Recent Articles
Mar 3, 2011 | No Comments | Sean Mills
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 [...]
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
Feb 28, 2011 | No Comments | Sean Mills
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 [...]
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 28, 2011 | No Comments | Sean Mills
LOS ANGELES — The gap between the average sale price of a foreclosed home and that of other properties grew wider last year, giving homebuyers who snapped up bank-owned homes big discounts.
And homebuyers can expect to see more of those bargains this year, because fewer foreclosed homes were sold in 2010 than were taken back [...]
LOS ANGELES — The gap between the average sale price of a foreclosed home and that of other properties grew wider last year, giving homebuyers who snapped up bank-owned homes big discounts.
And homebuyers can expect to see more of those bargains this year, because fewer foreclosed homes were sold in 2010 than were taken back by banks, foreclosure listing firm RealtyTrac Inc. said Thursday.
Buyers who purchased a foreclosed home last year got, on average, a 28 percent discount to a non-foreclosure sale. That’s up from a 27 percent average discount in 2009, RealtyTrac said.
While only a slight increase, the trend suggests a widening price spread between foreclosure sales and other types of residential properties.
Foreclosed homes made up nearly 26 percent of all home sales last year, according to RealtyTrac. That’s down from 29 percent in 2009 but up from 23 percent in 2008.
Traditionally, foreclosures account for less than 10 percent of all home sales.
In all, 831,574 foreclosed properties were sold last year, including those in some stage of foreclosure but not yet taken back by lenders, the firm said.
That’s down 31 percent from 2009 and down nearly 14 percent from 2008.
Sales of homes outside of the foreclosure process declined nearly 19 percent in 2010 from the prior year, according to RealtyTrac.
While the pace of foreclosure sales slowed, lenders stepped up their home repossessions, taking back more than 1 million homes last year.
That deepened the so-called shadow inventory of foreclosed homes that have yet to hit the market. Experts contend that the housing market won’t fully recover until banks find buyers for those properties.
“We need to clear out the inventory if the market is going to come back,” Rick Sharga, a senior vice president at RealtyTrac.
Banks are reluctant to put too many foreclosed homes on the market at once, because they would face booking sizeable losses on the sales.
Generally, about 30 percent of banks’ foreclosure inventory is on the market, Sharga said.
More foreclosure sales, however, would almost certainly send overall home values lower in many markets, because foreclosed homes often sell at a sharp discount to other properties.
Already, housing experts predict home prices will slide another 5 percent this year.
“You could have a scenario where housing prices could be pushed lower,” Sharga said.
Foreclosure sales, like home sales overall, fell sharply in the last three months of the year. Government tax credits earlier in 2010 helped gin up home sales, but pulled forward transactions that would have typically occurred later in the year.
Lenders’ efforts to deal with foreclosure documentation problems and heightened scrutiny in states where courts play a role in the foreclosure process also dampened sales of bank-owned homes.
That slowdown began to ease in December, however, and foreclosure sales spiked 21 percent, the firm said.
Nevada, Arizona and California had the highest percentage of foreclosure sales last year.
Nevada led the nation with foreclosure sales accounting for nearly 57 percent of all home sales, RealtyTrac said. That was down from 67 percent the year before.
Several other states had foreclosure sales that accounted for at least one quarter of all home sales last year: Florida, Michigan, Georgia, Idaho, Oregon, Illinois, Virginia and Colorado.
Feb 27, 2011 | No Comments | Sean Mills
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 [...]
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 | Sean Mills
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 [...]
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
Oct 19, 2010 | No Comments | Sean Mills
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 [...]
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 | Sean Mills
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 [...]
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
Oct 19, 2010 | No Comments | Sean Mills
Funny no one is denying the homeowners were late, seriously late/delinquent, on their payments of the homes in question but somehow it is there god given rights to stay in the homes. People always want the rules to apply when the rules benefit them. How about this…you can’t pay the mortgage do the right thing move [...]
Funny no one is denying the homeowners were late, seriously late/delinquent, on their payments of the homes in question but somehow it is there god given rights to stay in the homes. People always want the rules to apply when the rules benefit them. How about this…you can’t pay the mortgage do the right thing move out with deed in lieu of foreclosure. -Sean
MINNEAPOLIS (Oct. 12, 2010) – GMAC Mortgage is committed to preserving the integrity of the foreclosure process and in that spirit has engaged several leading legal and accounting firms to conduct independent reviews of its foreclosure procedures in each of the 50 states. In addition, foreclosure sale files nationwide receive an additional review by a specialized team to ensure that: home preservation procedures have been fully followed; the timing and substance of the foreclosure is appropriate; and the file itself is in good order and complies with all laws and requirements of the state of jurisdiction.
