01 July 2009
30 June 2009
Case Shiller Shows A Modest Bump Up In Prices, While Delinquent Prime Mortgages More Than Double Year Over Year
Well if you were in the retail trades you'd know that August aces July, year in, year out, because of back-to-school purchases made by millions of parents for their kids. You'd also know that despite "Black Friday" in late November, December sales always trump November sales, year after year.
The same is expected of April Real Estate sales over March sales. Anyone who follows Real Estate knows the Spring selling season is the most important time of year for Real Estate sales and the season really kicks off with April always trumping March.
Thus, it's no wonder we can probably turn on any business news channel today and have some pitchman from the NAR or the NAMB telling us that housing is bottoming as the Case Shiller index slowed in April.
The Bloomberg headline reads, Yale’s Shiller Sees ‘Improvement’ in Rate of Home-Price Decline.
The article which just posted to Bloomberg a little bit ago reads,'
June 30 (Bloomberg) -- Home prices saw a “striking improvement in the rate of decline” and trading in funds launched today suggest investors believe the U.S. housing slump is nearing a bottom, said Yale University economist Robert Shiller.
“At this point, people are thinking the fall is over,” Shiller, cofounder of the home price index that bears his name, said in a Bloomberg Radio interview today. “The market is predicting the declines are over.”
Note that Shiller is not saying he thinks the bottom is in. Rather, he is just remarking that data shows people are believing the worst is over.
Bloomberg goes on to say,
Home prices in 20 major U.S. metropolitan areas fell in April at a slower pace than forecast, the S&P/Case-Shiller home- price index showed today.
The index decreased 18.1 percent from a year earlier following an 18.7 percent drop in March. Economists predicted the index would drop 18.6 percent, according to a survey of 33 economists conducted by Bloomberg. The measure declined 19 percent in January, the most since the data began in 2001.
To which I respond by reminding all that you couldn't have found 33 Economists in the USA in 2005 who were aware we had a hellatious Housing Bubble blowing, much less a soon to be major Recession on the horizon as many an astute blogger was predicting all along. Now these Economists are supposed to be able to give us predictions on a Housing Crash which they never saw in the first place?
Moving on, we had some clearer news as to what is really happening in Housing and where the next blowup in Housing is going to take place: Prime and Jumbo loans (although the next article I mention doesn't discuss Jumbo loans, Alt-ARM resets or the crashing Commercial Real Estate markets.
This next article is headlined, Delinquencies Double on Least-Risky Mortgages, U.S. Report Says, and it begins . . .
Okay, now we're getting some insight, e.g., 2.9% of all Prime Mortgages through March 31, 2009 are now 60 days or more past due. Last year, for the same time period, 1.1% of all Prime Mortgages were delinquent. Note that the headline should have read Delinquencies More Than (my edit) Double on Least-Risky Mortgages, U.S. Report Says.June 30 (Bloomberg) -- Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.
Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.
I would re-write the headline because although a rise from 1.1% of prime loans to 2.9% of prime loans being delinquent might sound like small potatoes, keep in mind that we are talking about a 162% rise in Prime Loan Delinquencies in just one year's time! As a 100% rise is a double, the actual number of delinquent Prime Loans is closer to a triple than a double.
Nevertheless, we're' quibbling over the usual misleading headlines which hide the real data points we need to follow closely to know if housing is bottoming or going to continue to fall.
The article gave us three more nuggets of info:
Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said.
Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months, and increased to a 63 percent default rate after a year.
“Rising serious delinquencies are a leading indicator of increased foreclosure actions in the future,” the agencies said.
So, a quick recap of those last 3 paragraphs:
1. All mortgages combined have risen to an 88% higher delinquency rate year over year.
2. Loan re-modifications which are supposed to help people keep their homes from being foreclosed upon have a failure rate of 63% after 12 months go by.
and a very obvious point which so many bottom callers are missing today . . .
3. “Rising serious delinquencies are a leading indicator of increased foreclosure actions in the future."
Keep in mind the majority of resets for Option ARMs will take place in the years 2011-2013. Do any of you think defaults will stop rising anytime soon? The coming tsunami of resets will force many an ex-Big Real Estate Mogul on paper to walk away from their Prime . . . and Jumbo . . . Loans.
Add in continued job losses, credit card defaults, the loss of the Housing ATM (via HELOCs), a disturbing rise in Boomer retirements, more social programs coming as safety nets (meaning more taxation), crumbling infrastructure, Global Warming swallowing up more acreage of Florida and other Gulf Coast states every year, the now crashing Commercial Real Estate, the dying malls, and so on and so forth, and without a doubt, anyone thinking Housing is bottoming right here and now is not paying attention to History.
