Housing Doom

Doom friend OSO and I belong to similar religious denominations, although he characterizes himself an evangelical, and I see myself as a sort of liberal (within the fold this is a fraught distinction, but would be pretty hard to explain to most Doomers).

Anyway, a recent Wall Street spirituality moment has evidently weirded both of us out.  I’m going to tee up the discussion by reflecting on this snippet from Wikipedia (the image just below and at the bottom are borrowed from the article):

In every Mithraic temple, the place of honor was occupied by a tauroctony, a representation of Mithras killing a sacred bull which was associated with spring. Mithras is depicted as an energetic young man, wearing a Phrygian cap, a short tunic that flares at the hem, pants and a cloak which furls out behind him. Mithras grasps the bull so as to force it into submission, with his knee on its back and one hand forcing back its head while he stabs it in the neck with a short sword.

A sacrifice, but perhaps honouring the bull and drawing from its strength.  Pretty old fashioned stuff, except …

Well this is ironic…

 

by OSO

Apparently a bunch of my fellow evangelical Christians decided to get together and pray for the economy. Nothing really wrong with that. The problem is that they decided to gather and pray at The Wall Street Bull. Probably because they somehow feel that touching an object while they pray somehow releases some sort of spiritual anointing, a number of pray-ers prayed while touching the bull, as per the photo above. A video of the event shows the crowd singing "God Bless America", though not the Bull-touching bit.

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A big hat tip for M who sent me this story with the comment, "This is a very bad idea." 

He’s understating the situation.

A large number of Phoenix-area homeowners facing foreclosure have received a reprieve.

Bank of America, which last summer bought the nation’s largest subprime lender, Countrywide, has suspended foreclosure notices pending against nearly 2,000 homes across the Valley in the past week in an effort to help homeowners hold on to their property. And relief for even more homeowners is expected to follow.

Why would Bank of America make a move like this?  They have to know that they are encouraging more homeowners to quit popping that mortgage check in the mail.  They are apparently having extortion applied to them by the Arizona Attorney General’s office:

The move, which will lead to cuts in people’s mortgage payments, is part of the bank’s recent settlement agreement with the office of Arizona Attorney General Terry Goddard and could help stem the growing number of foreclosures that has crippled the local housing market.

Last month, BofA agreed to modify loans for struggling borrowers if attorneys general from Arizona, Texas, Ohio, Iowa and Washington halted legal action against Countrywide. That action is based on the lender’s "alleged use of deceptive practices" in its mortgage-lending business, according to Goddard.

The deal requires BofA to place a temporary hold on foreclosures on loans made up until the end of 2007 and work with buyers to make their mortgage payments more affordable so they have the option of staying in their homes.

And Bank of America isn’t the only lender being held at gunpoint:

Pending foreclosures are now down by at least 2,000 because of Bank of America’s action, and more foreclosures in the Valley are likely to be temporarily halted this month.

"Now, we are asking other big mortgage firms to take on the same obligations to work with struggling borrowers as (BofA)," Goddard said.

"We have asked them to do it voluntarily without us filing a lawsuit, but investigations do continue into fraud and the possible inducement (of homeowners) into some of these mortgages by firms."

The foreclosures may be down at the moment, but only temporarily. Here’s what the long term result of this will be:

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I haven’t posted on the Phoenix home sales report released by Jay Butler of ASU’s Realty Studies for awhile.  Butler changed his methodology separating trustee sales from foreclosures sales in May.  That was a great move on Butler’s part and provides a more accurate picture of the Phoenix housing market.  It does however, make it rough to compare current numbers using the new methodology  to the old ones.  As trustee sales have historically been a small part of the sales figures, we’ll compare "traditional" sales with old numbers, excluding foreclosures unless stating otherwise. Let me know if this doesn’t make sense.

According to Butler:

For the traditional market, the median price was $180,000, while the foreclosed properties had a median price of $153,000. For a year ago, the median prices were $254,000 and $215,950, respectively. Investment interest is being driven by the anticipation that home prices will rise again in the next few years.  The lower median price is being driven by several forces including the large number of vacant homes, especially in certain neighborhoods.

This would be a decline of 29% in the median price for traditional sales. Clearly the number would be much lower if foreclosure sales were included.  Here’s the appreciation graph.  Sales using the revised methodology are indicated in red:

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