Foreclosure is a very serious matter and only implemented when all other home preservation options have been fully exhausted. We are taking these additional steps to restore confidence in the process, which is critical for the stability of the home and mortgage industry.
In addition to the nationwide measures, the review and remediation activities related to cases involving judicial affidavits in the 23 states continues and has been underway for approximately two months. As each of those files is reviewed, and remediated when needed, the foreclosure process resumes. GMAC Mortgage has found no evidence to date of any inappropriate foreclosures.
GMAC Mortgage is committed to working through this matter diligently and encourages borrowers with questions to contact a customer service representative at 866-304-4682 or loan.assist@gmacm.com. Additional information Buy Amoxil can be found by visiting www.gmacmortgage.com.
Source article
Oct 19, 2010 | No Comments | Sean Mills
Jist of the article is hard to miss, especially seeing what the title is. -Sean
From NY Fed President William Dudley: Regional Economy and Housing Update
[L]et’s consider the slow housing recovery. Housing market activity—both new construction and sales—remains depressed. On the construction side, total housing starts are running at just 600,000 units per year (seasonally-adjusted) in [...]
Jist of the article is hard to miss, especially seeing what the title is. -Sean
From NY Fed President William Dudley: Regional Economy and Housing Update
[L]et’s consider the slow housing recovery. Housing market activity—both new construction and sales—remains depressed. On the construction side, total housing starts are running at just 600,000 units per year (seasonally-adjusted) in recent months. This is up from 530,000 units at the trough in the first quarter of 2009 but it is still extremely low by the standards of the last 50 years. In fact, the rate of new construction is so low that there is barely any net growth in the U.S. housing stock these days.
One reason why so little housing is being built is that many existing homes stand vacant. We estimate that there are roughly 3 million vacant housing units more than usual. And more vacancies are added daily as the foreclosure process moves homes from families to mortgage lenders. This stock of vacant homes will shrink when fewer are foreclosed upon and more of these homes are sold or rented out.
On the sales side, even though low mortgage interest rates and falling home prices have together boosted housing affordability to its highest level in 40 years, the current pace of sales is quite sluggish. Impediments to home sales include tight lending standards, a weak job market and continued uncertainty regarding the future path of home prices. The large decline in home prices that occurred between 2006 and 2008 is also important. This decline reduced the amount of equity that owners have in their homes, making it difficult for people to come up with the funds needed to “trade-up” and move into better homes.
In addition, the steep decline in home prices put many families at risk of mortgage delinquency and, ultimately, losing their homes to foreclosure. With lower home prices, many families now owe more on their mortgage than their home is worth. This means that they cannot refinance or sell their homes easily if they experience a financial crisis, such as a job loss or a serious illness. Recent developments on foreclosures have been mixed. While RealtyTrac reports that foreclosure completions in the United States exceeded 100,000 for the first time in September, it is important to remember that foreclosure is a lengthy process in most states. Our data indicate that, in recent quarters, borrowers are becoming less likely to fall behind on their mortgages, so fewer households are now entering the foreclosure process. At the same time, though, major lenders have acknowledged serious problems in the processes they have used to repossess homes and announced moratoria on new foreclosures. Taken together, these developments suggest that the situation in housing remains uncertain for the foreseeable future.
The Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu. We also support due process and access to legal counsel for homeowners facing foreclosure, for instance through legal aid programs. At the same time, it is important that foreclosures that properly comply with state and federal law can ultimately take place, as this is a necessary part of the adjustment that will eventually return us to more normal conditions in the housing market.
At present, the extent of the documentation problem and its wider ramifications are still uncertain. In conjunction with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, the Federal Reserve is therefore seeking to establish the facts through a review of the foreclosure practices, governance and documentation at the major bank mortgage servicers. We want to ensure that the housing finance business is supported by robust back-office operations—for processing of new mortgages as well as foreclosures— so that buyers of homes and investors in mortgage securities have full confidence in the process. We are monitoring developments closely in order to evaluate any potential impact on the housing market, financial institutions and the overall economy.For those in the New York / New Jersey area, much of Dudley speech is on the regional economy and housing market.
From NY Fed President William Dudley: Regional Economy and Housing Update
[L]et’s consider the slow housing recovery. Housing market activity—both new construction and sales—remains depressed. On the construction side, total housing starts are running at just 600,000 units per year (seasonally-adjusted) in recent months. This is up from 530,000 units at the trough in the first quarter of 2009 but it is still extremely low by the standards of the last 50 years. In fact, the rate of new construction is so low that there is barely any net growth in the U.S. housing stock these days.
