Housing Doom

According to the Arizona Republic this morning:

The illegal-immigrant population has fallen an estimated 11 percent nationwide over the past year and perhaps even more in Arizona, with stricter law enforcement a likely cause, according to a report issued Wednesday by a Washington organization that promotes less immigration.

The apparent drop preceded a spike in unemployment claims, suggesting enforcement, not the nation’s faltering economy, is responsible, said Steven Camarota, director of research for the Center for Immigration Studies. The drop of about 1 million illegal residents happened from August to May, the report says, even as the number of legal immigrants increased.

In Arizona, the number of illegal immigrants may have fallen as much as 18 percent since August, Camarota said, though the data is too spotty to say with confidence. The state, however, is among the leaders in declines, he said.

"There seems to be a sense among the illegals that the enforcement law is back in business," Camarota said.

Estimates before this study put the number of illegal immigrants at 12 million nationwide and 500,000 in Arizona.

Along with others quoted in the Republic, I disagree with Camarota when he discounts the economy as an issue.  Many illegals were employed in the construction industry.  When construction started to slow, illegals were the first to lose their jobs.  Often they were on crews that simply were not called back.  Legal employees were let go later. Others worked in services such as housekeeping and landscaping that were considered optional by people with tightening budgets.  Economically, the illegal population was hit first.

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According to Paul Krugman in the RGE Monitor today, the new housing bill is a "temporary fix":

Even if this bill succeeds…, it … will, at best, make a modest dent in … foreclosures. And it does nothing … for those who aren’t in danger of losing their houses but are seeing much if not all of their net worth wiped out — a particularly bitter blow to Americans … nearing retirement…

He sees a need for more regulation:

Financial regulation needs to be extended to cover a much wider range of institutions. Basically, the financial framework created in the 1930s, which brought generations of relative stability, needs to be updated to 21st-century conditions. …

If the government is going to stand behind financial institutions, those institutions had better be carefully regulated — because otherwise the game of heads I win, tails you lose will be played more furiously than ever, at taxpayers’ expense.

But how likely is change?

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I thought we’d let the shills get a word in first thing this morning and get it over with:

If you thought you heard Cramer call a bottom during Tuesday’s Mad Money, you were right.

“It smells to me like something, in fact many things,” he said, “have at last changed for the better.”

“I am indeed sticking my neck out right here, right now,” Cramer continued, “declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside.”

“Stop waiting,” he said, and “buy the next dip because I think it might be the last big one.”

What has brought about this bottom, pray tell?  Here’s a summary of his reasons:

1. Negativity is so bad we might be at the point of total capitulation.

2. The "power move" by Merrill yesterday shows that they can "unload all the bad paper", and now companies like Lehman, Citigroup and Wachovia can follow suit.

3. Companies have shown they can handle the commoditiy inflation through price increases.

4. The Securities and Exchange Commission announced it will continue to protect 19 banks in danger of having massive hedge funds short sell them into the ground.

5. Cramer likes the housing bill, because "major banks can now sell their bad mortgages to the Federal Housing Authority for 80 cents on the dollar".

We could take a long time debunking these points one by one, or we could just point out the news from this morning:

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John suggested we pull out a "Doom Classic" from early January this year.  Some things are worth repeating:

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January 2, 2008

Apparently the Bush administration decided to start out the New Year dishing out political double-talk on day one- no use putting it off I guess.  This from a chat with reporters on Air Force One yesterday:

More steps by Congress and the Bush administration are likely needed to stabilize the imploding U.S. housing market, a senior White House official said on Tuesday, as more signs of distress appear.

Ed Gillespie, counselor to Bush, pointed to efforts by the U.S. Congress to overhaul the Federal Housing Administration program developed in 1934 amid the Great Depression and designed to make home ownership more affordable. Members of the House of Representatives and Senate have been trying to work out a compromise plan.

"There’s more to be done we think on the housing front to address the concerns people have about the housing markets, including FHA reform and other reforms that the president has called for," Gillespie told reporters aboard Air Force One as Bush returned from a weeklong holiday at his Texas ranch.

So just what does the Bush administration have in mind?

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The following is a press release from James Lockhart, director of OFHEO: [No link provided.]

“Today President Bush signed the ‘Housing and Economic Recovery Act of 2008.’  I thank President Bush and Secretary Paulson for their leadership in making government-sponsored enterprise (GSE) regulatory reform a reality. 

The Act creates a world-class, empowered regulator, the Federal Housing Finance Agency (FHFA), with all the authorities necessary to oversee vital components of our country’s secondary mortgage markets — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — at a very challenging time.  As Director of the new agency I look forward to working with the combined Federal Housing Finance Board (FHFB), Office of Federal Housing Enterprise Oversight (OFHEO) and Housing and Urban Development (HUD) GSE Mission teams and with other regulators to ensure the safety and soundness of the 14 housing-related GSEs and the stability of the nation’s housing finance system.

For more than two years as Director of OFHEO I have worked to help create FHFA so that this new GSE regulator has far greater authorities than its predecessors.  As Director of FHFA, I commit that we will use these authorities to ensure that the housing GSEs provide stability and liquidity to the mortgage market, support affordable housing, and operate safely and soundly.”

