 percent of the homes sold, MDA DataQuick said. Riverside also had the biggest increase in the number of homes sold, more than doubling from a year earlier to 4,551. San Bernardino had the second-highest percentage of foreclosure sales, at 63 percent, and had the second-largest rise in sales, at 88 percent.
`Steep Price Declines'
``Steep price declines, especially inland, have improved housing affordability quite a bit and may keep sales levels well above the record lows we saw late last year and early this year,'' said John Walsh, president of MDA DataQuick, a unit of Richmond, British Columbia-based MacDonald, Dettwiler and Associates Ltd. ``It will depend on the severity of this economic downturn.''
The surge in foreclosure sales, which tend to be discounted, pushed the median price down 33 percent from a year earlier to $308,500. The September median was 39 percent below the record $505,000 median reached in Southern California last year, said MDA DataQuick, which compiles its surveys using county records and supplies real estate information to public agencies, lenders, title companies and other customers.
Prices fell in all six Southern California counties the company tracks, dropping the most in San Bernardino and Riverside, down 37 percent in each, followed by San Diego County, which was down 30 percent to a median $328,000.
credit default swaps (CDS)
asr: check there is FOX network story , detailed how Fannie/Freddie supported by Democrats crated easy loans ( affordable ) which lead to no income checking etc.
- Fannie/Freddie are the front face to customer accounting for 40% of total US home mortgages , then other private banks started doing same as Fannie ...
- Fox story and the story below confirms where it stared Fannie&Dems..
This is my most serious column yet. So let's get to it.
I get a fair amount of mail about the economy. Lately, much of it asks the same questions:
* What the heck happened to our economy so suddenly and powerfully that it caused the immense uproar and fear and stock market crashes we have had lately?
* Why didn't I, Ben Stein, famous so-called braino, get what was happening and why did I remain optimistic so long?
* What is the future going to bring?
First of all, obviously, I don't know what the future will bring. If I knew the future, I would be the richest man on the planet very soon and I assure you I am very far from that.
But I now see what has happened and I can explain that, and it might give a tiny bit of insight into what will happen in the future.
Start around 1995. Groups involved with civil rights issues and activities for poor people began to complain that poor people and especially non-white poor people got mortgages much less often than white well to do people. Many economists, including me, explained that it was not at all surprising that poorer, less credit worthy people were often turned down for credit. That's how credit is supposed to work: you lend to people who will pay you back.
But the advocates for poor and black people had immense political clout. Under President Bill Clinton, they passed legislation that called on banks to be required to lend to non credit worthy borrowers. The laws, including the Community Reinvestment Act, the CRA, required two large government sponsored enterprises, Fannie Mae and Freddie Mac, to buy those lower quality mortgages from the banks, guarantee them, and sell them to the public. These were bundled into immense pools of subprime mortgages as they were called, and sold all over the world.
Soon, the private sector got into the act in a vast way. They also went to banks and bought their subprime loans, packaged them, and sold them as Collateralized Mortgage Obligations all over the world.
Supposedly, the subprime collateralized mortgage obligations (CMOs) were sliced up in such a way that buyers could have a very high likelihood that they would be repaid even if many of the mortgages in the portfolio defaulted. This assumption was based on a misunderstanding of poor quality credit that had been popularized during the era of the junk bond investment powerhouse, Drexel Burnham Lambert.
As it happened, these low quality mortgage bonds were recognized as highly likely to have real problems very soon after they started to be issued by private banks in the billions. The people who recognized the high likelihood of defaults were able to profit from that likelihood:
First, they could sell the mortgage securities short, a straightforward wager that has long been available.
Second, they could buy credit default swaps (CDS) from financial entities. These were essentially a side bet that anyone could make about a certain mortgage bond (or any other kind of security). It paid off fantastically if the bond went into default or was close to default. The people who sold these CDS were banks and insurers, especially Merrill Lynch and A.I.G., that believed the mortgage bonds would not default and therefore charged very little to the other side, the counterparty, to make the bet.
Things went along well for everyone on the long side for several years as the housing market boomed. Even if borrowers could not repay their mortgages, they could refinance the mortgages for more money than was owed on the original mortgage, pay off the first mortgage and live happily in their new home. The mortgage in question in the bond would - again-- be paid off and the bond would continue happily in its owners hands.
Then, the housing market started to stabilize and soon fall, as housing prices do. They move in cycles, although around a rising mean, as we economists say.
Now, when the subprime mortgage holder could not pay off his mortgage, he could not refinance. Instead, he had to default. When a lot of these mortgages defaulted, the bonds into which they had been lumped declined in value.
So far, I, your humble servant, followed the deal just fine. It was extremely similar to the collapse of the Drexel Burnham Lambert junk bond empire. This had caused barely a ripple in the national economy when it fell apart in the early 1990's. I assumed that the same would happen with junk mortgages. There would be some failed banks and insurers, but the Federal Reserve, the Federal Deposit Insurance Corporation, and the Treasury could make all of those losses good. The total amount of subprime mortgage bonds was large but not compared with bank capital or the regenerative powers of the Fed.
So, I assumed, and wrote, things would be fine.
Where I missed the boat was not realizing how large were the CDS based on the junk mortgage bonds. They were not only large, but absolutely staggeringly large. Where the junk mortgage bonds were in the hundreds of billions, the CDS were in the tens of TRILLIONS. If the sellers of the CDS had to pay off in large part, the liability greatly exceeded the total bank capital in the United States and maybe in the world. That is, the derivatives based upon the junk mortgage bonds could be - and were - not in any way limited to the size of the mortgage bonds themselves, and this I did not know until a few months ago.
It is this liability that swamped the banks, investment banks, and insurers. It is the CDS liability that broke AIG and Lehman.
When I realized the extent of this problem, I wrongly thought the federal government would step in and in some way rescue everyone who had sold CDS. They did, except they ‘forgot' to rescue Lehman. Lehman was so large that when it failed, it was like a torpedo striking an ocean liner below the water line. A gaping hole was left in the whole world finance system.
1.Bankers panicked. If Lehman could fail, then anyone could fail. In that case, the banks that were still solvent figured they had better hoard their assets and stop making loans. This led to the ongoing credit freeze. This led to a rapidly gathering economic downturn and a drastic fall in prices of all kinds of securities, real estate and commodities.
2) It also led to a severe credit squeeze on hedge funds, which saw credit dry up and their asset prices fall suddenly, and were forced to sell stocks and other assets on a dramatic scale, leading to still greater falls in securities prices, and the worldwide panic that it still unfolding.
In turn, this led to huge infusions of liquidity into the banks of the world, the semi-nationalization of the banks of the United States and of many other nations to shore them up, thaw credit, and bolster world markets and economies. These were drastic steps for drastic times, all generated by derivatives. Warren Buffett had warned us against them, and he was dead right, as always.
