In late-November, as mortgage rates fell into the fives, homeowners helped to start a mini-Refi Boom. This week, however, self-doubt crept in.
Rest easy, friends. You're not missing out.
See, it's well-known that 0-point mortgage rates touched 4.500 percent Wednesday. But it's a little less well-known that those 4-and-a-half percent rates lasted less than 60 minutes. And when the rates were gone, they were gone.
The press isn't doing a follow-up on it, but that same 0-point loan is now priced at six percent, instead. Owie.
Nevertheless, the Plunge-and-Surge has Refi Boom Homeowners wondering whether it would be good idea to cancel their refinance-in-process and wait for rates to fall back into the 4s.
Speaking frankly, this is a terrible idea. And I have 9 really good reasons why.
1. You could unexpectedly lose your job. Nearly 2,000,000 people have been fired in the last 12 months and each week, more layoffs are announced. No job, no mortgage approval.
2. Mortgage lenders could reduce loan-to-value limitations. Suddenly, having a 20 equity stake may not be enough. You may need 25 percent or more. Homeowners with jumbo and investment mortgages are especially susceptible here.
3. Your home could be damaged in a winter storm. In Chicago, large snowfalls can ruin a roof. The same can happen in Seattle. Or Nevada. Then, as soon as a state Governor requests federal aid, mortgage lenders put start to put closings on hold pending home re-inspection. Damaged homes don't get their new mortgages.
4. Mortgage insurance rates could rise. Private mortgage insurers have lost billions this year and have twice raised premiums to even up the balance sheets. Default rates show few signs of abatement so it's likely that PMI rates will rise again in 2009.
5. You could fall ill or get injured. Even for insured Americans, medical issues are the second-most common trigger-event for home foreclosures next to income curtailment. If illness should keep you from working, or leads to long-term disability, your likelihood of getting a home loan is dramatically reduced. Nobody ever expects to get sick.
6. Banks could tighten lending guidelines. Well, we already know this is happening. With each passing week, it gets tougher to borrow mortgage money for one reason or another.
7. A nearby foreclosure could lower your home's value. Mortgage rates are highly sensitive to a home's value versus the amount of money borrowed against it. Foreclosures (and other "fire sales") bring down the Fair Market Value of every home nearby. This leads to higher loan-to-value ratios and, therefore, higher mortgage rates.
8. Your credit score could fall unexpectedly. Credit scores are meant predict the likelihood of mortgage default and the model appears to have failed these past few years. Anecdotally, there's evidence that the credit bureaus are correcting that. Carrying high balances or opening new tradelines appears to be more damaging to credit scores than it used to be. Lower credit scores means higher mortgage rates.
9. Mortgage rates could rise, not fall. Look, nobody knows what rates will do tomorrow. Anyone who says they do is lying. The only thing predictable about mortgage rates is that they're unpredictable. Take what you can, when you can. You can always refinance again later.
And, if you want to throw a 10th reason in there for good measure, use this: It's bad karma to cancel a loan. The Mortgage Gods never forget and -- someday -- it'll come back to bite you in the arse.
Monday, December 29, 2008
Monday, November 24, 2008
Friday, October 24, 2008
Starting December 13, 2008, Many Mortgage Approvals Will Require Larger Downpayments And More Home Equity
In a move that will stymie thousands of would-be home buyers and homeowners, Fannie Mae announced another round of mortgage guidelines changes last week.- Unlike past revisions in which Fannie Mae tightened debt ratio and credit scoring requirements, however, the newest underwriting updates zero in home equity and home buyer downpayments.
- This is consistent with the emerging underwriting philosophy that Collateral is King.
Paraphrasing Jeff Spicoli:
No home equity, no downpayment, no dice.
Effective December 13, 2008, Fannie Mae will enforce the following single-family residence restrictions:
- Primary residence, "cash out" refinances are limited to 85% loan-to-value
- Second home, cash out refinances are limited to 75% loan-to-value
- Investment properties cannot be refinanced without a 25% equity position
Each bullet point represents a 5 percent tightening over the previous guidelines.
Now, to be clear, Fannie Mae isn't the only source for mortgage money. The others are comprised by the FHA, the VA, and an innumerable amount of portfolio lenders. To date, these groups have yet to announce similar loan-to-value restrictions.
But, because Fannie Mae (along with Freddie Mac) guarantees almost half of the nation's home loans, it does swing a big stick. Historically, when Fannie Mae gets tight with its money, the other groups tend to follow.
Starting 60 days from now, qualifying for a conforming mortgage will require more home equity than at any time since 2003.
Now, there are a lot of people sitting around right now, waiting for mortgage rates to fall before buying or refinancing their home.
I'd offer a more prudent idea: Just get on with it already.
None of us can predict what where mortgage rates will go. Recession, inflation, whatever -- it's a big mystery. But, we do know with 100% certainty that guidelines will tighten effective December 13, 2008, and it will prohibit Americans from getting access to mortgages.
We know this because Fannie Mae published it on its Web site.
If you're buying a home or in need of a refinance, consider moving up your timeline. If rates fall after-the-fact, you can always try to refinance into something less expensive. But if guidelines shut you out, there's nothing you can do about in hindsight.
If you know you need mortgage money now, just take care of it. Great low rates don't mean a thing if you can't get qualified. And starting December 13, 2008, the qualifying hurdles are going to be raised.
Wednesday, October 15, 2008
If Your ARM Is Adjusting In November 2008 Or In 2009, You May Be A Victim Of Bad Timing
An adjustable-rate mortgage is a mortgage for which the interest rate remains fixed for some period of time, after which it can change based on some pre-determined rules.
A shared rule among adjustable rate mortgages is the formula by which they adjust.
Expressed as a formula, it reads:
(Adjusted Rate) = (Variable) + (Constant)
For conforming, full documentation mortgages made since 2003, the variable was often assigned to the 12-month LIBOR, and the constant was often fixed at 2.250.
So, to take the formula and apply it to the real world, the adjusted mortgage rate on a resetting ARM is equal to whatever the 12-month LIBOR is at the time of adjustment, plus 2.250 percent.
As the variable in the equation, of course, LIBOR is of paramount concern to homeowners.
LIBOR stands for London Interbank Offered Rate, but the acronym doesn't really matter to homeowners with ARMs. What does matter is that LIBOR is getting slaughtered.
LIBOR is the interest rate at which banks lend money to each other. And, as banks get munsoned worldwide, financial firms are raising LIBOR to offset the risk of their peers going belly-up. Since Lehman Brothers failed last month, LIBOR is up nearly 40 percent.
If you were looking for evidence that banks are nervous about their future, this should do nicely. Unfortunately, homeowners with ARMs are feeling the pain, too.
