Housing Doom

It has been awhile since we've dug into the Las Vegas home sale numbers.  Of note this month is that the most interesting number is not a sale statistic at all- it's the number of single family homes that have rented.

The Greater Las Vegas Association of Realtors (GLVAR) has only been tracking the number of homes leased since 2006.  In January 2006, 1113 homes were rented. [This number only includes homes leased through the MLS.] That number has steadily increased.  In February 2010, a record 2102 homes were leased:

Note the difference in trend between the number of homes rented and the number of homes sold.  2390 homes sold in February, up slightly YOY from last year's 2288, but dropping from January's 2608, an unusual trend for this time of year:

Could it be that the thrill of homeownership is cooling off, or are fewer potential buyers qualifying?  It might be a combination of both.  With more homeowners walking away, people might be thinking twice about walking toward homeownership.

While sales have been headed down, listings are moving up.  Only 19,707 homes were listed for sale in December, a level not seen since February 2007.  However, listings have risen for the past two months.  There were 22,142 homes listed at the end of February.  Consequently the 5.8 months supply that we saw in December has increased markedly to a 9.3 months supply in February.

So where are home prices?  February's $135,694 is down 12.8% YOY, and 56.9% off of the June 2006 peak of $315,000.

So where are home prices headed?  Long time Doom nemesis Larry Murphy said last month: Read the rest of this entry »

A “whole range” of options is being considered for investors in the two government-seized companies, “from paying nothing to a haircut to whatever,” said Frank, whose committee oversees Fannie Mae and Freddie Mac. Congress will maintain the “status quo” and won’t make drastic changes to Fannie Mae and Freddie Mac until a new system for housing finance is in place, Frank said. – BL¹

Housing Doom is delighted to report that Barney is now on the job and the urgently required agencies undisambiguation project is now well underway.  Indeed Warren Gamaliel Harding himself could not have come up with a more compelling demonstration of utter cluelessness.  It's exactly what America needed to support its T-bill sales.

Here's more from WaPo.² Igor is already off to the House with Doom's bill for consulting services.  This was our original idea after all

The comments by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, come despite the assumption of many investors that investments in the two mortgage finance giants are risk-free. Until now, federal officials — who took over Fannie and Freddie two years ago to save them from collapse — have signaled to the market that lending the companies money is just about as safe as lending to the U.S. government itself.
…

Fannie Mae and Freddie Mac use the proceeds of money raised from investors around the world to funnel cash to the housing market, providing a fresh supply of funds to make more home loans. [a one-way flow, it would seem; who knew?]

Of course the next step is for Acting FHooFAh Ed DeMarco to get up and contradict everything Barney just said, which will raise the level of doubt even further.

Holy confidence builder, Batman!  Timmy's gang reiterates support to the Enterprises, but take exquisite care to avoid mentioning their bonds.³

"As we said in December, there should be no uncertainty about Treasury's commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market during this current crisis," the statement from the Treasury said.

This story is moving really fast. Fellow blogger and Doom reader W.C. Varones sends additional info which pointed at this "clarification" in BI of all places by Barney himself. Note we're still talking support for the Companies not the Bonds.

Come on you people, someone get Ed back from lunch. If someone responsible doesn't balance Frank with a firm statement of support for the debt as opposed to the firms there's going to be total pandemonium in world bond markets inside another couple of hours.⁴

Margaret Kerins of RBS Securities said Frank's assessment that so-called agency debt is not fully backed by the government is incorrect. // "Regardless of the ultimate outcome for the GSEs, we expect all agency debt outstanding and issued under GSE status to remain related to the government. Reducing support is contrary to all of the actions takes by the administration and Treasury," Kerins said in a research note.

Great headline from Calculated Risk — lots of non-definitive statements happening …

"Frank: Fannie Freddie Investments not Risk Free, Treasury Clarifies"

So now Barney's retracting and non-retracting at the same time.⁵

House Financial Services Chairman Barney Frank on Friday said he agrees with the Obama administration's decision to fully back Fannie Mae and Freddie Mac bondholders to provide stability to the housing market and broader financial system.

At the same time, the powerful committee chairman said it would be a mistake to give Fannie and Freddie bondholders the same legal status as holder of US government debt by putting their obligations on the federal books.

Then FHooFAh Jim Lockhart did exactly the same thing (but with opposite polarity) on October 22, 2008 in clarifying away remarks that an explicit guarantee was in.  That time Ben Bernanke himself ended up looking silly explaining the resulting "effective" guarantee.  I wonder if the bond vigilantes are really going to swallow the same double-speak pabulum just a year and a half later.