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According to Reuters yesterday, profits at CB Richard Ellis were way down:

NEW YORK (Reuters) - CB Richard Ellis Group Inc the world’s largest commercial real estate brokerage, said quarterly net income plunged 88 percent, partly on lower brokerage fees from sales that have all but dried up due to the severely constrained global credit markets.

Several reasons were cited for the poor numbers

, including this:

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Apparently Arizonans aren’t the only one having difficulty selling their properties- the State of Arizona can’t unload them either:

The State Land Department has halted almost all land sales "for quite some time," a state official said.

The last attempted land sale, for a small parcel in northeast Phoenix on July 9, drew no interest.

Several previous sales attracted no bidders, including large parcels in or near the desirable Desert Ridge area of northeast Phoenix.

The State Land Department controls almost all undeveloped land in north and northeast Phoenix. It hoped to begin selling land north of Pinnacle Peak by now. That land, several Desert Ridge parcels and other pieces of land are now tentatively scheduled for sale in 2009.

Department officials have blamed the decline in interest on the economic downturn and the housing crisis.

No auctions are scheduled for August.

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Every now and then I stop by Broker Outpost to see what the mortgage brokers are chatting about.  I found the debate about "Fat Slob Rob" the appraiser fascinating. "HMDApproved" did the following post:

I must say, every appraiser in this part of town is a money hungry, bottom feeding, low life swindler that would charge their own mothers for an appraisal.

I had an incident where I told the appraiser (his name is "Fat Slob Rob"), that the only way the loan would work is if the house was worth $400k, I specifically told him to comp it out and let me know BEFORE he went to do it. This was a rate/term refi and the borrower was strapped for money and could not afford to pay $475.00 for an FHA appraisal if the refi would not go through.

Fat Slob Rob said that $400k was no problem, he had plenty of comps and to put him in touch with the borrower to schedule. Fat Slob Rob did the appraisal and charged the lady $475.00 at the door in cash. He took 5 days to send me the appraisal and when I got it, he appraised the house at $365k. When I asked him why he did that he said that what I asked him to do was illegal and he had to do the actual appraisal to get a "real value". He did this knowing that the loan wouldn’t work.

Am I wrong for thinking this guy is scum or was I asking him to commit a crime???

For the most part, posters seemed to agree with Assassin 17":

You tied the possibility of the ordered appraisal to a stated value of opinion by a non-licensed person (yourself).

Basically, you performed the appraisal yourself when you set a number of "at least 400,000" or the order would be canceled.

That is how you wrote it up and that is illegal.

HMDA came back with this though:

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On July 23, Marketwatch reported:

Despite instability in the mortgage-banking arena, America’s credit unions remain strong and safe for homeowners seeking solutions to their woes. The simple fact is conservative and prudent management policies kept credit unions out of the subprime mortgage mess.

Despite these comforting words though, it appears the pain is spreading:

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More possible "unintended consequences" of the housing bill- it is now easier for Americans to lose their home to eminent domain: [Hat tip to Freedom's Phoenix!]

Of all the unintended consequences of the housing bill that passed the House yesterday — of which there will likely be many — one of the most ironic and far-reaching may be this: that whatever security marginal homeowners have from foreclosures, their homes will be far less safe from being taken by a bureaucrat through eminent domain.

That’s because the bill unveiled this week — as the result of negotiations between House Financial Services Committee Chairman Barney Frank and Treasury Secretary Hank Paulson — takes specific language protecting property rights from the housing bill that most recently passed the Senate and renders it almost meaningless. As a result, the billions of dollar in new grants the bill provides for “the production, preservation and rehabilitation” of housing units, could stimulate a bonanza of state and local property confiscation of the type green-lighted in the Supreme Court’s 5-4 decision Kelo v. New London.

That 5-4 decision in 2005 allowed states and localities to use eminent domain for the benefit of private parties, so long [as] the land confiscation served a “public purpose.” The case generated outrage. As the Institute for Justice, who represented the homeowners whose property was under threat in the case, has argued, the results of the case mean that no one’s home is safe, because it would serve a “public purpose” to destroy the residence and put a retail store in its place to raise more tax revenue.

In the wake of the case, some states have passed laws protecting property owners by barring eminent domain solely for economic development purposes. But for the many states that still allow this practice, the federal government is often the source of funds for the projects that result in the use of eminent domain. Efforts to bar federal funds to be used on projects that make use of this type of eminent domain have stalled in this and the last Congress.

To their credit, the drafters of the Housing and Economic Recovery Act of 2008, which passed the Senate on July 11, at least recognized this danger of throwing billions in construction grants to state and local governments. So they put in a clause stating, “No funds under this title may be used in conjunction with property taken by eminent domain, unless eminent domain is employed for a public use.” The clause then adds that “public use shall not be construed to include economic development that primarily benefits any private entity.”

But this language has vanished from the House bill that passed yesterday, replaced with phrasing that at first glance may seem similar but would give governments substantially more leeway to take land. The nearly 700-page bill craftily replaces the Senate’s prohibition on funds “used in conjunction with property taken by eminent domain” with a looser ban on using the funds for a “project that seeks to use the power of eminent domain.”

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