Last Month: A 5-year ARM adjusts to 5.203 percent
This Month: A 5-year ARM adjusts to 6.308 percent
Applied to a $300,000 mortgage, LIBOR's rocket-ride drains an additional $2,500 from a household budget over the course of a year.
Until order is restored in global banking system, LIBOR should continue to rise. This is bad news for homeowners with ARMs adjusting in November, December, or in the early part of 2009. Mortgage rates will adjust higher, causing pain for homeowners with 2003-vintage, 5-year ARMs at 4.000 percent.
There is some good news, however.
Mortgage rates on most news loans are lower than what an adjusted mortgage rate would otherwise dictate. If you have equity in your home and a good credit score, it may be smart to refinance into a brand new mortgage as opposed to letting your existing mortgage adjust.
Contact your mortgage lender to see which plan fits your best.
A shared rule among adjustable rate mortgages is the formula by which they adjust.
Expressed as a formula, it reads:
(Adjusted Rate) = (Variable) + (Constant)
For conforming, full documentation mortgages made since 2003, the variable was often assigned to the 12-month LIBOR, and the constant was often fixed at 2.250.
So, to take the formula and apply it to the real world, the adjusted mortgage rate on a resetting ARM is equal to whatever the 12-month LIBOR is at the time of adjustment, plus 2.250 percent.
As the variable in the equation, of course, LIBOR is of paramount concern to homeowners.
LIBOR stands for London Interbank Offered Rate, but the acronym doesn't really matter to homeowners with ARMs. What does matter is that LIBOR is getting slaughtered.
LIBOR is the interest rate at which banks lend money to each other. And, as banks get munsoned worldwide, financial firms are raising LIBOR to offset the risk of their peers going belly-up. Since Lehman Brothers failed last month, LIBOR is up nearly 40 percent.
If you were looking for evidence that banks are nervous about their future, this should do nicely. Unfortunately, homeowners with ARMs are feeling the pain, too.
Last Month: A 5-year ARM adjusts to 5.203 percent
This Month: A 5-year ARM adjusts to 6.308 percent
Applied to a $300,000 mortgage, LIBOR's rocket-ride drains an additional $2,500 from a household budget over the course of a year.
Until order is restored in global banking system, LIBOR should continue to rise. This is bad news for homeowners with ARMs adjusting in November, December, or in the early part of 2009. Mortgage rates will adjust higher, causing pain for homeowners with 2003-vintage, 5-year ARMs at 4.000 percent.
There is some good news, however.
Mortgage rates on most news loans are lower than what an adjusted mortgage rate would otherwise dictate. If you have equity in your home and a good credit score, it may be smart to refinance into a brand new mortgage as opposed to letting your existing mortgage adjust.
Contact your mortgage lender to see which plan fits your best.
Wednesday, October 1, 2008
For How Long Is Your Mortgage Rate Quote "Good"? Try 3 Hours and 51 Minutes.
Exhibit A: Wall Street investors are making life difficult for mortgage rate shoppers.It used to be that mortgage lenders issued pricing on a Monday morning and those rates were good for the entire week. Rate shopping was easy back then because everybody could take their time.
Today, not so much.
Because Wall Street has been somewhat manic lately, mortgage lenders have had to publish mortgage pricing -- on average -- 2.07 times per day since August. That's more than 10 times per week.
Mortgage rate shoppers have been caught in the crossfire because many are unaware of how quickly the ground is moving beneath them. The classic story is the homeowner that "wants to sleep on it", only to find that rates moved a quarter-percent overnight. Changes like that happen more often than you think.
See, all year, stock markets and bond markets have been fighting over the same investment dollars and it's making mortgage rates act like crazy.
Mostly, this is happening because Wall Street has not been real strong on moderation this year -- it's either everybody in, or everybody out.
This lemming-like behavior has led to the highest levels of volatility in market history.
So, for rate shoppers, just being aware of what's happening on Wall Street is half of the battle. When there's encouraging news about the economy, stock markets tend soar at the expense of bond markets, including the mortgage-backed bond markets. This is bad for mortgage rates and pushes them higher.
Then, in the other direction, when there's discouraging news about the economy, stock markets tend to tumble and bond markets tend to do quite well. This is good for mortgage rates and helps them ease lower.
Shopping for a mortgage is a complicated process. It didn't used to be, but it is now. In addition to mortgage guidelines that disqualify new groups of "fringe borrowers" weekly, mortgage rates are highly volatile and extremely unpredictable. And to add another layer of uncertainty, mortgage lenders are closing their doors and loan officers are leaving the business.
What good is a great rate is your lender won't be there to close it?
In a market like this, a piece of solid advice is to saddle up with a lender you trust instead of looking for the absolute lowest rate and fee combination. It's important to save money but one of the little secrets of the business is that good lenders are usually among the cheapest to work with anyway.
Monday, September 29, 2008
Mortgage Rates Are Falling On The Combined Impact Of The Bailout Bill And The Washington Mutual And Wachovia Seizures
With mortgage rates moving faster than the Spread HD offense this morning, let's take a few minutes to recap what's going on, and what's causing rates to fall.
First, the bailout.
Late Sunday, Congress drafted the Emergency Economic Stabilization Act of 2008 bill and it goes to vote sometime today. The key provision in the bill that's helping mortgage rates is on Page 110.
The passage reads, summarized:
The U.S. Treasury gets access to $250 billion immediately
The U.S. Treasury has to ask the President for its next $100 billion
The U.S. Treasury has to ask Congress for its next $350 billion
Because of how the bill is worded, the U.S. Treasury can't go spending taxpayer money willy-nilly, lessening the likelihood of monetary supply inflation nationwide. This is good because anytime inflation pressures ease, mortgage rates stand to benefit and this is one of the catalysts for today's rate drop.
Another reason why rates are falling is death of banking giants Washington Mutual and Wachovia.
It's no coincidence that these two institutions shut down within 3 days of each other. Both were heavy pushers of the now-famous Negatively Amortizing Mortgage, the time-bomb assets of which clogged the banks' respective balance sheets.
Consider: When Washington Mutual was rescued bought by JP Morgan Chase & Co. and the buyer devalued WAMU's portfolio by a massive $31 billion, it forced investors to reassess Wachovia's mortgage portfolio, too.
Within minutes, Charlotte-based Wachovia lost a quarter of its value and was a Dead Man Walking. Then, before even a weekend could pass, Wachovia had been packaged and sold to Citigroup with the help of the U.S. government, leading to another $42 billion in mortgage portfolio writedowns.
That's $73 billion in mortgage losses practically overnight.
Surprisingly, this is good news for mortgage borrowers because each time a bank acknowledges losses like this, the mortgage market as a whole gets one step closer to discovering what an individual home loan is really worth on Wall Street.
