Housing Doom

[Hat tip to John, our resident Mr. Universe for locating this- I had a terrible time finding this paper!]

Earlier this week the Chicago Fed released a letter entitled, "Comparing the prime and subprime mortgage markets," by Sumit Agarwal and Calvin Ho.  The thesis of this paper was:

We believe that the subprime mortgage problems are not likely to spill over to the rest of the mortgage market or the broader economy.

That’s a line we’ve been hearing a lot, from a number of sources, so I was curious to see how they would substantiate it.  It did not appear to me that they did.
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According to The Independent, Bear Stearns boss took refuge in blogging as hedge funds imploded:
 

The sub-prime mortgage market meltdown threatens to become the first giant financial crisis of the 21st century. And it will be blogged.

They’ve got that one right.  We’re here to blog about the sub-prime mortgage market meltdown, or just about anything else housing related.  Doomers have company- Bear Stearn’s exec Rich Marin has also been blogging:
 

Mr Marin - "age: 53; astrological sign: Aquarius; interests: motorcycling, skiing; favourite music: Billy Joel, Meatloaf" - has been the head of asset management at Bear Stearns for four years, charged with turning the business into a high-fee, highly-aggressive manager through the launch of hedge funds.

For the numbers stuff - the $30bn in failed bets on the mortgage market, the $3.2bn rescue package - you could hit the financial pages of the newspapers. For the blood, sweat and tears, there was Mr Marin’s blog.

So Mr. Marin- if you’re lurking out there, you’re welcome to join us with any links, comments stories or ideas- or perhaps you’ll enjoy the latest effort from OcEd:

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According to Realtor.com:

NeighborWorks America, a national nonprofit group, is launching a new ad campaign in conjunction with the Ad Council to warn home owners that inaction is the worst possible response to mortgage troubles.

The campaign seeks to prevent foreclosures by urging home owners in financial trouble to call the Homeownership Preservation Foundation HOPE hotline, at 888/995-HOPE.

“Homeowners are facing foreclosure at record rates. This issue reaches into every social and economic demographic out there," says Colleen Hernandez, president and executive director of the Homeownership Preservation Foundation.

The National Ad Council produced the public service announcements, which are set to air on TV and radio in 16 markets across the country.

Here’s a preview of the ad: [For our imbedded link-Ad will not play in Firefox- in AE you need to click play twice- then give it a minute.Alternately, you can click here.]

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Anthem is a nice master-planned community northwest of Phoenix. M noticed that there was a "price adjustment " out there by Engle Homes this past weekend.  Here’s one example.  Can anyone spot the trend?

On this particular model, the base price has dropped 23% this year, and is below it’s Feb 2005 price.  Other model’s have had similar drops.
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1st-time buyers must conquer their fears! was the headline on the real estate section of the June 24th Arizona Republic. [No link available]  The Ellen James Martin article addressed buyer fears and "how to surmount them." The article dismisses such concerns as Fear of making a big mistake and Fear of having insufficient cash:

Novice buyers are well advised to explore these [low-to-no-down-payment mortgage program] options as soon as they decide to make a purchase, rather than waiting until their savings accounts are brimming with funds.

The mantra seems to have shifted from "It is always a good time to buy or sell a home" to "Be not afraid."

According to a post on Realtor.org entitled Fear, Not Defaults Blamed for Housing Slowdown:

Freddie Mac’s Treasurer Timothy Bitsberger told a Euromoney conference in London Monday that he was more worried about investor malaise than he was about subprime defaults spilling over into the rest of the market.

"There are some problems in the U.S. housing market but so far they are largely contained," he said. "If I have to worry, it’s about market psychology."

Lawrence Yun, David Lereah’s replacement at the National Association of Realtors (NAR) shares Bitsberger’s concerns:
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The Commerce Department has released the new home sales figures for May:

Sales of new one-family houses in May 2007 were at a seasonally adjusted annual rate of 915,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.6 percent (±10.8%)* below the revised April rate of 930,000 and is 15.8 percent (±9.0%) below the May 2006 estimate of 1,087,000. [The UNREVISED April rate was at 981,000 by the way- April was revised down 5.2%]

The commerce department does not figure cancellations into their sales figures.  As cancellations remain high, sales numbers will remain overstated.

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This was a post from yesterday’s Mortgage Fraud Blog: [Hat tip to Broker Outpost, who have a great discussion going on the topic here.]

eAppraiseIT, LLC filed a civil lawsuit in the Circuit Court of Brevard County Florida against Pamela Crowley, an appraiser that runs a website at www.mortgagefraudwatchlist.org and acts as a moderator on Appraiser’s Forum (www.AppraisersForum.com)

The lawsuit includes causes of action for defamation per se and tortuous interference with advantageous business relations and seeks injunctive relief and damages. 

The lawsuit alleges that Crowley publishes a website that contains ‘false, injurious and defamatory statements’ about eAppraiseIT’s business practices.

I have no idea as to the truthfulness of the allegations, but true or not, this seems to be indicative that the industry is taking greater notice of what is being said on the internet. 

As the housing market deteriorates and corporations face further difficulties, it is likely that they will be looking for scapegoats.  Who better than the media and the blogs?  After all, as is so often claimed in the housing industry, we’re the ones who brought the market down with our "negative talk."

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The National Existing Home Sales Report has been released by the National Association of Realtors, (NAR) and by any measure, the numbers are lousy.  According to the NAR:

Total existing-home sales- including single-family, townhomes, condominiums and co-ops- eased by 0.3% to a seasonally adjusted annual rate of 5.99 million units in May from an upwardly revised pace of 6.01 million in April, and are 10.3% below the 6.68 million-unit level in May 2006.

This is the third straight month of "easing," as sales have fallen steadily since February- bringing home sales to its lowest point since June 2003:

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To be fair, Bloomberg’s Will Edwards managed to bury the happy-talk of the first story down in the body of the second, but we ended up with a couple of pretty clashing narratives coming out of Bank of America on Wednesday [1] and Friday.[2]

Full marks to cynicalgirl at Friday’s Ben’s Bits for picking up the wildly opposing spins. Should Housing Wire ever decide to run a "best dig" contest, this deserves a nomination. Below you’ll find a snapshot of the Bits thread as it looked shortly before 6AM.

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This past weekend saw some big homebuilder promotions.  I decided to take a little field trip to check out the "hot" deals at a few of them-  Beazer Homes, Pulte, and Shea Homes. And it was hot here in Phoenix- fortunately all the builders were giving out water bottles, and Beazer had ice cream.  I made it to a couple of Beazer developments, another by Pulte and one by Shea.

By far the most impressive list of specials was at Beazer’s Vilaggio at Montelena in Queen Creek- here’s what was on their list of inventory homes:

However, before you run to sign on the dotted line, consider a Motley Fool article from last Friday , [Hat tip L!] which raises some great questions on builder specials.  It warns:
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