Mar 3, 2011 | No Comments
In another sign of sluggishness in the mortgage markets, home-loan applications fell by 6.5% last week after adjusting for seasonal factors, the Mortgage Bankers Assn. says in its latest report.
The decline occurred despite lower interest rates, according to the trade group, which reported Wednesday that the average contract rate for 30-year fixed-rate mortgages decreased to 4.84% from an even 5%. It was the third straight week that the rate went down, the MBA says.
The weekly report tends to jump around, but the overall trend is down: A four-week moving average of mortgage applications is down by 2.5%.
With distress sales dominating the housing market, vulture investors are using cash to buy many homes, so it may be no surprise that applications for purchase-money home loans are falling.
But despite the sub-5% rate — the trigger, once, for refinancings — the refi share of mortgage activity decreased to 64.9% of total applications from 65.7% the previous week.
Source article LA Times
Mar 2, 2011 | No Comments
This is definitely worth a look and the time it takes to digest it. If this does not get you scared about our future and/or mad as hell at the establishment nothing will. This report covers entitlements, defense spending, revenues shoot its got it all.-Sean
Inquiring minds are digging deep into a 266 page PDF called USA Inc. a basic summary of America’s financial statements.
It is loaded with stunning graphs and charts on Social Security, Medicare, Medicaid, TARP Bailouts, Fannie Mae and Freddie Mac, military spending, tax revenues, and various projections. Here are a few images, but please give the document a closer look when you have a few moments.
Click on any chart to see a sharper image.
Cash Flow
Expenses at a Glance
Unfunded Liabilities
Federal Spending as Percent of GDP
Note this mess started with the creation of the Fed
Growth in Entitlement Spending
Take a step back, and imagine what the founding fathers would think if they saw how our country’s finances have changed. From 1790 to 1930, government spending on average accounted for just 3% of American GDP. Today, government spending absorbs closer to 24% of GDP.
Spending + Interest vs. Revenues
By 2025, entitlements plus net interest payments will absorb all – yes, all – of USA Inc.’s revenue, per CBO.
Less than 15 years from now, in other words, USA Inc. – based on current forecasts for revenue and expenses – would have nothing left over to spend on defense, education, infrastructure, and R&D, which today account for only 32% of USA Inc. spending, down from 69% forty years ago.
This critical juncture is getting ever closer. Just ten years ago, the CBO thought federal revenue would support entitlement spending and interest payments until 2060 – 35 years beyond its current projection.
To 25 Countries in Defense Spending
Entitlement Spending by Household
Medicaid Underfunding
When Medicaid was created in 1965 to provide health insurance to low income Americans, 1 in 50 Americans received Medicaid, now 1 in 6 Americans receives Medicaid.
Healthcare Spending
Social Security Workers vs. Retirees
Social Security Dependents
GSE, Fannie Mae, Freddie Mac Expansion
If that is not a shocking state of affairs, what is? There are lot more charts and graphs in the PDF.
Source article Mish
Feb 28, 2011 | No Comments
It’s been almost five years since the housing bubble popped. And, with a glut of homes still on the market, housing prices could fall further. Why is it taking so long for the housing market to sort itself out?
The answer may have something to do with a coin toss.
I recently visited Eric Johnson, a professor at Columbia’s Business School. He offered me a sweet bet on the flip of a coin. If the coin came up heads, I would win $6. If it came up tails, I would lose $1.
I told him I’d take the bet.
But then he changed the terms — if the coin came up heads, I would win $6. If it came up tails, I would lose $4. That bet I didn’t like.
Of course, this is irrational. The bet is still very much in my favor. If I took the bet 1,000 times, I’d almost certainly make a nice profit.
Still, Johnson said a lot of people are like me: They won’t take that bet. So I went out on the street to test this out on random people.
I introduced myself to Frank Blake, a guy who makes his living as a stuntman, jumping through windows and crashing cars. I offered him the bet — told him I’d pay him $15 if he won, and he’d only have to pay me $10 if he lost.
No deal.
“The $15 makes no difference in terms of gaining it,” he told me. “But losing the $10 in my pocket does.”
Lots of other people turned down the bet, too.
As it turns out, our brains feel losses and gains unevenly: Losing feels worse than winning feels good.
So now — as promised — back to housing.
In a down market, people really don’t want to sell, because selling feels like losing.