In fact, it's this exact conundrum that defines the mortgage market domino chain, dating back to July 2007. If markets could just accurately answer "What is a mortgage worth?", this little credit mix-up thing would be over.
WAMU and Wachovia hitting the showers brings us one step closer, and at least for today, brings mortgage rates down.
First, the bailout.
Late Sunday, Congress drafted the Emergency Economic Stabilization Act of 2008 bill and it goes to vote sometime today. The key provision in the bill that's helping mortgage rates is on Page 110.
The passage reads, summarized:
The U.S. Treasury gets access to $250 billion immediately
The U.S. Treasury has to ask the President for its next $100 billion
The U.S. Treasury has to ask Congress for its next $350 billion
Because of how the bill is worded, the U.S. Treasury can't go spending taxpayer money willy-nilly, lessening the likelihood of monetary supply inflation nationwide. This is good because anytime inflation pressures ease, mortgage rates stand to benefit and this is one of the catalysts for today's rate drop.
Another reason why rates are falling is death of banking giants Washington Mutual and Wachovia.
It's no coincidence that these two institutions shut down within 3 days of each other. Both were heavy pushers of the now-famous Negatively Amortizing Mortgage, the time-bomb assets of which clogged the banks' respective balance sheets.
Consider: When Washington Mutual was rescued bought by JP Morgan Chase & Co. and the buyer devalued WAMU's portfolio by a massive $31 billion, it forced investors to reassess Wachovia's mortgage portfolio, too.
Within minutes, Charlotte-based Wachovia lost a quarter of its value and was a Dead Man Walking. Then, before even a weekend could pass, Wachovia had been packaged and sold to Citigroup with the help of the U.S. government, leading to another $42 billion in mortgage portfolio writedowns.
That's $73 billion in mortgage losses practically overnight.
Surprisingly, this is good news for mortgage borrowers because each time a bank acknowledges losses like this, the mortgage market as a whole gets one step closer to discovering what an individual home loan is really worth on Wall Street.
In fact, it's this exact conundrum that defines the mortgage market domino chain, dating back to July 2007. If markets could just accurately answer "What is a mortgage worth?", this little credit mix-up thing would be over.
WAMU and Wachovia hitting the showers brings us one step closer, and at least for today, brings mortgage rates down.
Friday, September 26, 2008
WaMu becomes biggest bank to fail in US history
NEW YORK - As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.
The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse those of Continental Illinois National Bank, which failed in 1984 with $40 billion in assets; adjusted for 2008 dollars, its assets totaled $67.7 billion. IndyMac, seized in July, had $32 billion in assets.
One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.
Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.
"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.
WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.
JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.
JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital. Its stock rose in midday trading Friday on the New York Stock Exchange, gaining $1.90, or 4.37 percent, to $45.36.
The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.
WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.
The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.
WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.
Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.
At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.
As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.
At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.
In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.
The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.
The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.
"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.
___
The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse those of Continental Illinois National Bank, which failed in 1984 with $40 billion in assets; adjusted for 2008 dollars, its assets totaled $67.7 billion. IndyMac, seized in July, had $32 billion in assets.
One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.
Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.
"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.
WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.
JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.
JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital. Its stock rose in midday trading Friday on the New York Stock Exchange, gaining $1.90, or 4.37 percent, to $45.36.
The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.
WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.
The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.
WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.
Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.
At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.
As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.
At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.
In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.
The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.
The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.
"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.
___
Run on Bank Helped Kill WaMu, But Your Money Is Safe
In the biggest bank failure in U.S. history, the Federal Deposit Insurance Co. seized Washington Mutual's assets Thursday. The FDIC then quickly sold most of WaMu (that's assets and liabilities) to JPMorgan.
Simply put, WaMu was victimized by a classic "run on the bank." Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined.
A longer explanation is WaMu was victimized by mismanagement and misguided bets on exotic (and toxic) instruments such as option adjustable-rate mortgages.
The deal has major ramifications for JPMorgan and the banking industry as a whole, as Henry and I discuss in a forthcoming segment.
For the vast majority of people who bank at WaMu, which had 2200 branches and $188.3 billion of deposits as of June 30, the important thing to remember is your deposits are insured up to $100,000, and the Federal government will go to every extreme to make sure it's available.
"There will be no interruption in services and bank customers should expect business as usual come Friday morning," FDIC Chairman Sheila Bair told reporters last night.
The sobering truth, however, is that repeated declarations about the sanctity of FDIC insurance from Bair, President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke and others failed to quell concerns among WaMu's customers. That suggests more "bank runs" could be in the offing unless the government moves quickly to restore confidence.
Simply put, WaMu was victimized by a classic "run on the bank." Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined.
A longer explanation is WaMu was victimized by mismanagement and misguided bets on exotic (and toxic) instruments such as option adjustable-rate mortgages.
The deal has major ramifications for JPMorgan and the banking industry as a whole, as Henry and I discuss in a forthcoming segment.
For the vast majority of people who bank at WaMu, which had 2200 branches and $188.3 billion of deposits as of June 30, the important thing to remember is your deposits are insured up to $100,000, and the Federal government will go to every extreme to make sure it's available.
"There will be no interruption in services and bank customers should expect business as usual come Friday morning," FDIC Chairman Sheila Bair told reporters last night.
The sobering truth, however, is that repeated declarations about the sanctity of FDIC insurance from Bair, President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke and others failed to quell concerns among WaMu's customers. That suggests more "bank runs" could be in the offing unless the government moves quickly to restore confidence.
New Home Sale | New Construction Sales Off Dramatically
New home sales in the U.S. tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve.
The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.
It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
Resale Home Sales - Home Sales Hitting New Lows.
The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.
The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.
The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.
It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
Resale Home Sales - Home Sales Hitting New Lows.
The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.
The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.
Wednesday, September 24, 2008
Real Estate Professionals Take Close Look At Short Sales
Oregon Real Estate Agency drafts guidelines to educate both buyers and sellers
Portland Business Journal - by Wendy Culverwell Business Journal staff writer
A cooling market for residential real estate means plenty of opportunities for bargain hunters, but if a home's price isn't enough to wipe out the current mortgage, liens or tax assessments, buyer beware.
Hard data about short sales -- where the price isn't high enough to cover the seller's mortgage -- is difficult to come by. It is such a recent phenomenon that local and national real estate organizations didn't bother to track it.
But anecdotally, the short-sale phenomenon is increasing both in Oregon and nationally.
Questions about short sales were nearly unheard of a year ago, said Dean Owens, deputy commissioner for the Oregon Real Estate Agency, which licenses and regulates the industry.
There have been so many questions that the agency drafted guidelines for agents representing both buyers and sellers and is working with the Oregon Association of Realtors to ensure the rights of buyers and sellers are protected.