Now, these acts should help. But it might not do the job all by itself. Major lender solvency issues remain. If housing prices keep falling, more mortgage bonds will default and the liability attached to the credit default swaps based upon them will still be in the trillions or even tens of trillions.
I might well be too alarmist here, but I think the only rational possibility is for the federal government or the New York State government (because most of the CDS were entered into in New York)
to simply annul the credit default swaps as void as being against public policy. After all, there was no insurable interest in most cases, which tends to void insurance contracts, which is what a CDS is.
Once that happens, the banks can breathe freely again, take risks, and the economy can revive. Or, perhaps the housing market will stabilize, mortgage based bonds will rally, and the CDS will be out of the money and will not be a threat to the lenders. But something has got to happen to defuse these deadly derivatives.
In any event, we now know a lot we did not know before. Credit default swaps are way too dangerous. Derivatives generally are dangerous. There is much that Ben Stein does not know. I hope this explains some of how we got to this precarious place, I apologize for not seeing it sooner. But I am still optimistic that the government will save us from the CDS, and we will go on to renewed prosperity. In other words, I am still buying.
- Fannie/Freddie are the front face to customer accounting for 40% of total US home mortgages , then other private banks started doing same as Fannie ...
- Fox story and the story below confirms where it stared Fannie&Dems..
This is my most serious column yet. So let's get to it.
I get a fair amount of mail about the economy. Lately, much of it asks the same questions:
* What the heck happened to our economy so suddenly and powerfully that it caused the immense uproar and fear and stock market crashes we have had lately?
* Why didn't I, Ben Stein, famous so-called braino, get what was happening and why did I remain optimistic so long?
* What is the future going to bring?
First of all, obviously, I don't know what the future will bring. If I knew the future, I would be the richest man on the planet very soon and I assure you I am very far from that.
But I now see what has happened and I can explain that, and it might give a tiny bit of insight into what will happen in the future.
Start around 1995. Groups involved with civil rights issues and activities for poor people began to complain that poor people and especially non-white poor people got mortgages much less often than white well to do people. Many economists, including me, explained that it was not at all surprising that poorer, less credit worthy people were often turned down for credit. That's how credit is supposed to work: you lend to people who will pay you back.
But the advocates for poor and black people had immense political clout. Under President Bill Clinton, they passed legislation that called on banks to be required to lend to non credit worthy borrowers. The laws, including the Community Reinvestment Act, the CRA, required two large government sponsored enterprises, Fannie Mae and Freddie Mac, to buy those lower quality mortgages from the banks, guarantee them, and sell them to the public. These were bundled into immense pools of subprime mortgages as they were called, and sold all over the world.
Soon, the private sector got into the act in a vast way. They also went to banks and bought their subprime loans, packaged them, and sold them as Collateralized Mortgage Obligations all over the world.
Supposedly, the subprime collateralized mortgage obligations (CMOs) were sliced up in such a way that buyers could have a very high likelihood that they would be repaid even if many of the mortgages in the portfolio defaulted. This assumption was based on a misunderstanding of poor quality credit that had been popularized during the era of the junk bond investment powerhouse, Drexel Burnham Lambert.
As it happened, these low quality mortgage bonds were recognized as highly likely to have real problems very soon after they started to be issued by private banks in the billions. The people who recognized the high likelihood of defaults were able to profit from that likelihood:
First, they could sell the mortgage securities short, a straightforward wager that has long been available.
Second, they could buy credit default swaps (CDS) from financial entities. These were essentially a side bet that anyone could make about a certain mortgage bond (or any other kind of security). It paid off fantastically if the bond went into default or was close to default. The people who sold these CDS were banks and insurers, especially Merrill Lynch and A.I.G., that believed the mortgage bonds would not default and therefore charged very little to the other side, the counterparty, to make the bet.
Things went along well for everyone on the long side for several years as the housing market boomed. Even if borrowers could not repay their mortgages, they could refinance the mortgages for more money than was owed on the original mortgage, pay off the first mortgage and live happily in their new home. The mortgage in question in the bond would - again-- be paid off and the bond would continue happily in its owners hands.
Then, the housing market started to stabilize and soon fall, as housing prices do. They move in cycles, although around a rising mean, as we economists say.
Now, when the subprime mortgage holder could not pay off his mortgage, he could not refinance. Instead, he had to default. When a lot of these mortgages defaulted, the bonds into which they had been lumped declined in value.
So far, I, your humble servant, followed the deal just fine. It was extremely similar to the collapse of the Drexel Burnham Lambert junk bond empire. This had caused barely a ripple in the national economy when it fell apart in the early 1990's. I assumed that the same would happen with junk mortgages. There would be some failed banks and insurers, but the Federal Reserve, the Federal Deposit Insurance Corporation, and the Treasury could make all of those losses good. The total amount of subprime mortgage bonds was large but not compared with bank capital or the regenerative powers of the Fed.
So, I assumed, and wrote, things would be fine.
Where I missed the boat was not realizing how large were the CDS based on the junk mortgage bonds. They were not only large, but absolutely staggeringly large. Where the junk mortgage bonds were in the hundreds of billions, the CDS were in the tens of TRILLIONS. If the sellers of the CDS had to pay off in large part, the liability greatly exceeded the total bank capital in the United States and maybe in the world. That is, the derivatives based upon the junk mortgage bonds could be - and were - not in any way limited to the size of the mortgage bonds themselves, and this I did not know until a few months ago.
It is this liability that swamped the banks, investment banks, and insurers. It is the CDS liability that broke AIG and Lehman.
When I realized the extent of this problem, I wrongly thought the federal government would step in and in some way rescue everyone who had sold CDS. They did, except they ‘forgot' to rescue Lehman. Lehman was so large that when it failed, it was like a torpedo striking an ocean liner below the water line. A gaping hole was left in the whole world finance system.
1.Bankers panicked. If Lehman could fail, then anyone could fail. In that case, the banks that were still solvent figured they had better hoard their assets and stop making loans. This led to the ongoing credit freeze. This led to a rapidly gathering economic downturn and a drastic fall in prices of all kinds of securities, real estate and commodities.
2) It also led to a severe credit squeeze on hedge funds, which saw credit dry up and their asset prices fall suddenly, and were forced to sell stocks and other assets on a dramatic scale, leading to still greater falls in securities prices, and the worldwide panic that it still unfolding.
In turn, this led to huge infusions of liquidity into the banks of the world, the semi-nationalization of the banks of the United States and of many other nations to shore them up, thaw credit, and bolster world markets and economies. These were drastic steps for drastic times, all generated by derivatives. Warren Buffett had warned us against them, and he was dead right, as always.