I think this makes a nice summary …

CRisk commenter Rob Dawg: Treasury wants people to think there is a guarantee. Treasury needs to be able to claim there is no guarantee. Should either be tested; game over.

Read the rest of this entry »

Once more those permanently surprised analysts were surprised again.  Home sales were slow:

Feb. 26 (Bloomberg) — Sales of previously owned U.S. homes unexpectedly declined in January for a second month, signaling the government’s extension of a tax credit is being limited by a lack of job growth.

Purchases fell 7.2 percent, the second-largest decline ever, to an annual pace of 5.05 million, the National Association of Realtors said today in Washington. In December, sales decreased a record 16.2 percent. The median sales price was unchanged from the same month last year, the group said.

The federal tax incentive helped drive purchases in the second half of 2009 and its extension in November may have trouble generating as much demand in coming months. Mounting distressed sales are making it harder to clear inventories, indicating job growth is required to sustain the recovery in the housing market.

“We were seeing payback for the first tax credit, and the second credit is not having any measurable impact on sales,” Patrick Newport, a housing economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Demand for housing is really weak. Improvement in the job market is really what has to happen for homes to start selling.”

Economists forecast existing home sales would rise to a 5.5 million rate in January, according to the median of 70 projections in a Bloomberg News survey. Estimates ranged from 5.04 million to 6 million. Read the rest of this entry »

Remember David Lereah, former chief economist for the National Association of Realtors? He was the economist we loved to hate. Where is he now?

Palm Beach County residents struggling to survive the worst housing crash since the Great Depression might soon be able to blame him in person: Lereah has applied for the position of president of Florida Atlantic University of Boca Raton.

Lereah, now head of a consulting firm in Washington, joins more than 40 candidates vying for the top job at FAU. Finalists are expected to start meeting with university officials in March. Lereah didn't respond to requests for comment.

Until recently, Lereah was the nation's real estate Cheerleader in Chief, a figure known for such comments as: "We feel confident that housing is landing softly" (2005); and "Housing bubbles pop. There's no risk of that happening here" (2005).

Lereah was roundly scorned by the business world when the bubble did, indeed, pop, and he could no longer get away with this sort of comment: "We've moved beyond the low for the housing cycle last fall" (2007).

Lereah resigned from the NAR in 2007. That same year, perhaps in a bid to hedge his bets, he penned, All Real Estate is Local: What You Need to Know to Profit in Real Estate — In a Buyer's and a Seller's Market.

 

In an e-mail, Lereah said he applied for the FAU post because believes his relationships and experiences with local, state and federal government, large financial institutions, Wall Street and the media would enhance "the university's brand, attracting quality professors and improving course curriculum." He said his contacts would also help out with fund-raising.

 

But Lereah noted that the still has a child in high school and is starting to think a move could be disruptive, so he's having second thoughts about the FAU job.

If Lereah does move forward with his application, he can send students to the bookstore for his previous works. They include his 2005 book, Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through The End of the Decade — And How To Profit From Them. (The book was re-released in February 2006, as the market showed signs of strain, under the title, Why The Real Estate Boom Will Not Bust — And How You Can Profit From It.)

And how's this for irony? Read the rest of this entry »

Even after the housing bubble popped, homeowners have had a NMH (Not-My-Home) attitude toward home value declines.  How often have agents tried to convince homeowners that their price expectations were unrealistic and were given statements like these:

But this is where little Timmy took his first steps, where Bob and I hung that lovely gold flocked wallpaper in the dining room, and we spent all those hours hauling rocks into the backyard.  Someone will come along who loves the place as much as we do, it just might take awhile.  Besides, Joe across the street got a ton of money for his place two years ago- my house has to be worth more than that!

Could it be that unrealistic optimism is changing?

Homeowners' previously upbeat views of their own homes' worth have become "overly cynical," according to a new survey released Thursday by property search and valuation site Zillow.com.

One in five homeowners, or 20 percent, thought their home's value had increased in 2009, while 28 percent of homes actually increased in value, according to the site.

The Zillow Home Value Misperception Index turned negative for the first time in the fourth quarter of 2009, to -2, the lowest score on record since the site started the survey in the second quarter of 2008.

An index score of zero would indicate that homeowners views were in line with actual home values, the survey said, while a negative or positive score would indicate either overly pessimistic or overly optimistic views, respectively.