In a short sale, a buyer and seller can agree to a price, but a third party must bless the deal before it closes. That's typically the bank that issued the existing mortgage and faces writing off the unpaid balance. Typically, Owens said, banks wait until the last minute to approve short sales.
"The lender wants to be in the best position. It's not going to be in any hurry to accept the first offer," he said.
The Regional Multiple Listing Service reports 14,695 new listings through March, an increase of 7.2 percent from the same period in 2007. In two years, the inventory of available homes has grown more than fourfold and is enough to satisfy demand for more than nine months.
As a result, it takes an average of 83 days to sell a home, 18 longer than a year ago. Though prices have generally held, the slow market gives buyers an edge. For sellers, it can be a challenge to get a price high enough to pay off mortgages, home equity loans, tax liens and past-due home owner association dues.
Ben Andrews, principal broker and owner of Willamette Realty Group, said he's seen short sales affect business first hand. Five weeks ago, he wrote a full-price offer on a short sale property. The bank still hadn't responded as of this week, he said.
Even when a bank does sign off, Andrews said last-minute complications make him reluctant to recommend buyers pursue short sales.
For example, a bank may wait until closing to attach old debts, such as past-due tax bills or association dues, to the new owner, adding thousands to the agreed-upon price.
And if a bank doesn't sign off, the buyer can be left with no deal despite entering an agreement in good faith and paying inspection and appraisal fees. To Andrews, the risk that a short sale will go bad outweighs the prospect of getting a great deal.
"There's so many more deals out there with a lot more security," said Andrews, who estimates that about two percent of homes currently on the market are short sales.
W. Lee Dunn, president of the Oregon Association of Realtors, said short sales are nothing new, but the way lenders are waiting to approve deals is.
"It's very frustrating for buyers," said Dunn, who is a vice president at Prudential Northwest. Unlike Andrews, he thinks short sales can be a smart strategy for buyers who can stomach waiting 30, 60 or even 90 days to find out if their offer is accepted.
"A short sale can be a good buy. But they have to have a lot of patience, and that's not something there's an abundance of," he said.
In Oregon, listing agents are required to disclose when a sale will require a lender's sign off.
The National Association of Realtors hasn't tracked short sales until recently, according to Walter Molony, who researches real estate issues for the Washington D.C.-based industry association.
The reason? Short sales weren't of consequence, he said.
Sensing that short sales are an emerging issue, the NAR asked members in March if their most recent client made a short sale. Nearly 18 percent of the 483 people who responded said yes.
Portland Business Journal - by Wendy Culverwell Business Journal staff writer
A cooling market for residential real estate means plenty of opportunities for bargain hunters, but if a home's price isn't enough to wipe out the current mortgage, liens or tax assessments, buyer beware.
Hard data about short sales -- where the price isn't high enough to cover the seller's mortgage -- is difficult to come by. It is such a recent phenomenon that local and national real estate organizations didn't bother to track it.
But anecdotally, the short-sale phenomenon is increasing both in Oregon and nationally.
Questions about short sales were nearly unheard of a year ago, said Dean Owens, deputy commissioner for the Oregon Real Estate Agency, which licenses and regulates the industry.
There have been so many questions that the agency drafted guidelines for agents representing both buyers and sellers and is working with the Oregon Association of Realtors to ensure the rights of buyers and sellers are protected.
In a short sale, a buyer and seller can agree to a price, but a third party must bless the deal before it closes. That's typically the bank that issued the existing mortgage and faces writing off the unpaid balance. Typically, Owens said, banks wait until the last minute to approve short sales.
"The lender wants to be in the best position. It's not going to be in any hurry to accept the first offer," he said.
The Regional Multiple Listing Service reports 14,695 new listings through March, an increase of 7.2 percent from the same period in 2007. In two years, the inventory of available homes has grown more than fourfold and is enough to satisfy demand for more than nine months.
As a result, it takes an average of 83 days to sell a home, 18 longer than a year ago. Though prices have generally held, the slow market gives buyers an edge. For sellers, it can be a challenge to get a price high enough to pay off mortgages, home equity loans, tax liens and past-due home owner association dues.
Ben Andrews, principal broker and owner of Willamette Realty Group, said he's seen short sales affect business first hand. Five weeks ago, he wrote a full-price offer on a short sale property. The bank still hadn't responded as of this week, he said.
Even when a bank does sign off, Andrews said last-minute complications make him reluctant to recommend buyers pursue short sales.
For example, a bank may wait until closing to attach old debts, such as past-due tax bills or association dues, to the new owner, adding thousands to the agreed-upon price.
And if a bank doesn't sign off, the buyer can be left with no deal despite entering an agreement in good faith and paying inspection and appraisal fees. To Andrews, the risk that a short sale will go bad outweighs the prospect of getting a great deal.
"There's so many more deals out there with a lot more security," said Andrews, who estimates that about two percent of homes currently on the market are short sales.
W. Lee Dunn, president of the Oregon Association of Realtors, said short sales are nothing new, but the way lenders are waiting to approve deals is.
"It's very frustrating for buyers," said Dunn, who is a vice president at Prudential Northwest. Unlike Andrews, he thinks short sales can be a smart strategy for buyers who can stomach waiting 30, 60 or even 90 days to find out if their offer is accepted.
"A short sale can be a good buy. But they have to have a lot of patience, and that's not something there's an abundance of," he said.
In Oregon, listing agents are required to disclose when a sale will require a lender's sign off.
The National Association of Realtors hasn't tracked short sales until recently, according to Walter Molony, who researches real estate issues for the Washington D.C.-based industry association.
The reason? Short sales weren't of consequence, he said.
Sensing that short sales are an emerging issue, the NAR asked members in March if their most recent client made a short sale. Nearly 18 percent of the 483 people who responded said yes.
Mortgage Rates Respond To A Rapidly-Devaluing U.S. Dollar
Monday, September 23, 2008 Wall Street made its verdict in the case of Government vs The Credit Markets, a knock-down, drag-out fight that may have ended last Friday.
Government wins, but not without inflation.
To an economist, inflation is the general increase in the price of everyday goods and services that occurs over time. It's an accurate description, but in the context of the government's actions of the last two weeks, we can get a better sense of what's impacting mortgage rates if we take that definition and reverse it.
Reversed, inflation is the devaluation of a currency, so more of said currency is required to buy the same quantity of everyday goods and services.
It's the latter interpretation that's driving Wall Street this week.
Investors assume that the government will have no choice but to print more money to service its debts, thereby diluting the dollar's value. Because there's more of them, after all, each dollar is worthless worth less.
This is sometimes called "monetary supply inflation" and concerns about it caused the U.S. dollar to fall 2.4 % versus the Euro yesterday -- the biggest one-day drop in history.