One reason why so little housing is being built is that many existing homes stand vacant. We estimate that there are roughly 3 million vacant housing units more than usual. And more vacancies are added daily as the foreclosure process moves homes from families to mortgage lenders. This stock of vacant homes will shrink when fewer are foreclosed upon and more of these homes are sold or rented out.
On the sales side, even though low mortgage interest rates and falling home prices have together boosted housing affordability to its highest level in 40 years, the current pace of sales is quite sluggish. Impediments to home sales include tight lending standards, a weak job market and continued uncertainty regarding the future path of home prices. The large decline in home prices that occurred between 2006 and 2008 is also important. This decline reduced the amount of equity that owners have in their homes, making it difficult for people to come up with the funds needed to “trade-up” and move into better homes.
In addition, the steep decline in home prices put many families at risk of mortgage delinquency and, ultimately, losing their homes to foreclosure. With lower home prices, many families now owe more on their mortgage than their home is worth. This means that they cannot refinance or sell their homes easily if they experience a financial crisis, such as a job loss or a serious illness. Recent developments on foreclosures have been mixed. While RealtyTrac reports that foreclosure completions in the United States exceeded 100,000 for the first time in September, it is important to remember that foreclosure is a lengthy process in most states. Our data indicate that, in recent quarters, borrowers are becoming less likely to fall behind on their mortgages, so fewer households are now entering the foreclosure process. At the same time, though, major lenders have acknowledged serious problems in the processes they have used to repossess homes and announced moratoria on new foreclosures. Taken together, these developments suggest that the situation in housing remains uncertain for the foreseeable future.
The Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu. We also support due process and access to legal counsel for homeowners buy drugs online facing foreclosure, for instance through legal aid programs. At the same time, it is important that foreclosures that properly comply with state and federal law can ultimately take place, as this is a necessary part of the adjustment that will eventually return us to more normal conditions in the housing market.
At present, the extent of the documentation problem and its wider ramifications are still uncertain. In conjunction with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, the Federal Reserve is therefore seeking to establish the facts through a review of the foreclosure practices, governance and documentation at the major bank mortgage servicers. We want to ensure that the housing finance business is supported by robust back-office operations—for processing of new mortgages as well as foreclosures— so that buyers of homes and investors in mortgage securities have full confidence in the process. We are monitoring developments closely in order to evaluate any potential impact on the housing market, financial institutions and the overall economy.For those in the New York / New Jersey area, much of Dudley speech is on the regional economy and housing market.
Source Article
Apr 28, 2010 | No Comments | Sean Mills
From David Kocieniewski at the NY Times: Home Tax Credit Called Successful, but Costly
Though the Treasury Department and the real estate industry have termed the program a success, helping 1.8 million people buy homes, many tax policy experts say it has been singularly cost-ineffective: most of the $12.6 billion in credits through end of [...]
From David Kocieniewski at the NY Times: Home Tax Credit Called Successful, but Costly
Though the Treasury Department and the real estate industry have termed the program a success, helping 1.8 million people buy homes, many tax policy experts say it has been singularly cost-ineffective: most of the $12.6 billion in credits through end of February was collected by people who would have bought homes anyway or who in some cases were not even eligible.
There is no question this program was very costly. And why is the Treasury confusing activity with accomplishment? Sure sales briefly surged, but were new households formed? How many new jobs were created?
“We were happy in our apartment, but $8,000 was just too much to pass up,” said [Mr. James Green, a student at Purdue University], 29, who shopped furiously with his wife for two months before signing a contract in March to buy a three-bedroom ranch.
“We bid on a couple places that didn’t work out,” he said, “but we always made sure we had a backup plan because we didn’t want to miss the deadline for the credit. And when we finally agreed to a contract, it was this huge relief.”
For every home buyer like the Greens, real estate agents say there are at least three others who collected the credit even purchase antibiotics online though they would have bought without it. That means for each new buyer who was truly lured into the market by the credit, the federal government paid more than $30,000.
This is very optimistic – the ratio was probably 5-to-1 for the initial credit and even higher for the extension. But this shows two failures of the tax credit: 1) the high cost, and 2) it was just moving people from apartments to homes and didn’t reduce the excess housing inventory (yes, rentals count as housing inventory too).
“The tax credit helped to stanch the price declines, which had substantial benefit for the entire economy,” said Mark Zandi at Moody’s Economy.com.
And this has been the policy – support asset prices by limiting the supply (all the foreclosure delays), and pushing demand (low mortgage rates and the tax credit). This has helped the banks significantly, and Zandi argues this has boosted confidence. Maybe … but I’m not convinced that supporting house prices above the market clearing level to help the banks and boost consumer confidence makes sense. I think targeting jobs – and therefore household formation – would have been a far more cost effective program.
Source Article
« Older Entries
