Housing Doom Housing Bubble Blog

Housing Doom no longer feels so alone following trends in foreign central banks’ net buys of US obligations. Early Thursday, Ambrose Evans-Pritchard of the Telegraph posted a story [1] speculating that the recent strong selling of US treasuries suggested a quiet dumping by the Chinese.

It’s especially good to have company this week, when both short and long term trends got knocked into a cocked hat. Foreign central banks, in a complete 180 degree turn from the previous week, bought a fair number of treasuries but sold even more agencies.[34] The agencies selloff was by far the biggest negative result we’ve observed since we picked up the series in early May. The pattern and change are a bit like the week that ended August 1st, but the difference between treasuries and agencies is much bigger.

Once again, thanks go to twist for the updated chart and graph.

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From Yahoo Finance this morning:

WASHINGTON (AP) — The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.

The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.

Doug Duncan, the MBA’s chief economist, said the worsening performance was driven by two factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Airzona.

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One of the joys of the internet is the ability to jump in the old Wayback Machine and see what was being said a few years back on current issues.  What I recently found interesting was seeing how much the housing industry was being pumped by the Bush Administration, starting with President Bush’s promotion of homeownership as The American Dream in 2002.

A good window into the mindset of the Bush administration is seen in comments made by Secretary Mel Martinez of HUD, to the National Association of Homebuilders in Las Vegas, Nevada, January 22,2003.  The whole speech is worth a read to put the time in perspective, but these comments in particular are of note:

The homeownership tax credit will provide yet another powerful stimulus to the economy and the Bush Administration is committed to working with you to get this homeownership tax legislation passed.

We also must work in close partnership to dispel the myth that our nation is experiencing a "housing bubble."

Although the United States is the best-housed nation in the world, we as a country still face a housing shortage. In fact, housing experts, economists and analysts met this past week at a conference in California and concluded that the momentum gained from low mortgage interest rates will carry strong home sales through the end of this year.

Not long after 9-11, however, a number of leading experts predicted that the housing bubble would burst. They were clearly wrong. Instead, many Americans chose to simply delay, rather than cancel, their plans to buy. And home purchases ended up reaching an all-time high in 2001. While the final numbers are not in, sales in 2002 are expected to eclipse the 2001 record.

Bubbles of course do burst, but the housing market is not in the same category of other weaker and less competitive sectors of the economy.

Today, demand remains strong, with new households being formed at a rate of more than 1 million per year. To meet this demand, and replace homes that are destroyed or demolished, the nation’s homebuilders will need to construct 1.6 million new homes and apartment units each year.

Plus, this Administration is making it easier for people to purchase their own homes - a change that will help drive home development and sales. And, it will help more minorities become homeowners.

Giving every American the opportunity to own a home is the best investment that a family can make. [All emphasis mine.]

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