Now, these acts should help. But it might not do the job all by itself. Major lender solvency issues remain. If housing prices keep falling, more mortgage bonds will default and the liability attached to the credit default swaps based upon them will still be in the trillions or even tens of trillions.
I might well be too alarmist here, but I think the only rational possibility is for the federal government or the New York State government (because most of the CDS were entered into in New York)
to simply annul the credit default swaps as void as being against public policy. After all, there was no insurable interest in most cases, which tends to void insurance contracts, which is what a CDS is.
Once that happens, the banks can breathe freely again, take risks, and the economy can revive. Or, perhaps the housing market will stabilize, mortgage based bonds will rally, and the CDS will be out of the money and will not be a threat to the lenders. But something has got to happen to defuse these deadly derivatives.
In any event, we now know a lot we did not know before. Credit default swaps are way too dangerous. Derivatives generally are dangerous. There is much that Ben Stein does not know. I hope this explains some of how we got to this precarious place, I apologize for not seeing it sooner. But I am still optimistic that the government will save us from the CDS, and we will go on to renewed prosperity. In other words, I am still buying.
Friday, October 17, 2008
Realtors Optimistic in CA for 2009 so long as…
asr: Link came from 'the bigpicture' left side categories ..
The 2009 forecast calls for a further decline in home prices, down 6 percent for the year following a 32 percent decline in year 2008 .
C.A.R.'s California Housing Market Forecast for 2009 -- See table
Given all those factors, and the uncertainty left in the marketplace, it was no doubt difficult to come up with a forecast for 2009, but Appleton-Young and her staff at CAR did a very admirable, and thorough, job of it. Based on the historic data she presented, it appears as if California is set to come out the other side in pretty good shape, probably by the second half of 2009 if no other major events change the nation’s — and the state’s — financial landscape
The 2009 forecast calls for a further decline in home prices, down 6 percent for the year following a 32 percent decline in year 2008 .
C.A.R.'s California Housing Market Forecast for 2009 -- See table
Given all those factors, and the uncertainty left in the marketplace, it was no doubt difficult to come up with a forecast for 2009, but Appleton-Young and her staff at CAR did a very admirable, and thorough, job of it. Based on the historic data she presented, it appears as if California is set to come out the other side in pretty good shape, probably by the second half of 2009 if no other major events change the nation’s — and the state’s — financial landscape
As Home Prices Plummet, When Will You Buy?
Home prices in 20 of the nation's major metro areas in July were collectively down 16.3 percent from a year ago, according to the S&P/Case-Shiller Home Price Index released today. Prices in those metro areas were down 19.5 percent from their peak in July 2006.
"There are signs of a slow down in the rate of decline across the metro areas, but no evidence of a bottom," said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's
"I think this time residential housing is in the 100-year flood, and I think it's going to take a long time to recover," said David Shulman, senior economist at the UCLA Anderson Forecast, at the Zelman & Associates Housing Summit in Dallas on Sept. 17.
Shulman said he expects home prices nationwide to go down 25 percent from peak to trough, although he acknowledged that prices could "overshoot to the downside." And while modest appreciation could resume in late 2009, prices won't be back to their 2006 peak until at least 2016, possibly as late as 2020 in some markets, according to Shulman
"There are signs of a slow down in the rate of decline across the metro areas, but no evidence of a bottom," said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's
"I think this time residential housing is in the 100-year flood, and I think it's going to take a long time to recover," said David Shulman, senior economist at the UCLA Anderson Forecast, at the Zelman & Associates Housing Summit in Dallas on Sept. 17.
Shulman said he expects home prices nationwide to go down 25 percent from peak to trough, although he acknowledged that prices could "overshoot to the downside." And while modest appreciation could resume in late 2009, prices won't be back to their 2006 peak until at least 2016, possibly as late as 2020 in some markets, according to Shulman
Builder Sentiment Hits All Time Low
"Reflecting profound uncertainties tied to the financial market shocks of recent weeks, builder confidence in the market for new single-family homes receded to a new record low this month. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined three points to 14 in October after having edged up slightly in the previous month..."
------------
Economists' Forecasts
The confidence index was forecast to fall to 65, according to the median of 61 economists surveyed by Bloomberg News.
Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
``Builders have stopped building in large measure, but they waited too long to stop building,'' Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, said in a Bloomberg Television interview. ``At this point they've got to clear the inventory.''
Recovery Delayed
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage finance companies Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month.
``These things are putting a new nail'' in the real-estate market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television yesterday. ``This sort of vicious feedback loop is still in play.''
Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Thursday, October 16, 2008
Home Prices Seem Far From Bottom
While those declines have been painful to homeowners in those cities, economists said the quick decline might help the markets reach bottom faster than in previous housing cycles, said Edward E. Leamer, an economist at the University of California, Los Angeles. In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again
Higher interest rates result in bigger monthly payments, pricing some potential buyers out of the market. For example,
monthly payments are $2,700 on a 6 percent 30-year, fixed-rate loan of $450,000.
If the interest rate rises to 7 percent, those monthly payments jump to $3,000.
All things being equal, when rates rise prices generally fall.
Single-family home prices in Las Vegas have already fallen 34 percent from their peak in the summer of 2006, according to the Standard & Poor’s Case-Shiller home price index. Prices in San Diego have fallen 31 percent since late 2005.
Is it about halfway far? That's about where we are. The problems are well known, but let's list the specifics anyway, for the sake of the perennial housing bottom callers:
asr: sarcastic , author means not bottomed yet
• Home prices remain elevated by traditional metrics;
• Inventory continues to increase
• Income is not rising, and in many industries is falling;
• Mortgage rates have been going higher;
• Nationwide unemployment is rising
Other than that, Real Estate is terrific. Here's the required NYT excerpt:
"One reliable proxy of housing values — the ratio of home prices to rents — indicates that in many cities prices are still too high relative to historical norms.
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.
It increased the most on the coasts and somewhat less in the middle of the country. Economy.com’s calculations show that while it remains elevated in many places, the ratio has fallen sharply to more normal levels in places like Sacramento, Dallas and Riverside, Calif.
The current housing downturn is much more national in scope and severe than any other in the postwar period, partly because of the proliferation of risky lending practices. Today, foreclosures are running ahead of the downturn in the economy, a reversal of previous housing slumps
asr: meaning in previous housing slump ( LA 1989 time?), first came 'downturn in economy' then 'housing slump'. This time it is reverse firt 'housing slump'
."
Sunday, October 12, 2008
Tax Aspects of Home Ownership - Selling a Home
Though most home-sale profit is now tax-free, there are still steps you can take to maximize the tax benefits of selling your home. Learn how to figure your gain, factoring in basis, home improvements and more.
It might not matter at all. In fact, there's a good chance you won't even have to report the sale to the IRS because most home-sale profit is now tax-free.
Do I Have to Pay Taxes on the Profit I Made Selling My Home?