Dollar weakness then spilled over into the commodity market because all of the instruments are priced in U.S. dollars. Oil prices jumped $25 per barrel at one point before settling in a tad lower. This, too, was the biggest one-day movement in history.
And lastly, the mortgage market got hit. Because mortgage bonds are repaid in U.S. dollars, the value of those repayments dropped. This forced mortgage rates higher because the only way to entice investors to buy devalued mortgage-backed bonds is to offer them with a higher interest rate.
If you're wondering why conforming mortgage rates are up by 0.750% since last week, this is it -- it's because mortgage rates are responding to the expectations of a weaker dollar going forward. This is the reverse of what happened in August.
So far, non-conforming mortgages including jumbo and super jumbo loans are unaffected.
Government wins, but not without inflation.
To an economist, inflation is the general increase in the price of everyday goods and services that occurs over time. It's an accurate description, but in the context of the government's actions of the last two weeks, we can get a better sense of what's impacting mortgage rates if we take that definition and reverse it.
Reversed, inflation is the devaluation of a currency, so more of said currency is required to buy the same quantity of everyday goods and services.
It's the latter interpretation that's driving Wall Street this week.
Investors assume that the government will have no choice but to print more money to service its debts, thereby diluting the dollar's value. Because there's more of them, after all, each dollar is worthless worth less.
This is sometimes called "monetary supply inflation" and concerns about it caused the U.S. dollar to fall 2.4 % versus the Euro yesterday -- the biggest one-day drop in history.
Dollar weakness then spilled over into the commodity market because all of the instruments are priced in U.S. dollars. Oil prices jumped $25 per barrel at one point before settling in a tad lower. This, too, was the biggest one-day movement in history.
And lastly, the mortgage market got hit. Because mortgage bonds are repaid in U.S. dollars, the value of those repayments dropped. This forced mortgage rates higher because the only way to entice investors to buy devalued mortgage-backed bonds is to offer them with a higher interest rate.
If you're wondering why conforming mortgage rates are up by 0.750% since last week, this is it -- it's because mortgage rates are responding to the expectations of a weaker dollar going forward. This is the reverse of what happened in August.
So far, non-conforming mortgages including jumbo and super jumbo loans are unaffected.
Tuesday, September 16, 2008
Home Mortgage Tips
#1 - You decide how much you want to spend on a mortgage. Don't allow mortgage lenders to influence your decision on how much to borrow. Never let a lender talk you into more than you can afford. Only you know how much you are comfortable with spending each month on your mortgage. Find a mortgage company or bank that will not pressure you to take on a mortgage that would put too much financial pressure on you and your family and will take your personal budget into account.
#2 - Shop around for the best mortgage FOR YOU! Contact several reputable lenders and get quotes on rates and closing costs. Make the banks and mortgage companies compete for your business!
#3 - Avoid loans with prepayment penalties. Choosing a lender that will charge you a penalty if you pay off or refinance, could cost you thousands of dollars.
#2 - Shop around for the best mortgage FOR YOU! Contact several reputable lenders and get quotes on rates and closing costs. Make the banks and mortgage companies compete for your business!
#3 - Avoid loans with prepayment penalties. Choosing a lender that will charge you a penalty if you pay off or refinance, could cost you thousands of dollars.
Wednesday, September 10, 2008
Pending Home Sales Drop 3.2% - NAR Report On Housing
Pending home sales fell 3.2% in July after gaining in June, according to a real estate group’s report released Tuesday, in the latest in a series of gloomy housing reports.
The Pending Home Sales Index fell to 86.5, after gaining 5.8% in June, according to the National Association of Realtors (NAR). It now stands 6.7% below July 2007’s reading of 92.8.
The index is a forward-looking indicator of housing sales, based on contracts signed during the month.
“This is more evidence that the housing market is still in a malaise,” said Michael Larson, a real estate analyst with Weiss Research.
Tighter lending standards have made it hard for buyers to get loans, which is hurting sales.
“Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings,” said NAR chief economist Lawrence Yuan.
The Midwest was the best performing region in July, with sales contracts up 2.8%. The index fell in the Northeast by 7.5% and in the West by 10.6%, while the South region was unchanged.
The July result was disappointing, according to Richard DeKaser, chief economist for National City Corp. but not unexpected. The index has held in a range between 83 and 89.4 over the past few months, but saw a sharp jump in June to 89.4.
The good news, according to DeKaser, is that the index has plateaued, indicating that a bottom in existing home sales may have been reached. And that bottom may mean that prices could stabilize in some areas, although at lower levels than they once were.
Bargains in areas of the country hard hit by the bust are drawing house hunters back into a few local markets, said Larson.
“We have seen sales pick up in some areas where homes are being basically liquidated for just about any price the sellers can get,” he said.
That could provide a boost to sales volume in the coming months.
Sales have been flat despite the fact that home prices are way down. The most recent S&P/Case-Shriller report found that home prices fell 15.4% nationally during the 12 months ended June 30.
“Pricing remains attractive, but the ability of home buyers to obtain financing has been made more difficult,” said DeKaser. “Lending standards had gotten increasingly tight.”
The weekend takeover of Fannie and Freddie, the two mortgage giants that were created to promote mortgage lending, should help. Funding costs for Fannie and Freddie will be significantly reduced, according to DeKaser, and those savings will be passed on to consumers.
Already interest rates have fallen to 5.88% from 6.26% a week earlier, according to Bankrate.com.
“We want to see if the mortgage rate decline stands,” said Larson. “That would help to stabilize things.”
The Pending Home Sales Index fell to 86.5, after gaining 5.8% in June, according to the National Association of Realtors (NAR). It now stands 6.7% below July 2007’s reading of 92.8.
The index is a forward-looking indicator of housing sales, based on contracts signed during the month.
“This is more evidence that the housing market is still in a malaise,” said Michael Larson, a real estate analyst with Weiss Research.
Tighter lending standards have made it hard for buyers to get loans, which is hurting sales.
“Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings,” said NAR chief economist Lawrence Yuan.
The Midwest was the best performing region in July, with sales contracts up 2.8%. The index fell in the Northeast by 7.5% and in the West by 10.6%, while the South region was unchanged.
The July result was disappointing, according to Richard DeKaser, chief economist for National City Corp. but not unexpected. The index has held in a range between 83 and 89.4 over the past few months, but saw a sharp jump in June to 89.4.
The good news, according to DeKaser, is that the index has plateaued, indicating that a bottom in existing home sales may have been reached. And that bottom may mean that prices could stabilize in some areas, although at lower levels than they once were.
Bargains in areas of the country hard hit by the bust are drawing house hunters back into a few local markets, said Larson.
“We have seen sales pick up in some areas where homes are being basically liquidated for just about any price the sellers can get,” he said.