Chris Mayer, professor of real estate at Columbia Business School, found evidence for this fear of losses when he studied the Boston condominium bubble in the ’80s.
He would compare two basically identical condos. The owners of both had paid off their mortgages. But one had bought at the peak of the market. That person, he found, would stubbornly ask for a higher price, and keep his condo on the market longer than the other person, who had bought at a lower price. (Here’s the study.)
“The overall magnitude of this effect is very big,” Mayer told me. “This is an important factor in how housing markets operate.”
There are certainly other reasons the housing market is taking so long to sort out. Some people are stuck financially with their mortgages, for example.
But this psychological quirk is also slowing the healing process. It makes people reluctant to lower the asking price on their homes, which in turn contributes to the glut of houses on the market.
“It’s sort of like having a Band-Aid, where you know you would be better off if you just pulled it off at once,” Johnson said. “But instead what you do is you tend to pull it off very slowly, if at all.”
It’s unclear why our brains are wired this way — why we overemphasize losses. Johnson says it could go back millions of years, to when a losing bet was way more serious.
Millions of years ago, we were avoiding animals that wanted to eat us. Today, we’re selling houses.
But some part of our brains may be still be thinking about leopards in the trees.
Source article NPR
Funny I just went through this myself in trying to sell a senior housing unit I had bought for one of my parents, I knew the market had corrected but could not get myself to sell it until it was too late. I wonder how many of you ar with me?-Sean
Feb 28, 2011 | No Comments
Here is a new article affirming the notion “cash is king”, hopefully you all kept reserves where you could and are ready to buy when you see the diamond in all this rough.-Sean
It’s a new beginning in America’s home-buying market. More and more buyers are saying no to expensive and convoluted bank loans and paying cash instead for bargain properties.
The Wall Street Journal reports scores of bargain-basement deals being closed by cash-bidding buyers who feel the bottom has been reached in the market.
Where are they getting the cash from? They are selling other investments like paintings, cars and jewelry.
For example, In Atlanta, 62-year-old piano teacher Virginia Hall-Busch paid cash for a 93-year-old three-bedroom, one-bath bungalow in scenic Stone Mountain, GA.
The property initially listed for $159,000, then dropped to $129,000 and then to $79,900. The piano teacher didn’t think her bid of $52,500 would be taken seriously. It was. She is the new owner.
In Miami Beach, Richard Stoker, a 73-year-old retired sales executive, paid cash for two condominiums and soon plans to close on a third. He is paying $1.8 million, $1.2 million and $1 million for properties that were initially listed for double those amounts.
The Stokers have a home in Potomac, Md., but spend most of the year in Florida. Stoker doesn’t plan to rent out any of his new properties. He tells the WSJ he and his wife will live in one with two dogs, his son might live in another and the third will house an older dog and guests.
Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to an analysis from real-estate portal Zillow.com.
In the fourth quarter of 2006, they represented just 13% of deals. Meanwhile, downtown Miami prices rose 15% in 2010 from a year earlier, according to the Miami Downtown Development Authority.
The percentage of buyers in Phoenix paying cash hit 42% in 2010–more than triple the rate in 2008, according to Raymond James’s equity research division.
Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure.
The Federal Reserve reports that Americans increased their use of credit cards in December 2010 for the first time since August 2008.
“Some of the cash purchases reflect a tight lending environment, where even people with good credit and ample down payments are sometimes turned away for conventional borrowing,” reports the WSJ.
“The rates are great but the underwriting is brutal,” said Henry Schlangen, an agent with real-estate firm Pacific Union International who buys and sells for clients, mainly in Napa Valley, CA.
Schlangen tells the WSJ, “They (lenders) hang these people upside down and shake them till they see what falls out of their pockets. So people are buying with cash and maybe they’ll ‘Refi’ later.”
Schlangen, who deals in higher-end properties such as vineyard estates, estimated that 95% of his deals last year were all-cash, up from about half in previous years.
“The deals that are consummating, these are buyers who feel they got a great deal,” he said. He notes the number of buyers from China are increasing.
Cash buyers can often command 5% to 10% more off the asking price than a potential buyer using a mortgage, Mohammed Siddiq, a real-estate professional in Fort Lauderdale, FL, tells the WSJ.
Sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind, he says.
Nationally, it isn’t clear whether prices have bottomed.
The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward.