It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax free. If you are married and file a joint return, up to $500,000 of the profit is tax free if you meet the ownership and residency tests. The law lets you "exclude" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you cannot take a deduction for the loss.)
You can use this exclusion every time you sell a primary home, as long as you owned and lived in it for two of the five years leading up to the sale and haven't sold another home in the last two years.
If your profit exceeds the $250,000/$500,000 limit, the excess is reported as a capital gain on Schedule D.
How Do I Qualify for This Tax Break?
There are three tests you must meet in order to treat the gain from the sale of your main home as tax free:
Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary home, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
Also, if you're married:
You must file a joint return.
At least one spouse must meet the ownership requirement, and both you and your spouse must have lived in the house for two of the five years leading up to the sale.
http://turbotax.intuit.com/tax-tools/selling_a_home_turbotax/article
For More Information - good IRS site info with exmaplesFor information on the basis for figuring out whether you have a gain or loss on the sale of your home, see IRS Tax Topic 703: Basis of Assets. For general information on the sale of your home, see IRS Publication 523: Selling Your Home, and Tax Topic 701: Sale of Home.
It might not matter at all. In fact, there's a good chance you won't even have to report the sale to the IRS because most home-sale profit is now tax-free.
Do I Have to Pay Taxes on the Profit I Made Selling My Home?
It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax free. If you are married and file a joint return, up to $500,000 of the profit is tax free if you meet the ownership and residency tests. The law lets you "exclude" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you cannot take a deduction for the loss.)
You can use this exclusion every time you sell a primary home, as long as you owned and lived in it for two of the five years leading up to the sale and haven't sold another home in the last two years.
If your profit exceeds the $250,000/$500,000 limit, the excess is reported as a capital gain on Schedule D.
How Do I Qualify for This Tax Break?
There are three tests you must meet in order to treat the gain from the sale of your main home as tax free:
Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary home, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
Also, if you're married:
You must file a joint return.
At least one spouse must meet the ownership requirement, and both you and your spouse must have lived in the house for two of the five years leading up to the sale.
http://turbotax.intuit.com/tax-tools/selling_a_home_turbotax/article
For More Information - good IRS site info with exmaplesFor information on the basis for figuring out whether you have a gain or loss on the sale of your home, see IRS Tax Topic 703: Basis of Assets. For general information on the sale of your home, see IRS Publication 523: Selling Your Home, and Tax Topic 701: Sale of Home.
Friday, October 10, 2008
Homebuyers balk amid Wall Street meltdown
The Dow has lost over 2,200 points in the last seven trading sessions - and that's giving the few homebuyers that are out there right now reason to reconsider.
The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.
"The events of the past couple of weeks have people's heads spinning," said Steve Melman, NAHB's director of economic surveys.
The National Association of Realtors (NAR) estimates that there are about 25% fewer people shopping for homes than there normally would be at this time of year. Potential buyers are worried about their jobs, their declining investments and falling housing prices, which is keeping them on the sidelines, according to spokesman Walter Molony.
"You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment," said Molony.
Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.
Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. "They told me they had lost about a quarter of their retirement portfolio," said Rose, and that they could no longer afford it.
Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.
Deal or no deal
Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.
"It wasn't that we lost money [in the market] or that we were worried about our jobs," said Tai, a software developer in his mid-20s, "but we thought we could get a better deal, so we decided to wait."
The couple backed out of the deal by citing problems with the inspection, but they haven't given up on making a purchase.
"We're keeping our eyes out," said Tai. "We want to see how things shake out. If we see a great deal, we'll take it."
Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.
"Buyers are seeing the [market implosion] as an opportunity to get concessions," said Holt. In the end, the
The National Association of Home Builders (NAHB) for instance has seen its contract cancellations spike recently to as high as 30%, compared with an average rate of about 20%. During the housing boom, as few as 5% of sales were cancelled.
"The events of the past couple of weeks have people's heads spinning," said Steve Melman, NAHB's director of economic surveys.
The National Association of Realtors (NAR) estimates that there are about 25% fewer people shopping for homes than there normally would be at this time of year. Potential buyers are worried about their jobs, their declining investments and falling housing prices, which is keeping them on the sidelines, according to spokesman Walter Molony.
"You have to have a lot of confidence to make this kind of big-ticket purchase in the current environment," said Molony.
Real estate agent Bob Rose was helping one couple look for an investment property in battered Contre Costa County, hoping to find a bargain that they could sell in a few years.
Then, on September 29 the Dow dove nearly 800 points and the couple decided not to buy. "They told me they had lost about a quarter of their retirement portfolio," said Rose, and that they could no longer afford it.
Even some buyers who are already in contract are managing to pull out of sales amidst all the economic turmoil.
Deal or no deal
Two weeks ago, one Washington state couple, Sharif Tai and Gaby Ghafari, went into contract on a new $450,000, three bed, three bath, house in central Seattle. Soon afterwards, the stock market began its steep descent.
"It wasn't that we lost money [in the market] or that we were worried about our jobs," said Tai, a software developer in his mid-20s, "but we thought we could get a better deal, so we decided to wait."
The couple backed out of the deal by citing problems with the inspection, but they haven't given up on making a purchase.
"We're keeping our eyes out," said Tai. "We want to see how things shake out. If we see a great deal, we'll take it."
Other buyers are demanding sweeteners before they close a deal during such a rocky time. San Francisco agent Jim Holt had clients go into contract on September 29, on a $750,000 home in town. But by the end of the week the Dow had lost over 800 points and the buyer demanded a whopping $50,000 price cut.
"Buyers are seeing the [market implosion] as an opportunity to get concessions," said Holt. In the end, the
Thursday, October 9, 2008
California's Discount Foreclosure Sales Point to Housing Bottom
Loan Values
Bank-owned properties attract investors who can rent out the homes for 10 percent of the purchase price annually, said Sean O'Toole, founder of real estate auction Web site ForeclosureRadar in Discovery Bay, California. ``Those deals are starting to pop up and putting a floor on the market,'' he said.
Bruce Norris, president of the Norris Group investment firm in Riverside, said he purchased foreclosed properties for one- third of the outstanding loan value during the past two months.
asr: Since Bloomberg published Bruce notes, it must be verified , adding to Bruce credit
Norris bought a three-bedroom home in the Moreno Valley section of Riverside for $106,000, a 65 percent discount on the $300,000 loan held by Bear Stearns Cos., now part of JPMorgan Chase & Co. He got a 61 percent discount on a home with $258,750 in loans held by Deutsche Bank AG, and a 63 percent discount for a home with $324,000 in loans held by Morgan Stanley, he said.
``The banks are stuck wholesaling to people like me,'' Norris said. ``They are starting to move product faster than the market would normally allow.''
