Housing Doom

"….and then the great housing bust ended in 2010 and they all lived happily ever after…." - Lawrence Yun, chief economist, National Association of Realtors

O.K. Yun may not have said it exactly like that, but this looks pretty darn close. [Thanks L!]

Home sales will increase 15 percent to about 5.7 million units and REALTOR® income will be up 20 percent in 2010, NAR Chief Economist Lawrence Yun told a packed room of REALTORS® today in a residential economic update at the 2009 NAR Conference & Expo.

Yun credited the home buyer tax credit with unleashing sales on the lower-end of the housing market this year, bringing up to 400,000 first-time buyers into the market who wouldn’t have bought otherwise. That influx tightened inventories of starter homes, shored up prices, and helped reduce households’ fear over continuing price drops.

This virtuous cycle will continue now that the federal government has extended the credit to mid-2010 and expanded it to make a smaller credit available to repeat buyers and to households with higher incomes. “The key is stabilizing prices and preserving household wealth,” he says.

Yun predicts the supply of homes to stabilize at the historic norm of six to seven months. Homes above $500,000 will remain elevated in the near-term, but that weakness will be offset by a hefty drop in starter-home inventories, which are running at about a five months supply.

The tightening inventory at all price points will help improve market performance by bringing supply into better balance with demand, but the added sales, particularly on the higher end, will also increase the number and quality of the market comparables used by appraisers to assign valuations. Once appraisals improve, foreclosures will ease, blunting their drag on the market and making it less likely that Fannie Mae, Freddie Mac, and even FHA will need help from the taxpayer.

What a happy, feel-good story.  It’s enough to bring tears to your eyes. I may need a tissue….

It’s Friday. Do you find yourself tired of huge deficits and a burgeoning national debt? The Treasury would be more than happy to accept your donation: [In the immortal words of Dave Barry, "I am not making this up." Hat tip L!]

WASHINGTON (Reuters) – Not sure what to give Uncle Sam this Christmas? How about a nice, fat check to help whittle away at the $7.6 trillion national debt?

The U.S. Treasury Department accepts gifts, payable to the Bureau of the Public Debt. Just mail them to the attention of Department G, Post Office Box 2188, Parkersburg, West Virginia, 26106-2188. Make a note in the memo section that it is a gift to reduce the debt held by the public.

Yes, really.

It’s all on the Treasury’s website, at the end of the list of frequently asked questions.

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It’s been nearly three and a half years since I put up Doom’s first, rather uninspiring post. [In my defense, it was only a test.]  We were joining the ranks of a number of "bubble bloggers". 

Bubble bloggers were for the most part, regular folks who saw an insane real estate market and said, "It’s going to crash, and someone should say something".  Some, like HousingPanic, Ben Jones and Patrick had inspired a national audience, others were smaller and more local. There was a lot of comradery in those days.  We’d check each others posts, and add each other to the blogroll.  We had fun taking potshots at the likes of Lereah and Mozillo and watched the data in our local markets.

This morning I read Chuck Ponzi’s Top 10 signs you’ve been following the housing bubble too long.  Chuck, we’re you writing about me?

10. You kinda miss the days when everyone was still on blogspot.  Uh… except for that Ritholtz guy.

9.  Everything looks like a bubble now.  Even bubbles.

8.  Oompa Loompas and “The Tan Man” evoke feelings of intense disgust.

7. You know who Tanta and the Mortgage Pig are and you miss them.

6.  You KNOW Neil has got popcorn.

5. The inflation vs. deflation argument was sooo 2007.

4.  You wonder if Schiller has a time machine.

3. You know the rental multiplier for your neighborhood.

2. You think the Flying Monkey Warriors vs. Greg Swann battle was epic and you totally know who won.

1.  Hoodoodanode?

I can add another to Chuck’s list- you realize that nearly half your blogroll has disappeared.  Bloggers have logged off, cease to post, or have sold their name to RE interests or online casinos.

I told John that sadly, I think it’s time to do some housekeeping.  These are the names that I’m about to purge from the list.  If anyone has any suggestions as to who should or shouldn’t be on our roll- please speak up and let us know: [Links are still live on the left sidebar if you want to check these out.] We are also open to adding goodies if you know of any out there.

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“The injunction of Jesus to love others as ourselves is an endorsement of self-interest,” Goldman’s Griffiths said Oct. 20, his voice echoing around the gold-mosaic walls of St. Paul’s Cathedral, whose 365-feet-high dome towers over the City, London’s financial district. “We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”  Bloomberg¹

Thank goodness for Tatjana’s 17th Century English Lit course.  The last few months would have made no sense at all if I hadn’t decided to make a close study of Donne’s sermons and Laud’s adventures in Xtreme Interior Decoration.

As it stands, I can just sort of work my way through the section on  "The Growth of Individualism" in Tawney’s 1922 Religion and the Rise of Capitalism and treat the whole affair as a kind of cosmic joke.

When the banking lobbyists marched up the Hill on September 18, 2008 and seized control of the economy it was the perfectly symmetrical event to the fall of Soviet Communism.  We’re now enjoying (on a compressed time frame) the same post-collapse rise of oligarchs that Russia experienced in the late ’90s.  Perhaps if Putin’s not too busy pulling the strings back home, Larry could sign him on as a consultant.  Obama’s got a serious problem if he lets these guys strut around unhindered.

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Final risk. The increasing asset prices we’ve seen since March for everything: global equities; in US, equities; EM [emerging market] asset classes; commodity; credit; everything around the world is driven by one factor.