But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick, reports the WSJ.
source article Real Estate Channel
Feb 27, 2011 | No Comments
By TIFFANY RAY
The Press-Enterprise
Sales of foreclosure properties dropped in the Inland Empire in 2010 from the year before but continued to make up the largest share of the region’s housing market.
In Riverside and San Bernardino counties, 44,714 residential properties in some stage of foreclosure were snapped up by third-party buyers last year. That’s down 46 percent from 2009.
But despite the drop, foreclosure properties continued to represent more than half of all homes sold — 52 percent in Riverside County and 54 percent in San Bernardino County. In 2009, foreclosures represented 68 percent of home sales in Riverside County and 69.5 percent in San Bernardino County.
In California, foreclosure sales dropped 42 percent in 2010 and represented 44 percent of all residential sales, the third highest percentage among states.
Foreclosure properties can include properties owned by banks or in some stage of foreclosure, including those in default or scheduled for auction.
Sales of nonforeclosure homes were down across the U.S., too, but only by 19 percent.
James Saccacio, RealtyTrac’s CEO, said in a news release that a bloated supply of foreclosure properties and weak demand from homebuyers are keeping foreclosures high as a percentage of home sales. They are also keeping foreclosure prices low, he said.
The average selling price for a foreclosure property in Riverside County last year was $196,331. That was 18 percent less than the average selling price for a nonforeclosure home. San Bernardino County’s average selling price for foreclosed properties was $164,952, a discount of 24 percent from a conventional sale.
Daren Blomquist, a spokesman for RealtyTrac in Irvine, said Inland Empire sales have declined more dramatically than in other parts of the country, in part, because the market has hit a saturation point. The large supply of Inland foreclosure properties has also contributed to a smaller discount for homebuyers, he said, boosting prices for foreclosure properties and depressing conventional-sale prices because those sellers must compete in a market in which foreclosures are dominant.
Michael Novak-Smith, who specializes in selling bank-owned properties for Re/Max Results in Moreno Valley, said home sales and showings are down across the board, and he doesn’t see any big recovery on the horizon until credit loosens up. “It’s just really tough to get a loan,” he said.
Feb 27, 2011 | No Comments
I have been saying for years the NAR has inflated figures but for me it never seemed too far off what I would expect from a professional organization for real estate professionals who SELL real estate. Even as the market was falling I would see ads and hear ads on the radio saying it was “still a good time to buy.” -Sean
I read on MSN that the NAR apparently overstated home sales by as much as 20% as far back as 2007. The author opines, without any apparent reason, that “No one seems to be implying that numbers were massaged, cooked or manipulated.”
I would think there is every reason to believe the numbers were massaged, cooked or manipulated since that would be in the NAR’s interests and consistent with its numerous misleading practices.
If the numbers were manipulated by the NAR, I would think that would make the NAR a target for legal action by anyone and everyone who purchased real estate while the numbers were being manipulated and subsequently saw the market price of their property drop (that would be the vast majority who purchased since 2007). Obviously inflated figures would have inspired false buyer confidence.
Shouldn’t the justice department investigate? Wouldn’t this constitute a RICO violation? A subpoena of email and other correspondence at the NAR would likely allow an easy determination of innocence or guilt. I am tempted to say I would be shocked if there is no investigation, but sadly I am no longer affected that way by the government’s stupidity, incompetence and audacious complicity with power elites.
I guess it would be up to those who bought houses and suffered to initiate legal action. I think they should all sue the NAR. Fortunately for me I am not one of them as I have followed and heeded the information on Patrick.net for several years.
Source Article Patrick.net
Feb 27, 2011 | No Comments
This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).
The Composite 10 index is off 31.2% from the peak and still 2.4% above the May 2009 post-bubble bottom.
The Composite 20 index is also off 31.2% from the and only 0.8% above the May 2009 post-bubble bottom and will probably be at a new post-bubble low in January.
The next graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.
From S&P:
Eleven MSAs posted new index level lows in December 2010, since their 2006/2007 peaks. These cities are Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland (OR), Seattle and Tampa.
Prices are now falling just about everywhere, and more cities are hitting new post-bubble lows. Both composite indices are still slightly above the post-bubble low, but the indexes will probably be at new lows in early 2011.
Source Article Calculated Risk
Oct 19, 2010 | No Comments
This is an article from Forbes on line:
I just got off the telephone with economist, Forbes magazine columnist and newsletter editor Gary Shilling. As you probably know by now, Gary has been spot-on in his predictions on the economy, global markets and housing.