Broken down, results were a bit mixed: 50 percent of homeowners believed their home was worth less at the end of 2009 than the year before, while in reality 65 percent of homes lost value. Almost a third — 30 percent — thought their home's value had stayed the same, while in reality only 7 percent of homes had remained unchanged.

Read the rest of this entry »

I received an interesting email yesterday from Tim Harris, who runs a real estate coaching company along with his wife Julie.  Tim said that I would find this interesting, and he was right.  He wrote a post Wednesday entitled URGENT BREAKING NEWS: New ‘Secret’ Program, Homeowners Given New Mortgages Immediately After Foreclosure! Here's an excerpt:

[B]anks are now extending opportunities to REINSTATE mortgages loans…after a foreclosure…to the former homeowners!

You read that right….homeowner ‘loses’ their home to foreclosure. Legally, its no longer their home. Home is legally in the hands of the bank. In the past…after the homeowner loses the home in a foreclosure sale….they move out…afterall, its no longer their home..home becomes a REO listing.

Now, homeowners are being offered the opportunity to stay in their home…reinstate their mortgage reflecting the value as established at the foreclosure sale. New mortgage terms, market interest rates.

It seems that this new ’secret’ program is being tested in many major markets across the US. The former homeowner is now able to REINSTATE their mortgage…at the new value as established by the foreclosure sale. In other words, the negative equity is gone…the second mortgage is gone….back property taxes paid off…back HOA fees gone.  Their new mortgage amount IS the amount the lender paid at the foreclosure sale!

I want you to think about that for a moment. This means that even AFTER a homeowner missed payments…loses the home to foreclosure…that they can now IMMEDIATELY secure another loan for the homes current market value. WOW!

Consider this, 25% of all homeowners with mortgages are upside down by at least 10%…..10% of all homeowners with mortgages are upside down by at least 25%. HREU Students know that this trend of underwater homeowners will increase before it levels off. There are 50,000,000 mortgages in the US….as of today…6,000,000 aren’t ‘performing’. In other words, homeowners aren’t paying their mortgages!

What happens when all of these millions of upside down homeowners  discover that they can have their negative equity wiped out….secure a new mortgage…and keep their home…if they let it go into foreclosure?

I asked Tim if he could tell me any more particulars.  He said: Read the rest of this entry »

Considering a short sale in Arizona?  It pays to be careful.  M forwarded me the following information that he received, which came from a discussion with Tom Farley, CEO of the Arizona Association of Realtors. It stated:
 

One issue that Tim made perfectly clear, and we all felt was important to get out to those of you who may not have attended, is this.  In Arizona, there is anti-deficiency protection for a large number of property owners who go through foreclosure, however, there is no statute that proves anti-deficiency protection to any property owner in the case of a short sale.  Our anti-deficiency laws only cover foreclosure.

Tom Farley stressed that it is important that we not make incorrect representations to the sellers in this regard.  The deficiency protection they may be able to receive is only found in the terms of the short sale approval letter provided by the lender. If the lender does not fully release them from the lien, but only releases the property to close and transfer, there is not any guarantee that the lender will not pursue the seller for the remainder of the unpaid balance on the note.

One popular myth that was dispelled at yesterday's meeting is that there was protection if it was purchase money.  This is not true.  While some lenders are providing the release in these cases they are not obligated to do so.  Tom stressed the importance of legal counsel for sellers facing short sale with regards to this issue once again. Read the rest of this entry »

Existing home sales are due to be reported today and analysts expect a serious drop in sales.  The WSJ launched a preemptive strike against panic by declaring that The housing market isn't as bad as new numbers indicate: [Thanks John!]

The National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.

The large drop is exaggerated by the initial Nov. 30 expiration of the government's first-time home buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.

The tax credit has been extended through June, but most analysts don't expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.

But there are scattered signs of improvement. Home-price declines have slowed; the S&P/Case-Shiller index out Tuesday is expected to show prices in 20 major cities down about 5.4% in November from a year ago, compared with a trough of nearly 20%.

It's interesting that while the WSJ feels that the numbers are "exaggerated" by the drop, back in November, they didn't seem to think that the rise in sales was "exaggerated" by the tax credit when they announced that Existing Home Sales Jump 10.1%: [Although they indicated that the tax credit was a factor.]

Home resales leaped in October, rising far more than expected as a fat tax credit offset fears about joblessness.

Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors said Monday.

Inventories kept shrinking. Prices fell, but the NAR said the decline was the smallest in more than a year.

