Gary Shilling is Bearish on Housing

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Fannie Mae and Freddie Mac Money Pit Will Suck 1 trillion Of US Taxpayer Cash

Bloomberg checked in on the state of Fannie Mae and Freddie Mac, the two once-quasi-private mortgage subsidy companies that are now almost wholly owned by taxpayers. Bloomberg found that Fannie and Freddie have already drawn down $145 billion in their unlimited line of taxpayer credit, and that their losses could ultimately be as high as $1 trillion.To put that in context, Fannie and Freddie alone may consume more than the entire TARP Wall Street bailout, which was in the neighborhood of $800 billion. Fannie and Freddie’s taxpayer-money-vaporization will likely dwarf even that of AIG, which most people still consider the most appalling bailout beneficiary of all.Just as bad, Congress isn’t even pretending that it has a plan to stop the losses at Fannie and Freddie. Reducing the Fannie and Freddie losses would mean reducing a huge housing-market subsidy–and that’s the last thing Congress wants in an election year. Also, the Fannie and Freddie losses are functioning as a back-door Wall Street bailout: Fannie and Freddie are using the taxpayer cash to buy mortgages from Wall Street, and they are paying prices so high that they’re taking a loss.It’s certainly tough to decide what SHOULD be done about Fannie and Freddie, because just disbanding them immediately would likely have a negative effect on the housing market and economy.But it doesn’t seem to much to ask to demand that Congress at least come up with a plan.

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One In Three Chance You’ll Soon Owe More Than Your House Is Worth: Tech Ticker, Yahoo! Finance

One In Three Chance You’ll Soon Owe More Than Your House Is WorthPosted Aug 20, 2009 11:15am EDT by Henry BlodgetRelated: xhb, tol, len, kbh, dhi, phmForeclosure rates in the U.S. remain near record highs. More than 13% of American homeowners with a mortgage are either behind on their payments or in foreclosure. The latest report from the Mortgage Bankers Association, released today, shows the percentage of loans that entered the foreclosure process dipped slightly to 1.36%, down from an all-time high of 1.37% in the first quarter.However, that number may soon rise again as mortgage delinquency rates continued to climb in the second quarter.That news is no surprise to Karen Weaver of Deutsche Bank. She startled everyone a few weeks ago when she predicted that, by 2011, nearly half of American mortgage holders would be underwater (meaning that they’ll owe more on their mortgages than their houses were worth).Half of mortgage holders means about one-third of American households. Put another way, Weaver forecasts 25 million mortgage holders will be under water by 2011, up from an estimated 14 million currently.Aside from the mega-bummer of owing the bank more than your house is worth, underwater mortgages exacerbate another problem: foreclosures. In previous housing busts, being underwater led to a greater likelihood of default, and Weaver believes this the foreclosure problem will be much worse this time around.In a recent report, Weaver analyzed all the various kinds of mortgages in the US and estimated that 48% of them would be underwater by 2011. This includes “prime” borrowers, of whom a startling 41% will be underwater.

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Foreclosures Up 48 Percent From Year Ago: RealtyTrac

I think I can pay the mortgage this month?

By AMY MCALISTER
Published: June 13, 2008

Foreclosure filings continued their surge in May, jumping 48 percent from levels recorded one year earlier as the number of distressed borrowers continues to mushroom in key housing markets across the nation. RealtyTrac Inc. reported Friday morning that 261,255 properties were subject some sort of foreclosure activity — default notices, auction sale notices and bank repossessions — during the month, up 7 percent from April.

That number translated into foreclosure filings for one in every 483 U.S. households, the highest such rate of foreclosures since RealtyTrac began normalizing against population in January 2005.

“May was the third straight month where we’ve seen a month-to-month increase in foreclosure activity and the 29th straight month we’ve seen a year-over-year increase,” said James J. Saccacio, chief executive officer of RealtyTrac.

“The nationwide rate of increase for default notices and foreclosure auction notices slowed in May, with default notices up just 1 percent from the previous month and auction notices down 3 percent from the previous month.”

While notices of default and trustee’s sale notices inched upward, the total number of REO properties in RealtyTrac’s property database surged above 700,000 as repossession activity doubled year-ago activity.

California, Florida lead the way
Foreclosure filings were reported on 71,930 California properties, 37,364 Florida properties and 12,959 Arizona properties during May, RealtyTrac said — the three highest state totals in May. Michigan was not far behind Arizona, however, with 12,792 properties receiving foreclosure filings during the month.