Doom Transcripts: Index & Guide

The penultimate risk was merely the prospect of World War III breaking out.  Fortunately Nouriel was running overtime so Alex had to cut him short just before he got to the scary bit

UPDATE (11/6): Here’s Nouriel’s Nov 4th expansion on the idea

Housing Doom is pleased to present a fourth selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

Dr. Doom was batting cleanup …

Nouriel Roubini: [0:37:03] OK. Tom spoke about housing and mortgages. What Chris spoke about — the banks. So I’ll try to speak about the economy and what’s going to happen to the economy looking ahead.

We’ve had the most severe recession and financial crisis since the Great Depression. Given the monetary and fiscal stimulus and the backstopping of the financial system now we’re close to the bottom, at least on a temporary basis.

And now the debate is, of course, on what’s going to happen — the shape of the recovery. Given what has happened in the markets I would say the markets are pricing now a V-shaped recovery with rapid return to potential growth, and that’s even what the macro forecasters’ consensus is.

There is a second view, which is the one I share, is that this recovery is going to be at best an anaemic, subpar, below trend, with growth well below trend for the next couple of years, much as in the US, but also in advanced economies. So more like a U-shaped recovery. That’s also the view of the IMF and the one of those folks at PIMCO who are talking about A New Normal.

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Oct. 29 (Bloomberg) — The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. - BL¹

A month and a half ago I confidently predicted that the equity markets would be collapsed by yesterday.  Obviously wrong.  What I failed to enter into my calculations was a world where Google’s top biz story could have the above lead paragraph and just about nobody would see the least little bit wrong with it.

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Doom Transcripts: Index & Guide

Housing Doom is pleased to present a third selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by IRA co-founder Chris Whalen.  I see Nouriel on deck, but this one’s going to be a tough act to follow.

So this is what the commenters at Calculated Risk have been going on about …

Chris Whalen: [0:27:02] I’m going to talk a little bit about the industry because we’re in the middle of earnings season, and I apologize for not preparing something, but I’ve been reading bank earnings statements, so I will share some of my impressions of that. And then I want to talk a little bit about not only lessons, but some of the enduring trends that I see that have not been affected by the extensive bailout that the government has put together for our largest financial institutions.

In general, when you look at the industry you have to recall the words of Mr. Feinberg, and I don’t mean the guy who was in the newspaper today, I mean my friend Bob Feinberg in the back of the room, who predicted several years ago in an interview we published that the GSE would become the business model of choice for the United States.

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How’s this for a weird one? It is not uncommon to see sad stories where grandparents in 55+ communities end up with custody of grandchildren and have difficulty with HOAs and neighbors.  This time though, the community wants the little girl gone, but they don’t want the grandparents to drop the home price too much- they think it might hurt neighborhood home values.

A protracted battle to get a 6-year-old Florida girl to move out of a 55-plus community has dragged on, her grandmother says, because the housing market meltdown has made it impossible to sell her home.

Kimberly Broffman moved in to Judie and Jim Stottler’s Clearwater home when she was 6 months old in 2004, well before foreclosures started mounting in Florida. The move was only meant to be temporary — the rules of the retirement community state that anyone under 18 cannot live there longer than 60 days — but with the little girl’s mother in and out of jail and coping with a drug problem, a court awarded Ms. Stottler custody of her granddaughter. The local Homeowners Association insists the little girl must leave; Ms. Stottler says there is nowhere else for her to go, and they cannot afford to move unless the house sells.

“[The association doesn’t] live under a rock. They know the housing situation, they know the economy,” said Ms. Stottler, 62, while at work as a dietery assistant at an assisted living facility, where she earns $18,000 a year. “I’ve been trying to sell my home, but I can’t drag somebody off the street to buy it.”

Mr. Stottler, 54, is not working due to a disability.

Robert Eckard, the family’s lawyer, said the Stottlers do not plan to give up Kimberly. “There’s no where else to go except for foster care,” said Mr. Eckard, who took on the Stottler’s case pro bono after he saw it in the news. “My goal is to keep them together which they still are.”

It sounds like the Stottlers are willing to be aggressive in pricing their home. Even after dropping the price from $239,000 to $129,000 though, there was only one showing in nine months. You’d think that if the homeowners association was in a real hurry to have the little girl gone, they’d want Grandma to cut the price so she could sell, but no:

Ms. Stottler said she’s offered to bring the price down even further, but she said a lawyer for the Association discouraged her from going too low because it would bring down the value of the entire neighborhood.

I don’t know why the Stottlers would be taking advice like that from the HOA’s attorney.  Homes in the neighborhood are worth what people are willing to pay, and "discouraging" owners from pricing homes realistically won’t prop up home values. Clearwater is in the Tampa area, which has seen a 17% drop in the median price in the past year. Setting the price too high and waiting for someone to come along and pay it is not a good sales strategy.

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In this economy, you do what you have to do to make a living- even if you have to take your job out on the road.

I just got an email from M who sent me this picture.  It’s a photo he took of a mortgage broker working from the back of his pickup.  This is in the Phoenix Southeast Valley in my old neck of the woods:

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Foreclosures keep going from bad to worse: [Thanks L!]

NEW YORK (CNNMoney.com) — Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

And things aren’t getting any better.  M sent me this worrying bit of information a couple of days ago:

As expected, another  $659,000,000 of mortgage debt defaulted in the last week……..just in Phoenix [metro]……..Maricopa county only!!!!!  This is a continuation of a trend we’ve been tracking all year.

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