Housing Bill
Banks will foreclose on about 700,000 properties with subprime mortgages this year, more than double the number a year ago, Sharga estimated. The increase is prompting overwhelmed banks to hire more workers to process purchase offers.
Bank-owned properties attract investors who can rent out the homes for 10 percent of the purchase price annually, said Sean O'Toole, founder of real estate auction Web site ForeclosureRadar in Discovery Bay, California. ``Those deals are starting to pop up and putting a floor on the market,'' he said.
Bruce Norris, president of the Norris Group investment firm in Riverside, said he purchased foreclosed properties for one- third of the outstanding loan value during the past two months.
asr: Since Bloomberg published Bruce notes, it must be verified , adding to Bruce credit
Norris bought a three-bedroom home in the Moreno Valley section of Riverside for $106,000, a 65 percent discount on the $300,000 loan held by Bear Stearns Cos., now part of JPMorgan Chase & Co. He got a 61 percent discount on a home with $258,750 in loans held by Deutsche Bank AG, and a 63 percent discount for a home with $324,000 in loans held by Morgan Stanley, he said.
``The banks are stuck wholesaling to people like me,'' Norris said. ``They are starting to move product faster than the market would normally allow.''
Housing Bill
Banks will foreclose on about 700,000 properties with subprime mortgages this year, more than double the number a year ago, Sharga estimated. The increase is prompting overwhelmed banks to hire more workers to process purchase offers.
California Real Estate
-------------------
realtytrac map site,
see Cupertino has 50 houses vs. 8000 san jose,
consider cupertino is 1/10 of san jose then still it needs 800 houses vs. 50 .
see sunnyvale is better, Fremont after sunnyvale , this shows foreclosures problem
http://www.realtytrac.com/MapSearch/MapSearch/MapSearch.aspx?txtCity=cupertino&txtCity=CA#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
------------------
http://www.thenorrisgroup.com
http://www.thenorrisgroup.com/crash_overview.html
http://www.thenorrisgroup.com/crash_overview.html
Testimonials
-----------------
http://piggington.com/bruce_norris_predictions
---------------
Bruce Reviews
http://www.realestatecoursereviews.com/review/index2.php?item_id=39
----------------------
Bubble Premier
http://piggington.com/bruce_norris_predictions
(asr: this site piggington.com seems credible, he gave lots of data on San Deigo RE: ,and he attenede Bruce meeting and endorsed so we can give credit to Bruce based on Piggington .. and piggington is still continuous live site ..)
Bruce Norris' predictions
User Forum Topic
Submitted by EconProf on December 20, 2007
Long time real estate guru Bruce Norris spoke last night in San Diego about the likely future of CA real estate. Gave a wide-ranging analysis of why we are only in the initial stages of a "perfect storm" that is hammering real estate and will create opportunities galore once the bottom is reached.
First, as to why this guy commands respect--his forecasting record is near perfect, as far as I can tell. In 1997, after 7 years of housing prices declining then stabilizing, he predicted they would double in 8 years. He was mocked for that call, but as we now know, they actually about tripled. Then he turned bearish in 2005, and in January of 2006 published a prediction that prices were wildly overblown and would fall radically. He really caught hell for that call. If others here can chime in with any other evidence of his record, then please chip in.
Anyway, here is a summary of some of his observations and predictions:
1. The bottom will be in about 2010 or 2011, with the steepest decline occurring in 2008. ( asr: meaning after 2008 still there is bottom, but peak yearly %drop is in 2008)2. 50 - 60% of sales in 2008 will be REO's.
3. Auctions will be a growing segment. Suggests investors only play that game and buy when "absolute auctions" are held.
4. Rents are falling rapidly in the most hard hit areas of Riverside. We in San Diego are helped by our fires (!), and less overbuilding.
5. Watch out for BK judges pushing "cramdowns", which I believe is when he simply tells the home lender to wipe out a portion of the principle on the loan and renegotiate it. (Correct me if I'm wrong on this interpretation).
6. Look for interest rates to get a bump up due to (5) above as investors naturally flee from lending in the future. Expect same fallout effect from current and feared future tendencies by gov't to interfere with existing loan contracts. This will prolong the decline, and rub salt in the wound of those responsible savers who have waited to buy a home. Law of unintended consequences.
7. Outmigration from CA due to our still-insane housing costs will accelerate. People will start coming back only when price/income ratios revert to the mean, about 2011. An interesting prediction is that Phoenix and Las Vegas will bounce off the bottom sooner than SoCA, since demographics favor them, i.e., many refugees from here will tend to prop up their housing markets, speeding their recovery.
8. As support for above, he cited the ratio of the cost of renting a U-haul truck from SD to other cities, versus the reverse. Biggest ratio cities:
Portland 2 1/2 to l, Salt L.C., Seattle, Dallas, Denver, all 2 to 1.
9. Another ticking time bomb I had not heard of: some HELOCs have a provision in which if the value of the house falls a certain amount, the loan converts to a fixed 15-year amortization loan AT 18 PERCENT.
All in all, a very analytical, data-driven speech, not the kind of hype-driven presentation most of these events are.
Any other attendees from this forum there? Would like to hear your input.
‹ Refinancing now: A bad move? prices down, slowly but surely ›
Login or register to post comments Printer-friendly version
I didn't attend. I was
Submitted by pbnative on December 20, 2007 - 3:40pm.
I didn't attend. I was curious about #9 so I looked at mine. It says that my line can be terminated, requiring me to pay the outstanding balance and pay certain fees, if "the value of the dwelling securing the equity account declines significantly below its appraised value for purposes of the equity account." Separate from the possible termination, the rate can go as high as 18%. I can't find anything about a conversion to fixed 18%. I don't have any money on it, but this is good to consider in case I want to use it.
I suppose that 'Declines significantly' means whatever they want it to mean. There is no specific LTV amount.
Login or register to post comments
This is now not something to
Submitted by kev374 on December 20, 2007 - 3:49pm.
This is now not something to forecast but it is quite OBVIOUS!
Login or register to post comments
BobSPBNative: Sounds like
Submitted by EconProf on December 20, 2007 - 9:46pm.
BobSPBNative: Sounds like you are vulnerable to the lender's whims.
Norris also said there is a clustering of resets scheduled to hit in 2010, after the cluster hitting in early 2008.
Login or register to post comments
2010 resets sound about
Submitted by sdrealtor on December 21, 2007 - 9:04am.
2010 resets sound about right. I have long said that 2009/2010 will be the pain for the higher end as all the 5/1 arm's reset on 04/05 purchases/refis.