Illustrating just how bad the housing market is in the two former “bubble” states, for the second month in a row, California and Florida cities accounted for nine out of the top 10 metropolitan foreclosure rates among the 230 metropolitan areas tracked in the RealtyTrac report.

Seven California cities were in the top ten, led by Stockton in the top spot. One in every 75 Stockton area households received a foreclosure filing in May — more than six times the national average. Other California cities in the top 10 were Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield, Bakersfield, and Sacramento.

The Cape Coral-Fort Myers metro area in Florida registered the second-highest metro foreclosure rate in May, with one in every 79 households receiving a foreclosure filing during the month; the other Florida metro area in the top 10 was Port Lucie-Fort Pierce, ranking tenth.

Las Vegas was the only city outside of California and Florida with a foreclosure rate ranking among the top ten, RealtyTrac said. One in every 96 Las Vegas households received a foreclosure filing in May, more than five times the national average and sixth among the metro areas.

Other metro areas with foreclosure rates among the top 20 included Phoenix (20), Detroit (14), San Diego (17) and Miami (19).

For more information, visit http://www.realtytrac.com.

AP Poll: Mortgage Payments Worry Many

US News and World Report

Apr 14, 3:26 PM EDT

AP Poll: Mortgage Payments Worry Many


WASHINGTON (AP) — One in seven mortgage holders worry they may soon fail to make their monthly payments and even more fret that their home’s value is shrinking, according to a poll showing widespread stress from the nation’s housing crisis.

In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money & Finance poll also found that 60 percent said they definitely won’t a buy a home in the next two years. Continue reading

CNNMoney.com – Interest Rates Tumble

CNN Money

CNNMoney.com
The bond yield tumble, and the economy
Monday March 24, 7:15 am ET
By Paul R. La Monica, CNNMoney.com editor at large

Bond yields have plunged in the past few weeks. And even if you are not an active investor, you should care about what’s been going on in the bond markets lately. Here’s why.

The yield on the benchmark U.S. 10-year Treasury currently stands at about 3.33%, down from nearly 4% about a month ago. The rate on this long-term government note is a key factor behind what happens to fixed-rate mortgages.

If rates continue to fall, they could hit not only a new low for the year – the 10-year briefly touched 3.28% in January – but could come close to falling below the 3.07% level they hit in June 2003, which was a 45-year low at the time. Continue reading

Economic Update – March 9,2008

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  • Housing Foreclosures hit an all time high of 0.83% of all mortgages nationwide.

  • Over 5.8% of homeowners were behind in their mortgage payments, the largest number in more than two decades.

  • House prices lost a staggering 8.9% in 2007 – and they’re still dropping.

  • The supply of unsold houses rose to 4 million, or to over a 10 month’s supply.Homeowners’ equity fell below 50% for the first timesince 1945, hitting a new low of 47.9%. As Barry Ritholtz expressed, never before have banks and other various and sundry lenders owned more of the average American’s house than they do.

  • For February 2008 – the economy lost 63,000 jobs. That means 63,000 people lost their job in one month. Actually, the number was 101,000 people who lost their jobs in February, but the government hired 38,000 just to make the numbers look better.

  • In January 2008 – the consumer price index, the widely reported statistic used to measure inflation, rose 4.3% from January 2006.

  • According to John Williams of Shadow Government Statistics, he comes up with a reading of 11.8% inflation for the January CPI calculation. With oil at $106-a- barrel and every kind of commodity up 30% or more (aluminum, oats, silver-hit a 27 year high recently), and double-digit gains in other commodities such as, coffee, corn, wheat, zinc, etc. This just makes more sense than the economic statistics given to us by the government.

By STEPHEN S. ROACH – from Hong Kong

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March 5, 2008
Op-Ed Contributor

Double Bubble Trouble

Hong Kong

AMID increasingly turbulent credit markets and ever-weaker reports on the economy, the Federal Reserve has been unusually swift and determined in its lowering of the overnight lending rate. The White House and Congress have moved quickly as well, approving rebates for families and tax breaks for businesses. And more monetary easing from the Fed could well be on the way.

The central question for the economy is this: Will this medicine work? The same question was asked repeatedly in Japan during its “lost decade” of the 1990s. Unfortunately, as was the case in Japan, the answer may be no.

If the American economy were entering a standard cyclical downturn, there would be good reason to believe that a timely countercyclical stimulus like that devised by Washington would be effective. But this is not a standard cyclical downturn. It is a post-bubble recession.