That could provide a boost to sales volume in the coming months.
Sales have been flat despite the fact that home prices are way down. The most recent S&P/Case-Shriller report found that home prices fell 15.4% nationally during the 12 months ended June 30.
“Pricing remains attractive, but the ability of home buyers to obtain financing has been made more difficult,” said DeKaser. “Lending standards had gotten increasingly tight.”
The weekend takeover of Fannie and Freddie, the two mortgage giants that were created to promote mortgage lending, should help. Funding costs for Fannie and Freddie will be significantly reduced, according to DeKaser, and those savings will be passed on to consumers.
Already interest rates have fallen to 5.88% from 6.26% a week earlier, according to Bankrate.com.
“We want to see if the mortgage rate decline stands,” said Larson. “That would help to stabilize things.”
Friday, September 5, 2008
What Must Happen Before Real Estate Crash Ends?
Three years ago, the housing bubble burst. That set the stage for a pullback in new-home construction and consumer spending as home sales and prices began to fall. Many believe that at best we are only half way through the ‘housing correction’.
In spite of what you may have read or heard about the “unprecedented” decline in home prices, normal housing prices are still beyond the horizon. We are expecting to see many of the larger markets to bottom in 2010. There after we expect to experience a 3-5 year plateau before appreciation returns.
Here is why…
According to the latest data from the Census Bureau and the National Association of Realtors, median home prices in July equaled 3.6 times median household incomes. This may be down from the peak of four times incomes set back in 2005, but it is still far above the 2.9 times of the 1980s — when housing was more affordable and sales and construction grew at a steady pace.In the halcyon days of the early 1970s, when home sales and construction were at their peaks both in absolute terms and relative to the size of the population, the ratio of home prices to incomes was less than 2.5.
To get back to the average of the 1980s, home prices would have to fall another 20%, on average. Add another 10 percentage points decline for housing to be as affordable as it was in the 1970s.Of course, these ratios could be reached through a rise in household incomes. But this would take much longer, since incomes are growing less than 2% per year these days, owing to the drop in employment and the inability of workers to secure raises.
Simply put, the first step on the road to recovery is lower housing prices. We will know when they are low enough to be affordable when sales pick up and the inventory of unsold homes begins to decline.
In spite of what you may have read or heard about the “unprecedented” decline in home prices, normal housing prices are still beyond the horizon. We are expecting to see many of the larger markets to bottom in 2010. There after we expect to experience a 3-5 year plateau before appreciation returns.
Here is why…
According to the latest data from the Census Bureau and the National Association of Realtors, median home prices in July equaled 3.6 times median household incomes. This may be down from the peak of four times incomes set back in 2005, but it is still far above the 2.9 times of the 1980s — when housing was more affordable and sales and construction grew at a steady pace.In the halcyon days of the early 1970s, when home sales and construction were at their peaks both in absolute terms and relative to the size of the population, the ratio of home prices to incomes was less than 2.5.
To get back to the average of the 1980s, home prices would have to fall another 20%, on average. Add another 10 percentage points decline for housing to be as affordable as it was in the 1970s.Of course, these ratios could be reached through a rise in household incomes. But this would take much longer, since incomes are growing less than 2% per year these days, owing to the drop in employment and the inability of workers to secure raises.
Simply put, the first step on the road to recovery is lower housing prices. We will know when they are low enough to be affordable when sales pick up and the inventory of unsold homes begins to decline.
Tuesday, August 26, 2008
Housing Alert: Are We FINALLY Seeing A Bottom?
The state of the housing market remains dismal, based on data released Aug. 26. Still, it appears the pace of declines for U.S. home prices is moderating, and the glut of unsold homes is easing—offering some reason for cheer.
New U.S. home sales jumped 2.4% in July to a 0.515-million-unit annual pace, but after a downwardly revised 0.503 million rate in June (from 0.530 million) and below the 0.525 million expected. May’s pace was also revised down to 0.514 million from 0.533 million previously. The months’ supply of homes for sale declined to a still-high 10.1 from 10.7 in June. The median sales price rose to $230,700 from $230,000, though it’s still down 6.3% over last year.
“The weaker than expected July sales rate, together with downward revisions in May and June, will likely add to market fears that the housing correction has further to go,” wrote S&P senior economist Beth Ann Bovino.
New Construction Builders Homes Inventories Drop….
Miller Tabak strategist Tony Crescenzi wrote in an Aug. 26 note that “inventories are now at their lowest level since February 2005, 154,000 below the June 2006 peak of 570,000, and not all that far from normal levels of about 350,000. The supply of new homes is controlled by home builders and is not subject to the direct influence of foreclosures, which explains why the supply of new homes is falling and the supply of older homes is continuing to rise.”
Decelerating Declines
The U.S. S&P/Case-Shiller 20-city composite home price index fell 0.5% in June to 167.69, a new record low. However, 11 of the 20 cities posted month-over-month declines, while 13 posted month-over-month declines in May. Phoenix (–2.6%) led the pace of declines, followed by San Francisco (–1.8%), Miami (–1.7%), and Las Vegas (–1.6%). The June index was down 15.9% on a year-over-year basis, after a 15.8% decline in May. All 20 cities saw year-over-year declines, with 10 cities seeing double-digit percentage declines. The biggest year-over-year declines were in Phoenix, Miami, and Las Vegas, down 27.9%, 28.3%, and 28.6%, respectively.
“[T]he monthly pace of decline is slowing rather dramatically from the hefty 2.1% to 2.6% monthly declines over the November-March period, which may mark the maximum rate of collapse for the U.S. real estate market in this cycle,” wrote Action Economics analysts in an Aug. 26 Web site posting.
“The bubble markets, such as California, Florida, and Arizona, which are struggling with excess inventory and rising foreclosures, continue to lead the decline in national home prices. On a positive note, home prices in some non-bubble markets are declining at a slower pace or even increasing,” wrote Lehman Brothers (LEH) economist Michelle Meyer in an Aug. 26 note.
The U.S. Office of Federal Housing Enterprise Oversight home price index was flat in June, after declining 0.4% in May (revised from –0.3%). On a quarterly basis, prices fell 1.36% in the second quarter, less steep than the –1.68% in the first quarter. The home price index was down 4.80% in the second quarter a year ago, below the –3.03% year-over-year pace in the first quarter.
“The deceleration in the pace of declines over the past three months, together with the better than expected Case-Shiller reading, may give markets hope that the housing market is nearing the bottom,” wrote S&P’s Bovino in a separate note.