Login or register to post comments
realtytrac map site,
see Cupertino has 50 houses vs. 8000 san jose,
consider cupertino is 1/10 of san jose then still it needs 800 houses vs. 50 .
see sunnyvale is better, Fremont after sunnyvale , this shows foreclosures problem
http://www.realtytrac.com/MapSearch/MapSearch/MapSearch.aspx?txtCity=cupertino&txtCity=CA#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
------------------
http://www.thenorrisgroup.com
http://www.thenorrisgroup.com/crash_overview.html
http://www.thenorrisgroup.com/crash_overview.html
Testimonials
-----------------
http://piggington.com/bruce_norris_predictions
---------------
Bruce Reviews
http://www.realestatecoursereviews.com/review/index2.php?item_id=39
----------------------
Bubble Premier
http://piggington.com/bruce_norris_predictions
(asr: this site piggington.com seems credible, he gave lots of data on San Deigo RE: ,and he attenede Bruce meeting and endorsed so we can give credit to Bruce based on Piggington .. and piggington is still continuous live site ..)
Bruce Norris' predictions
User Forum Topic
Submitted by EconProf on December 20, 2007
Long time real estate guru Bruce Norris spoke last night in San Diego about the likely future of CA real estate. Gave a wide-ranging analysis of why we are only in the initial stages of a "perfect storm" that is hammering real estate and will create opportunities galore once the bottom is reached.
First, as to why this guy commands respect--his forecasting record is near perfect, as far as I can tell. In 1997, after 7 years of housing prices declining then stabilizing, he predicted they would double in 8 years. He was mocked for that call, but as we now know, they actually about tripled. Then he turned bearish in 2005, and in January of 2006 published a prediction that prices were wildly overblown and would fall radically. He really caught hell for that call. If others here can chime in with any other evidence of his record, then please chip in.
Anyway, here is a summary of some of his observations and predictions:
1. The bottom will be in about 2010 or 2011, with the steepest decline occurring in 2008. ( asr: meaning after 2008 still there is bottom, but peak yearly %drop is in 2008)2. 50 - 60% of sales in 2008 will be REO's.
3. Auctions will be a growing segment. Suggests investors only play that game and buy when "absolute auctions" are held.
4. Rents are falling rapidly in the most hard hit areas of Riverside. We in San Diego are helped by our fires (!), and less overbuilding.
5. Watch out for BK judges pushing "cramdowns", which I believe is when he simply tells the home lender to wipe out a portion of the principle on the loan and renegotiate it. (Correct me if I'm wrong on this interpretation).
6. Look for interest rates to get a bump up due to (5) above as investors naturally flee from lending in the future. Expect same fallout effect from current and feared future tendencies by gov't to interfere with existing loan contracts. This will prolong the decline, and rub salt in the wound of those responsible savers who have waited to buy a home. Law of unintended consequences.
7. Outmigration from CA due to our still-insane housing costs will accelerate. People will start coming back only when price/income ratios revert to the mean, about 2011. An interesting prediction is that Phoenix and Las Vegas will bounce off the bottom sooner than SoCA, since demographics favor them, i.e., many refugees from here will tend to prop up their housing markets, speeding their recovery.
8. As support for above, he cited the ratio of the cost of renting a U-haul truck from SD to other cities, versus the reverse. Biggest ratio cities:
Portland 2 1/2 to l, Salt L.C., Seattle, Dallas, Denver, all 2 to 1.
9. Another ticking time bomb I had not heard of: some HELOCs have a provision in which if the value of the house falls a certain amount, the loan converts to a fixed 15-year amortization loan AT 18 PERCENT.
All in all, a very analytical, data-driven speech, not the kind of hype-driven presentation most of these events are.
Any other attendees from this forum there? Would like to hear your input.
‹ Refinancing now: A bad move? prices down, slowly but surely ›
Login or register to post comments Printer-friendly version
I didn't attend. I was
Submitted by pbnative on December 20, 2007 - 3:40pm.
I didn't attend. I was curious about #9 so I looked at mine. It says that my line can be terminated, requiring me to pay the outstanding balance and pay certain fees, if "the value of the dwelling securing the equity account declines significantly below its appraised value for purposes of the equity account." Separate from the possible termination, the rate can go as high as 18%. I can't find anything about a conversion to fixed 18%. I don't have any money on it, but this is good to consider in case I want to use it.
I suppose that 'Declines significantly' means whatever they want it to mean. There is no specific LTV amount.
Login or register to post comments
This is now not something to
Submitted by kev374 on December 20, 2007 - 3:49pm.
This is now not something to forecast but it is quite OBVIOUS!
Login or register to post comments
BobSPBNative: Sounds like
Submitted by EconProf on December 20, 2007 - 9:46pm.
BobSPBNative: Sounds like you are vulnerable to the lender's whims.
Norris also said there is a clustering of resets scheduled to hit in 2010, after the cluster hitting in early 2008.
Login or register to post comments
2010 resets sound about
Submitted by sdrealtor on December 21, 2007 - 9:04am.
2010 resets sound about right. I have long said that 2009/2010 will be the pain for the higher end as all the 5/1 arm's reset on 04/05 purchases/refis.
Login or register to post comments
A Lot Worse Before It Gets Better
Here is post link
http://news.nakedrealestate.info/2007/06/22/expert-says-californias-real-estate-crisis-will-be-worse-than-most-analysts-realize.aspx
Article Date: 2007-June
A press release from Bruce Norris. "California's real estate downturn will be deep and long lasting, with home prices falling 15 to 30% during the next 36 to 42 months, according to a real estate expert. Bruce Norris, who correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices, said the downturn will reflect a perfect storm that includes record numbers of foreclosures, a sharp decline in migration to California, substantial increases in unsold inventory, and, of course, falling prices."
"'We are in for a very rough ride in California's real estate market, which is likely to be far more severe than analysts, state officials and real estate industry associations have acknowledged,' Norris said, adding, 'Foreclosures alone are likely to be more numerous than anything we've ever experienced, with bank repossessions ultimately accounting for as high or as many as 25-30 percent of all homes sold during the next three years.'"
"Norris said prudent investors need to arm themselves with the facts and come to terms with the fact that analysts, state officials and the California Association of Realtors are either not being frank about the severity of the coming crisis or they simply aren't looking at the right categories of statistics."
"But while Norris' outlook is gloomier than most observers for the short term, he expects California real estate prices to again rebound in 2011 as foreclosures decrease, the number of homes for sale declines to a manageable level and as California again experiences a net increase in population migration from other states."
"'There is light at the end of the tunnel,' Norris said, 'but we have to be very careful in this market environment. Investors need to know that marginal deals are no longer acceptable. The market will no longer cover their investment mistakes. If they don't know what they're doing, they need to stay out of the market until conditions change.'"
"The trouble with the analysis given by most real estate observers is that it's based on flawed assumptions, including the widespread belief that interest rate adjustments can somehow hold back the looming real estate crisis."
"'Interest rates alone do not determine the direction of prices,' Norris said. 'Look what happened the last time we had a real estate downturn in California. Interest rates were actually lower in lower in 1997 than they were in 1990. Yet prices declined by as much as 35 percent in some areas.'"