The United States is now going through its second post-bubble downturn in seven years. Continue reading

Housing In Deepest Decline Since The Great Depression

Rapid Deterioration

Housing in deepest decline since the Great Depression, economist says

CHICAGO (MarketWatch) — Housing is in its “deepest, most rapid downswing since the Great Depression,” the chief economist for the National Association of Home Builders said Tuesday, and the downward momentum on housing prices appears to be accelerating.
The NAHB’s latest forecast calls for new-home sales to drop 22% this year, bringing sales 55% under the peak reached in late 2005. Housing starts are predicted to tumble 31% in 2008, putting starts 60% off their high of three years ago.
“More and more of the country is now involved in the contraction, where six months ago it was not as widespread,” said David Seiders, the NAHB’s chief economist, on a conference call with reporters. “Housing is in a major contraction mode and will be another major, heavy weight on the economy in the first quarter.”
A home-sales measure tracked by the association that includes data on cancellations from 30 large U.S. builders that account for one-quarter of all sales shows sales down 65% from their peak in 2005, Seiders said. Government measures of home sales do not include numbers from contracts that were signed but buyers later backed out.
Vacant homes for sale in the U.S. now number about 2 million, Seiders said, an increase of 800,000 from 2005. That inventory overhang is bedeviling builders, who have been forced to cut prices and write down the value of their holdings.
Read more on the builders’ plight. “Weak demand and oversupply naturally put downward pressure on prices,” Seiders said.
Citing the Case-Shiller index, Seiders noted that home prices nationally have fallen nearly 10% from their peak in early 2006 and that prices were declining at a 19% annual rate in the fourth quarter. “The downward momentum was building at the end of the year,” he said. Read the latest Case-Shiller numbers.
Home sales may bottom out later this year, Seiders predicted, but housing starts are not likely to rebound until 2009. Housing, which took 1.25 percentage points off GDP in the fourth quarter, looks like it will continue to be a major drag on gross domestic product at least through the end of 2008, he said. End of Story

Foreclosures Hit All-Time High

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Foreclosures hit all-time high

Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.

CNN Money
By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — More home owners than ever are losing the battle to make their monthly mortgage payments.

Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.

Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.

Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.

“Boy, that was ugly,” said Jared Bernstein, an Economic Policy Institute economist of the data.

“It’s another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess,” he said.” It could take a lot longer for the correction to work through the system.”

One reason it may take so long is that there seems to be no end in sight for falling home prices.

“Declining prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state,” said Doug Duncan, MBA’s Chief Economist said in a prepared statement.

The foreclosure rates for prime and subprime adjustable rate mortgages both more than doubled compared with a year ago, from 0.41% for prime ARMs to 1.06% and from 2.70% for subprime ARMs to 5.29%.

But it was subprime ARMs that contributed most heavily to the nation’s soaring foreclosure rates. Many of these loans come with low introductory rates that reset higher, often to unaffordable levels, in two or three years. Although they represent only 7% of all outstanding mortgage loans, they accounted for 42% of foreclosure starts during the quarter.

Delinquencies stood at 5.82% of outstanding mortgages, up from 5.59% during the three months ended September 30, 2007, according to the MBA. In the last quarter of 2006, the rate was 4.95%.

“In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell their homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face,” said Duncan.

“In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through.”

California and Florida are the states hardest hit by foreclosures. They accounted for 30% of all foreclosure starts in the United States last quarter, despite representing only 21% of the mortgage market.

Florida’s foreclosure start rate more than tripled during the last three months of the year compared with a year ago, and they more than doubled in California.

Both states still have a sizable over-supply of inventory, according to Duncan, due to over-building during the speculative boom that lasted through mid-2006. That will continue to depress home prices and add to mortgage delinquencies in those states.

“We expect to see home price declines to last there through the end of 2008,” he said, “after the rest of the country is in recovery.”

As prices plummet — already some California and Florida areas have seen price drops of 25% or more, according to Duncan — defaults will soar.

And falling prices and growing foreclosures create a vicious cycle; the more prices fall the less likely it is that borrowers can use home equity to refinance into more affordable loans, which leads to more defaults. And as foreclosures rise housing inventory increases, further depressing prices.

At the same time, these trends have lead to a contraction the construction industry, hurting overall U.S. economic activity and increasing the chances that the economy will fall into recession.

CNN Money