I asked him what was new and he told me that he had revised his forecast for housing. Here are some of his comments :
“If I am right and we see another 20% decline in housing prices, then we figure that the number of mortgages underwater will go from 23% to 40%. That is a huge amount and at some point the dam breaks,” says Shilling.
That’s bad news for the economy and bad news for homeowners and real estate brokers. It’s also bad news for banks and the stock market.
Shilling went on to say that if there is a bright spot in all this gloom it probably will benefit the profligate spending homeowners, who were lured by men like Angelo Mozilo into homes and mortgages they couldn’t afford.
“Home ownership still has a lot of political clout in this country,” said Shilling. ” By hook or by crook, the politicians will come up with some kind of bailout for a lot of people underwater on their mortgages.”
In other words it doesn’t help anyone to have millions of homeowners foreclosed on and thrown into the street. Gary estimates that houses that are foreclosed on and vacant lose an average of $1,000 per month in value as long as they remain unsold. He adds that all the scrutiny that banks are under fire over concerning foreclosure procedures is creating the perfect environment for a massive bail-out of deadbeat homeowners.
Special Offer: Gary Shilling was mocked for predicting a housing crash back in 2006, but he and his subscribers cleaned up. Click here for instant access to Shilling’s current investment strategy in his Insight newsletter.
Gary thinks we need a Resolution Trust Corp (RTC) type solution for the housing market. You may remember that the RTC was set up by the Office of Thrift Supervision in the 1980s to deal with hundreds of insolvent thrifts who, like homeowners, got in way over their heads. Some of them invested in Mike Milken junk bonds, others invested in real estate and other highly leveraged loans.
The RTC entered into a number of equity partnerships to help liquidate real estate and other assets it had inherited from insolvent thrift institutions. Gary says the key to the RTC’s success was that it acted relatively quickly and that is what is needed forthe housing market inorder to liftthe giant overhang caused by our zombie homeowner situation.
I reminded Gary that many investors Amoxil Online got rich from buying assets of troubled savings and loans, including billionaire Leon Black. We shall see who steps up this time. Any guesses?
source article
Oct 19, 2010 | No Comments
It is hard to read, watch or listen to the news as it seems to be the same old items rehashed. My own personal econimist, Mr. Havins, says it best when he tells the market is a very perfect place once everyone in government gets out of it and lets it find its equalibrium. Come on people wake up and get mad about this before it is too late to do something. – Sean
Most pundits argue that the government needs to stem the tide of foreclosures–to avoid a flood of houses hitting the market all at once and, thereby crushing house prices. The government needs to do everything it can to stimulate the housing market, these folks say, or the renewed decline of the housing market will take the economy down with it.
Peter Schiff, president and chief global strategist of Euro Pacific Capital, disagrees.
Schiff believes that the government should exit the housing market completely and let prices fall to a natural level. In other words, says Schiff, the government should stop subsidizing mortgage rates with quantitative easing, stop using taxpayer-funded losses at Fannie Mae and Freddie Mac to lubricate the mortgage market, and stop enacting things like the homebuyer tax credit to encourage people to buy houses.
But won’t this wallop the housing market? Won’t this cause many homeowners to go even deeper “underwater” and thus become more likely to just walk away. Won’t this lead to even more foreclosures?Yes, says Schiff. And that’s the point. This country needs more foreclosures, not fewer. We need to clear the market of “shadow inventory” consisting of houses owned by people who never should have bought them in the first place and return to fair pricing.
Artificially pumping buying online up house prices is not doing underwater homeowners any favors, Peter Schiff says. The problem is that, thanks to the crazy mortgages of the bubble years, today’s homeowners were often able to buy houses they can’t afford. And now these houses are millstones around their owners’ necks.Keeping house prices artificially high is also hurting new homebuyers, Schiff points out — by making it more expensive to buy (and forcing people to borrow more money to do it). In many cases, this punishes responsible people who have been saving up money to buy a house and rewards those who spent beyond their means.
Lastly, Schiff says, we need to do away with the cult of homeownership that has taken over the country in recent decades. There’s nothing wrong with renting, Schiff says. In most cases it’s far cheaper than owning. Until recently, Schiff observes, he was a renter himself.
(By the way, if you’re thinking about walking away from your mortgage, here are some things to consider)
Source article