"The most reliable indicator of a downturn in California is low affordability. Historic affordability lows signaled the previous two real estate recessions and prevented inventory from selling quickly."
"'We still have strong employment and historically low interest rates,' Norris said, 'yet we continue to see the inventory of homes soar, even as builders lower prices and give huge sales incentives. This change in the market caught economists off guard because they said that without an increase in unemployment, you can't have a real estate downturn. That wasn't true!'"
"Centex Corp., Hovnanian Enterprises, Pulte Homes, Lennar and D.R. Horton together have written off more than a half-billion dollars worth of land option agreements during the past year, Norris said, citing published reports. 'If prices were heading upward and if demand for housing was strong, they wouldn't be walking away from these land option agreements,' he said."
"'Many economists and real estate observers and even government officials continue to offer rosy assessments because they are under political pressure to say nothing or because they are simply looking at the wrong statistics. Trouble is, there are many investors, including builders, who have been misled by their commentary,' said Norris."
"Various organizations are deliberately misleading investors and the general public, Norris said, adding that the National Association of Realtors (NAR) launched a $40 million ad camping in January of this year in which they told buyers that now is the perfect time to buy a home."
"Even more recently, Jeff Davi, commissioner of the California Department of Real Estate, is quoted in this month's issue of California Real Estate Magazine saying that California continues to need another 250,000 single and multifamily housing units to be built each year."
"'If this was truly the case,' Norris asked, 'why are we seeing vacant properties, increasing housing inventory and builders walking away from millions of dollars in land options? The reality is that the real estate market in California is going to get a lot worse before it gets better.'"
"The good news is that the market should turn upward again in 2011. By then, Norris said, prices will be low enough to lure many people back into California again, lenders will have again adjusted their lending guidelines and investors will again re-enter the market, sensing bargains and opportunities for additional profits and equity growth in the years ahead."
http://news.nakedrealestate.info/2007/06/22/expert-says-californias-real-estate-crisis-will-be-worse-than-most-analysts-realize.aspx
Article Date: 2007-June
A press release from Bruce Norris. "California's real estate downturn will be deep and long lasting, with home prices falling 15 to 30% during the next 36 to 42 months, according to a real estate expert. Bruce Norris, who correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices, said the downturn will reflect a perfect storm that includes record numbers of foreclosures, a sharp decline in migration to California, substantial increases in unsold inventory, and, of course, falling prices."
"'We are in for a very rough ride in California's real estate market, which is likely to be far more severe than analysts, state officials and real estate industry associations have acknowledged,' Norris said, adding, 'Foreclosures alone are likely to be more numerous than anything we've ever experienced, with bank repossessions ultimately accounting for as high or as many as 25-30 percent of all homes sold during the next three years.'"
"Norris said prudent investors need to arm themselves with the facts and come to terms with the fact that analysts, state officials and the California Association of Realtors are either not being frank about the severity of the coming crisis or they simply aren't looking at the right categories of statistics."
"But while Norris' outlook is gloomier than most observers for the short term, he expects California real estate prices to again rebound in 2011 as foreclosures decrease, the number of homes for sale declines to a manageable level and as California again experiences a net increase in population migration from other states."
"'There is light at the end of the tunnel,' Norris said, 'but we have to be very careful in this market environment. Investors need to know that marginal deals are no longer acceptable. The market will no longer cover their investment mistakes. If they don't know what they're doing, they need to stay out of the market until conditions change.'"
"The trouble with the analysis given by most real estate observers is that it's based on flawed assumptions, including the widespread belief that interest rate adjustments can somehow hold back the looming real estate crisis."
"'Interest rates alone do not determine the direction of prices,' Norris said. 'Look what happened the last time we had a real estate downturn in California. Interest rates were actually lower in lower in 1997 than they were in 1990. Yet prices declined by as much as 35 percent in some areas.'"
"The most reliable indicator of a downturn in California is low affordability. Historic affordability lows signaled the previous two real estate recessions and prevented inventory from selling quickly."
"'We still have strong employment and historically low interest rates,' Norris said, 'yet we continue to see the inventory of homes soar, even as builders lower prices and give huge sales incentives. This change in the market caught economists off guard because they said that without an increase in unemployment, you can't have a real estate downturn. That wasn't true!'"
"Centex Corp., Hovnanian Enterprises, Pulte Homes, Lennar and D.R. Horton together have written off more than a half-billion dollars worth of land option agreements during the past year, Norris said, citing published reports. 'If prices were heading upward and if demand for housing was strong, they wouldn't be walking away from these land option agreements,' he said."
"'Many economists and real estate observers and even government officials continue to offer rosy assessments because they are under political pressure to say nothing or because they are simply looking at the wrong statistics. Trouble is, there are many investors, including builders, who have been misled by their commentary,' said Norris."
"Various organizations are deliberately misleading investors and the general public, Norris said, adding that the National Association of Realtors (NAR) launched a $40 million ad camping in January of this year in which they told buyers that now is the perfect time to buy a home."
"Even more recently, Jeff Davi, commissioner of the California Department of Real Estate, is quoted in this month's issue of California Real Estate Magazine saying that California continues to need another 250,000 single and multifamily housing units to be built each year."
"'If this was truly the case,' Norris asked, 'why are we seeing vacant properties, increasing housing inventory and builders walking away from millions of dollars in land options? The reality is that the real estate market in California is going to get a lot worse before it gets better.'"
"The good news is that the market should turn upward again in 2011. By then, Norris said, prices will be low enough to lure many people back into California again, lenders will have again adjusted their lending guidelines and investors will again re-enter the market, sensing bargains and opportunities for additional profits and equity growth in the years ahead."
The Housing Bubble
The Housing Bubble -- refered link fron bigpicture.com
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
http://thehousingbubbleblog.com/index.html
California specific stories
http://thehousingbubbleblog.com/?p=4991 -- it has other newspaper links
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
http://thehousingbubbleblog.com/index.html
California specific stories
http://thehousingbubbleblog.com/?p=4991 -- it has other newspaper links
Tuesday, March 25, 2008
U.S. home prices continued to plunge in January
U.S. home prices continued to plunge in January
By Michael M. Grynbaum -- Published: March 25, 2008
NEW YORK: Home prices across the United States continued to plunge at record rates in January, a private survey released Tuesday showed, and economists said the slump was probably worse than at the height of the last housing recession in the early 1990s.
The fresh evidence of deterioration in the U.S. housing market came as a measure of consumer confidence reached a five-year low, buffeted by gyrations in financial markets and fears the United States may be sliding into a recession.
The value of single-family homes plummeted 10.7 percent in January compared with a year earlier, as measured by the Standard & Poor's/Case-Shiller index, a leading gauge of 20 major metropolitan regions.