New U.S. home sales jumped 2.4% in July to a 0.515-million-unit annual pace, but after a downwardly revised 0.503 million rate in June (from 0.530 million) and below the 0.525 million expected. May’s pace was also revised down to 0.514 million from 0.533 million previously. The months’ supply of homes for sale declined to a still-high 10.1 from 10.7 in June. The median sales price rose to $230,700 from $230,000, though it’s still down 6.3% over last year.
“The weaker than expected July sales rate, together with downward revisions in May and June, will likely add to market fears that the housing correction has further to go,” wrote S&P senior economist Beth Ann Bovino.
New Construction Builders Homes Inventories Drop….
Miller Tabak strategist Tony Crescenzi wrote in an Aug. 26 note that “inventories are now at their lowest level since February 2005, 154,000 below the June 2006 peak of 570,000, and not all that far from normal levels of about 350,000. The supply of new homes is controlled by home builders and is not subject to the direct influence of foreclosures, which explains why the supply of new homes is falling and the supply of older homes is continuing to rise.”
Decelerating Declines
The U.S. S&P/Case-Shiller 20-city composite home price index fell 0.5% in June to 167.69, a new record low. However, 11 of the 20 cities posted month-over-month declines, while 13 posted month-over-month declines in May. Phoenix (–2.6%) led the pace of declines, followed by San Francisco (–1.8%), Miami (–1.7%), and Las Vegas (–1.6%). The June index was down 15.9% on a year-over-year basis, after a 15.8% decline in May. All 20 cities saw year-over-year declines, with 10 cities seeing double-digit percentage declines. The biggest year-over-year declines were in Phoenix, Miami, and Las Vegas, down 27.9%, 28.3%, and 28.6%, respectively.
“[T]he monthly pace of decline is slowing rather dramatically from the hefty 2.1% to 2.6% monthly declines over the November-March period, which may mark the maximum rate of collapse for the U.S. real estate market in this cycle,” wrote Action Economics analysts in an Aug. 26 Web site posting.
“The bubble markets, such as California, Florida, and Arizona, which are struggling with excess inventory and rising foreclosures, continue to lead the decline in national home prices. On a positive note, home prices in some non-bubble markets are declining at a slower pace or even increasing,” wrote Lehman Brothers (LEH) economist Michelle Meyer in an Aug. 26 note.
The U.S. Office of Federal Housing Enterprise Oversight home price index was flat in June, after declining 0.4% in May (revised from –0.3%). On a quarterly basis, prices fell 1.36% in the second quarter, less steep than the –1.68% in the first quarter. The home price index was down 4.80% in the second quarter a year ago, below the –3.03% year-over-year pace in the first quarter.
“The deceleration in the pace of declines over the past three months, together with the better than expected Case-Shiller reading, may give markets hope that the housing market is nearing the bottom,” wrote S&P’s Bovino in a separate note.
What Does This REALLY Mean? …July Home Sales Data…
Sales of previously owned homes in the U.S. rose 3.1 percent in July. Nonetheless, the increase masked continued weakness in the housing market.
Resales increased more than forecast to an annual rate of 5 million, with at least one-third of the purchases coming from foreclosed properties, the National Association of Realtors said today in Washington. At the same time, the median price dropped 7.1 percent from July 2007, and the number of homes for sale jumped to a record.
Sales averaged a pace of 4.95 million the past three months, the same rate as the previous period, indicating that purchases may have touched a bottom. At the same time, the glut of houses for sale means property values will probably keep dropping, putting pressure on household wealth and consumer spending.
“Existing home sales have likely stabilized,” Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said in an interview with Bloomberg Television. “In terms of demand, we’re probably close to the bottom. In terms of prices, we don’t think we’ll see a bottom until the end of next year.”
Treasuries, which had rallied earlier in the day, remained higher after the report. Benchmark 10-year notes yielded 3.78 percent at 11:14 a.m. in New York, from 3.87 percent at last week’s close. The Standard & Poor’s Supercomposite Homebuilding Index of stocks was down 1.1 percent at 285.89.
Economists’ Forecasts
Resales were forecast to rise to a 4.91 million annual rate, according to the median estimate of 75 economists. Projections ranged from 4.69 million to 5 million. July’s sales rate was the highest since February.
Sales were down 13 percent compared with a year earlier. Resales totaled 5.65 million in 2007.
The increase in sales wasn’t enough to keep up with the surge in properties coming into the market as foreclosures mount. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month’s supply at the current sales pace, matching the highest ever. The group has said a five to six months’ supply is consistent with a stable market.
The jump in inventory was driven by an increase in the supply of condos as projects started one or two years ago came on the market, the Realtors group said.
The median price of an existing home fell to $212,400 from $228,600 in July 2007.
“We are in a very tight credit-availability condition,” Lawrence Yun, NAR’s chief economist, said in a press conference. “Inventories continue to remain very high.” One-third to 40 percent of total sales last month reflected distressed properties, which include foreclosures, he said.
Market Composition
Resales account for about 85 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report tomorrow from the Commerce Department may show new-home sales fell in July for the third consecutive month, according to the Bloomberg survey median.
Today’s report showed resales of single-family homes increased 3.1 percent to a 4.39 million annual pace. Sales of condos and co-ops climbed 3.4 percent to a 610,000 rate, the most since November.
Purchases increased in three of four regions, led by a 9.7 percent jump in the West. Sales fell 0.5 percent in the South.
Tight credit conditions and ongoing declines in residential construction will weigh on economic growth in coming months, Federal Reserve policy makers said at their Aug. 5 meeting. The Fed’s quarterly survey of bank loan officers showed 75 percent had made it tougher for prime borrowers to get a mortgage, more than in the April survey.
`Worry a Lot’
“I worry a lot about what’s happening in housing,” Martin Feldstein, a member of the committee that charts American business cycles. “The number of negative-equity homes is exploding. Housing prices will continue to go down, driven by the large oversupply of houses and the increasing number of foreclosures.”
The number of unsold previously owned homes has piled up as some owners resist lowering prices and banks repossess more properties.
Resales increased more than forecast to an annual rate of 5 million, with at least one-third of the purchases coming from foreclosed properties, the National Association of Realtors said today in Washington. At the same time, the median price dropped 7.1 percent from July 2007, and the number of homes for sale jumped to a record.
Sales averaged a pace of 4.95 million the past three months, the same rate as the previous period, indicating that purchases may have touched a bottom. At the same time, the glut of houses for sale means property values will probably keep dropping, putting pressure on household wealth and consumer spending.
“Existing home sales have likely stabilized,” Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said in an interview with Bloomberg Television. “In terms of demand, we’re probably close to the bottom. In terms of prices, we don’t think we’ll see a bottom until the end of next year.”
Treasuries, which had rallied earlier in the day, remained higher after the report. Benchmark 10-year notes yielded 3.78 percent at 11:14 a.m. in New York, from 3.87 percent at last week’s close. The Standard & Poor’s Supercomposite Homebuilding Index of stocks was down 1.1 percent at 285.89.