I opine that Housing is having a "Dead Cat" bounce. Remember, the wipe out in Real Estate in 1928 in Florida took out many a wealthy individual's home equity and it never returned.
As always, Caveat Emptor and keep your thinking caps on . . .
Rock Trueblood
Business/Economic/Housing Headlines: 30 June 09
Yale’s Shiller Sees ‘Improvement’ in Rate of Home-Price Decline
Two Chatam, Mass beach homes pulled out to sea by fierce storm
Financial Armageddon: "Scenes From A Downturn"
IEA says world oil demand to drop by 3.7%
Financially strapped Michigan offers to imprison California inmates to earn revenue
The Florida Keys are ill-prepared for rising sea
U.S. Companies Seek New Tax Havens
Bill Fleckenstein takes aim at the Real Estate lobbyists (National Association of Realtors and the National Association of Mortgage Brokers) who are trying like hell to blow bubbles in Real Estate again
Mountains of paperwork stop foreclosure/loan remodifications dead in their tracks
EPA relents, discloses list of high-risk coal ash sites
Sears to Let Jobless Customers Stop Payments, Still Keep Fridge
Facebook vs. Google, how the social network plans to wall out the biggest search engine and steal its dominance on the Internet
Nearly completed 13 story Shanghai high-rise falls over
Dr. Housing Bubble's latest, "The Continued Crony Banking and Housing Industry Bailout: Foreclosure Scams, Japan Subprime Loans Coming Back, and Generally Bad Advice for American Consumers" is another must read for this week.
Nigerian rebels raid Shell Oil facility, claim to have to have killed 20 soldiers
New York to launch mortgage probe
Hookers hurt by Recession in Nevada
Foreclosures: The poor pets are getting left behind
Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity
5 More Banks Closed This Past Weekend
29 June 2009
A Must Read From This Past Weekend: How Goldman Sachs Has Manipulated Every Bubble Since the Great Depression
This article was not re-printed on Rolling Stone's main website; however, someone posted it to Scribd.
This is one you will either want to print out in its entirety, or you will want to run out and buy the lastest issue of Rolling Stone so you can read this at the beach.
I am not going to reprint a single word of "The Great American Bubble Machine". Just take my word, it will wake you up to what will be the next bubble construct with Goldman Sachs making the most $$$ out of the mess.
13 More Homes In Key West Added to Notice of Default/Pre-Foreclosure List This Weekend Bringing The Total to 243
This past weekend, 13 Key West homes were added to this list. (When the page opens, type in the zipcode: 33040. A list of 243 "defaults" will list from most recent to oldest.)
At this time, 17 Key West homes with a $1,000,000 or more mortgage are in pre-foreclosure or have been foreclosed upon. You can find these 17 by clicking on the column market "Amount". By the way, many homes's "Amount" is blank. Thus the list of million dollar plus homes in Key West now in default is most likely higher than just the 17 showing.
The local NAR is publicizing that inventory is diminishing. What the NAR conveniently forgets to tell homebuyers is how many bank owned/short-sale foreclosed upon homes are not being shown on the MLS at this time.
It still makes more sense to rent down here, unless, of course, some panicked homeseller can see the handwriting on the wall and agrees to sell you his/her property at 1995 prices.
Right now, I continue to see one home/condo after another which was bought in 2004 through 2007 sell for prices in 2009 for less than it was bought. And we are moving the trendline down to 2003 prices very, very soon. (I've recently seen a sale of a home which was bought in 2008 sold at a smaller price this year. I will write about it soon.)
The trend is still downward in pricing. What the local NAR is not telling on "sold" homes is what the original price or previous prices were. Instead, when a house sells, the NAR only publicizes the most recent listing price was.
And then there's the old trick of manipulating data where a house has one "listing price" drop after another from the original price, finally, to only have the homeseller rip the home off the market. Then when that home comes back on the market it will show a brand new "original" price way below the old "original" price. Hence, new drops in listing price will disguise the real fall from what the owner was trying to get. Meaning a home buyer will know not just how panicked the seller is.
Therefore, I've constructed my own Exel spreadsheet on which I type daily changes in listing prices so I can gauge what is really happening to the data without manipulation.
Thus, in the future, I will show you things the local MLS is hiding.
Mark my word, home prices are not bottoming in Key West. Only non-observant people are paying full listing price in this environment of cascading Notice of Defaults, soon to blow up Option ARMs resetting, commercial Real Estate blowing up, credit card defaults rising, and job unemployment rising.
Pay attention, dig deep. If you can find a foreclosure for 1995 prices, snap it up now. Otherwise, it still makes much more sense to follow the falling prices in rentals around the Keys.