The decline was the steepest year-over-year since the index began eight years ago, and reflected a wide-spread deceleration in values.
"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Robert Shiller, chief economist at MacroMarkets and co-developer of the index, said in a statement.
Another housing index published Tuesday by the U.S. Office of Federal Housing Enterprise Oversight, showed home prices continuing to fall, but less sharply across the United States. The decline nationwide was about 1.1 percent from December to January, and 3 percent from a year earlier.
"The weakness is not contained to the bubble areas," Michelle Meyer, an economist at investment bank Lehman Brothers in New York, told Reuters. "It has spread to the rest of the nation."
As housing prices tumble, some economists see a silver lining: The decline may help to lure buyers back into the beleaguered market, where sellers are struggling under a wave of foreclosures and a tight credit market that has made it more difficult for many Americans to take out mortgages.
Inventories have ballooned as purchases have dried up, as buyers hold out for prices to fall even further.
Yet the slide in home values has been compounded by a general sense of gloom about the economy.
Confidence among consumers unexpectedly fell this month, dragged lower both by eroding asset values and concern that business and employment conditions will worsen before they improve. A quarter of those surveyed in an index created by the Conference Board, a private research group, said they believed businesses conditions would worsen in the next six months, and nearly a third said the economy would have fewer jobs.
The index slumped more sharply than expected, to 64.5 from 76.4 in February. A value of 100 represents the level of confidence in 1985.
The positive sales figure led some analysts to suggest that the housing market is approaching its bottom. But many economists predict that prices will fall for several more months before sales pick up in earnest.
"It's a necessary thing," said Joshua Shapiro, the chief U.S. economist at MFR, a New York economic research firm. "It's like the mess going down in financial markets. You gotta get through it. The sooner you get through it you can look for better times."
All 20 regions included in the Case-Shiller survey Tuesday recorded price declines, with Sun Belt cities like Las Vegas; Phoenix, Arizona; and Los Angeles suffering the worst losses in January. Prices in Miami and Las Vegas have fallen nearly 20 percent in the 12 months ending in January.
In the New York metropolitan area, home values fell just 0.9 percent in January, and 5.8 percent compared with a year earlier. But the drop-off appeared to be gaining speed: values were down nearly 10 percent on a three-month annualized basis.
By Michael M. Grynbaum -- Published: March 25, 2008
NEW YORK: Home prices across the United States continued to plunge at record rates in January, a private survey released Tuesday showed, and economists said the slump was probably worse than at the height of the last housing recession in the early 1990s.
The fresh evidence of deterioration in the U.S. housing market came as a measure of consumer confidence reached a five-year low, buffeted by gyrations in financial markets and fears the United States may be sliding into a recession.
The value of single-family homes plummeted 10.7 percent in January compared with a year earlier, as measured by the Standard & Poor's/Case-Shiller index, a leading gauge of 20 major metropolitan regions.
The decline was the steepest year-over-year since the index began eight years ago, and reflected a wide-spread deceleration in values.
"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Robert Shiller, chief economist at MacroMarkets and co-developer of the index, said in a statement.
Another housing index published Tuesday by the U.S. Office of Federal Housing Enterprise Oversight, showed home prices continuing to fall, but less sharply across the United States. The decline nationwide was about 1.1 percent from December to January, and 3 percent from a year earlier.
"The weakness is not contained to the bubble areas," Michelle Meyer, an economist at investment bank Lehman Brothers in New York, told Reuters. "It has spread to the rest of the nation."
As housing prices tumble, some economists see a silver lining: The decline may help to lure buyers back into the beleaguered market, where sellers are struggling under a wave of foreclosures and a tight credit market that has made it more difficult for many Americans to take out mortgages.
Inventories have ballooned as purchases have dried up, as buyers hold out for prices to fall even further.
Yet the slide in home values has been compounded by a general sense of gloom about the economy.
Confidence among consumers unexpectedly fell this month, dragged lower both by eroding asset values and concern that business and employment conditions will worsen before they improve. A quarter of those surveyed in an index created by the Conference Board, a private research group, said they believed businesses conditions would worsen in the next six months, and nearly a third said the economy would have fewer jobs.
The index slumped more sharply than expected, to 64.5 from 76.4 in February. A value of 100 represents the level of confidence in 1985.
The positive sales figure led some analysts to suggest that the housing market is approaching its bottom. But many economists predict that prices will fall for several more months before sales pick up in earnest.
"It's a necessary thing," said Joshua Shapiro, the chief U.S. economist at MFR, a New York economic research firm. "It's like the mess going down in financial markets. You gotta get through it. The sooner you get through it you can look for better times."
All 20 regions included in the Case-Shiller survey Tuesday recorded price declines, with Sun Belt cities like Las Vegas; Phoenix, Arizona; and Los Angeles suffering the worst losses in January. Prices in Miami and Las Vegas have fallen nearly 20 percent in the 12 months ending in January.
In the New York metropolitan area, home values fell just 0.9 percent in January, and 5.8 percent compared with a year earlier. But the drop-off appeared to be gaining speed: values were down nearly 10 percent on a three-month annualized basis.
Tuesday, June 12, 2007
Saharaindiapariwar
Sahara group has today exponentially grown to become a conglomerate of USD 10.87 billion. The group has been expanding its ventures at a rapid pace.
The group's Financial Services Division serves more than 61 million depositors, one out of every 17 Indians, with its financial services making the group one of the most influential financial companies in India. The Infrastructure and Housing Division is on its way to creating the world’s largest chain of luxury townships in 217 Indian cities. One of its residential projects, Aamby Valley City has magnificence written all over its 10000 acre serene township and has already become a dream destination. Sahara India’s Media and Entertainment Network that includes multi-lingual dailies, weeklies, 24-hour satellite news channels, two entertainment channels and a film production company is one of the largest in India.
"Saharasri" Subrata Roy Sahara -- friend of Mulayam, Amitabh trio...
AAMBY VALLEY CITY
http://www.saharahousing.com/projects.html
http://www.saharahousing.com/default.html
The group's Financial Services Division serves more than 61 million depositors, one out of every 17 Indians, with its financial services making the group one of the most influential financial companies in India. The Infrastructure and Housing Division is on its way to creating the world’s largest chain of luxury townships in 217 Indian cities. One of its residential projects, Aamby Valley City has magnificence written all over its 10000 acre serene township and has already become a dream destination. Sahara India’s Media and Entertainment Network that includes multi-lingual dailies, weeklies, 24-hour satellite news channels, two entertainment channels and a film production company is one of the largest in India.
"Saharasri" Subrata Roy Sahara -- friend of Mulayam, Amitabh trio...
AAMBY VALLEY CITY
http://www.saharahousing.com/projects.html
http://www.saharahousing.com/default.html
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