The 6.10-million rate was the highest since February 2007. Economists surveyed by Dow Jones Newswires expected a 2.3% increase in sales during October, to a rate of 5.70 million.

"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit," NAR economist Lawrence Yun said.

Aside from the tax credit, low prices and mortgage rates have drawn in buyers, concerned as the U.S. unemployment rate climbed in October to 10.2%.

Along with the cheery news last November, the WSJ included this video interview with noted expert Ken Rosen of the Fisher Center for Real Estate.  Rosen indicated then that the extension of the tax credit was going to have an even bigger effect over the next six months:

Read the rest of this entry »

For those of you who like baloney with your breakfast, might I recommend this article from the Wall Street Journal, California's housing inventory shrinks to 5-year low:

SAN FRANCISCO—California's inventory of unsold, previously owned homes shrank to a five-year low in December, in another sign that the state may be coming out of its worst housing slump in decades.

The supply of unsold single-family homes dropped to 3.8 months from 5.6 months a year ago and 16.6 months in January 2008, when inventories were at a peak, according to estimates released Friday by the California Association of Realtors. The inventory levels are now at their lowest level since 2005, resulting in frenzied sales with multiple offers in some cities.

In Northern California's Santa Clara County, where inventory has dropped to 50 days from 243 a year ago, Amanda Garcia said she and her 62-year-old father Luis Garcia finally gave up a nine-month search for a home last month, after they kept losing out on homes priced in the highly competitive sub-$500,000 market.

"It's more like an auction nowadays," said Ms. Garcia, 26, a medical coordinator from Milpitas, Calif. "They shouldn't call it a house sale."

The WSJ also says:

The current inventory rate is running well under California's historical average since the 1980s of about an eight-month supply of existing homes on the market. That's partly because a once huge supply of foreclosures in the state has dwindled. In November, foreclosed properties accounted for 40% of all single-family sales, new and used, in California, compared with 58% in January, according to the most recent estimates by Zillow.com, a market tracker.

This is a curious statement, given this comment from RealtyTrac's latest report:

A total of 632,573 California properties received a foreclosure filing in 2009, the nation’s largest state foreclosure activity total and an increase of nearly 21 percent from 2008.

This is in spite of the reluctance of lenders to foreclose and all of the foreclosure prevention efforts of governments and lenders. It's hard to keep borrowers in homes though when borrowers don't have jobs:

California got coal in its stocking for the holidays as employers cut 38,800 jobs in December and the unemployment rate registered 12.4 percent, according to an Employment Development Department report that showed little sign of life in the state's labor market.

Also, the November unemployment rate – initially reported as 12.3 percent – was revised upward to 12.4 percent on Friday.

December's figure would have been even higher had not 107,000 Californians quit looking for work last month and thus fallen out of the calculations.

December's labor force dropout figure was the highest on record and marks the eight consecutive month of shrinkage in the number of Californians looking for work.

The state estimates that 2.254 million people were unemployed in December.

In addition to the jobless, state officials say 1.53 million Californians were forced to work part time in December because they couldn't find anything full time and another 903,000 people had stopped looking but wanted jobs.

So why the low inventory then?  One explanation is offered by Sean O'Toole, CEO of ForeclosureRadar.com: Read the rest of this entry »

I was forwarded an interesting article on rising apartment vacancies in Tucson by our friend M.R. I might have even posted on how Tucson’s vacancy rate has risen faster than any other metro area in 2009, but then I read the comments and got distracted.  Does this comment by J. Saba bother anyone else, or just me? [Edited slightly for clarity]

Long time owners cashed out from 2004-2007 and the new owners leveraged their properties greatly.  They were sold on the idea that rents in tucson were too LOW. But hey, with property prices rocketing up, it took no genius to realize the time bomb investors where sitting on, and we’ll see a few more of them explode soon this year.

I sold some apartments in 2007 which are now in bankruptcy – this guys problem was that he didn’t have good financing and not a lot of money behind his grand dreams.

I predicted it when I sold it and EARNED MY COMMISSION.

Now I am looking at buying them for a steep discount.

It’s not clear to me if Saba was merely the seller’s agent, or if he owned those apartments in 2007. Whatever the case was, I’m wondering who he made his predictions to when he "earned his commission".  Did he warn the buyer, who ignored him?  If so, I suppose there’s a certain poetic justice if the agent buys the apartments now.  Why do I get the feeling though that he made his predictions to someone else? Read the rest of this entry »