Economists’ Forecasts
Resales were forecast to rise to a 4.91 million annual rate, according to the median estimate of 75 economists. Projections ranged from 4.69 million to 5 million. July’s sales rate was the highest since February.
Sales were down 13 percent compared with a year earlier. Resales totaled 5.65 million in 2007.
The increase in sales wasn’t enough to keep up with the surge in properties coming into the market as foreclosures mount. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month’s supply at the current sales pace, matching the highest ever. The group has said a five to six months’ supply is consistent with a stable market.
The jump in inventory was driven by an increase in the supply of condos as projects started one or two years ago came on the market, the Realtors group said.
The median price of an existing home fell to $212,400 from $228,600 in July 2007.
“We are in a very tight credit-availability condition,” Lawrence Yun, NAR’s chief economist, said in a press conference. “Inventories continue to remain very high.” One-third to 40 percent of total sales last month reflected distressed properties, which include foreclosures, he said.
Market Composition
Resales account for about 85 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report tomorrow from the Commerce Department may show new-home sales fell in July for the third consecutive month, according to the Bloomberg survey median.
Today’s report showed resales of single-family homes increased 3.1 percent to a 4.39 million annual pace. Sales of condos and co-ops climbed 3.4 percent to a 610,000 rate, the most since November.
Purchases increased in three of four regions, led by a 9.7 percent jump in the West. Sales fell 0.5 percent in the South.
Tight credit conditions and ongoing declines in residential construction will weigh on economic growth in coming months, Federal Reserve policy makers said at their Aug. 5 meeting. The Fed’s quarterly survey of bank loan officers showed 75 percent had made it tougher for prime borrowers to get a mortgage, more than in the April survey.
`Worry a Lot’
“I worry a lot about what’s happening in housing,” Martin Feldstein, a member of the committee that charts American business cycles. “The number of negative-equity homes is exploding. Housing prices will continue to go down, driven by the large oversupply of houses and the increasing number of foreclosures.”
The number of unsold previously owned homes has piled up as some owners resist lowering prices and banks repossess more properties.
Friday, August 22, 2008
Fannie And Freddie Fallout…
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
“New home buyers are going to have to get credit at reasonable terms for the decline to stop,” said Christopher Mayer, a real-estate professor at Columbia University’s business school in New York. “The price issue alone is having a very, very big effect.”
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
Record High
Applications for mortgages fell 34 percent to the lowest level since 2000 in the week ended Aug. 15 from a year earlier, partly because of the increase in loan rates, according to the Washington-based Mortgage Bankers Association.
Paulson received authority from Congress last month to pump unlimited amounts of capital into Fannie and Freddie in an emergency after the debt yields rose and their shares tumbled 90 percent from a year earlier. Freddie paid its highest yields over Treasuries on record in a debt sale Aug. 19.
Fannie, the largest mortgage-finance provider, was created as part of Franklin D. Roosevelt’s New Deal in the 1930s and became a publicly owned company in 1968. Freddie was started in 1970, when the economy was strained by the Vietnam War.
The economy’s growth is forecast to slow to 1.5 percent this year, the slowest since 0.8 percent growth in 2001.
Outside People
Home foreclosure filings rose 55 percent in July and banks repossessed almost three times as many homes as a year earlier as falling prices made it harder to sell or refinance, according to RealtyTrac Inc., an Irvine, California-based seller of foreclosure data. U.S. home prices fell 15.8 percent in May, the most since at least 2001, according to the S&P/Case-Shiller home- price index.
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
“New home buyers are going to have to get credit at reasonable terms for the decline to stop,” said Christopher Mayer, a real-estate professor at Columbia University’s business school in New York. “The price issue alone is having a very, very big effect.”
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
Record High
Applications for mortgages fell 34 percent to the lowest level since 2000 in the week ended Aug. 15 from a year earlier, partly because of the increase in loan rates, according to the Washington-based Mortgage Bankers Association.
Paulson received authority from Congress last month to pump unlimited amounts of capital into Fannie and Freddie in an emergency after the debt yields rose and their shares tumbled 90 percent from a year earlier. Freddie paid its highest yields over Treasuries on record in a debt sale Aug. 19.
Fannie, the largest mortgage-finance provider, was created as part of Franklin D. Roosevelt’s New Deal in the 1930s and became a publicly owned company in 1968. Freddie was started in 1970, when the economy was strained by the Vietnam War.
The economy’s growth is forecast to slow to 1.5 percent this year, the slowest since 0.8 percent growth in 2001.
Outside People
Home foreclosure filings rose 55 percent in July and banks repossessed almost three times as many homes as a year earlier as falling prices made it harder to sell or refinance, according to RealtyTrac Inc., an Irvine, California-based seller of foreclosure data. U.S. home prices fell 15.8 percent in May, the most since at least 2001, according to the S&P/Case-Shiller home- price index.
Wednesday, August 20, 2008
Breaking News on Housing
U.S. builders broke ground on the fewest new homes in 17 years and producer prices climbed the most since 1981, providing no sign of an economic recovery or easing inflation.
Housing starts fell 11 percent in July to an annual rate of 965,000, the Commerce Department said today in Washington. The Labor Department reported the producer price index jumped 9.8 percent from a year before.
“There’s no doubt we’re in a period of stagflation now,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York who formerly worked at both the Federal Reserve Bank of New York and the Fed Board in Washington.
Compared with July 2007, work began on 30 percent fewer homes. Building permits, a sign of future construction, also fell in July, the Commerce Department reported. They were down 18 percent to a 937,000 annual pace.
Starts were projected to fall to a 960,000 annual pace, according to the median forecast of 77 economists polled by Bloomberg News. The median estimate for permits was 970,000.
`Pull Back’
“A recovery will not happen this year,” said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. “Not only are mortgage rates creeping up, but financing is becoming more difficult for a lot of people. Builders will continue to pull back.”
Construction of single-family homes fell 2.9 percent to a 641,000 rate, the fewest since January 1991, today’s report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 24 percent from the prior month to an annual rate of 324,000.
“The news ahead for housing remains bad,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in a Bloomberg Radio interview. “There’s a corrective process we have to get through here.”
Northeast Sales
The decrease in starts was led by a 30 percent decline in the Northeast. Construction fell 8.2 percent in both the South and West. Starts in the West slumped to a 26-year low. The Midwest showed a 10 percent gain.
The magnitude of the July drop in the Northeast reflected, in part, a payback from an unexpected surge the prior month. Starts and permits jumped in June as builders hurried to break ground ahead of new regulations in New York City’s building code that took effect July 1.
Underneath the gyrations, demand is weakening. Sales of existing homes fell to a 10-year low in the second quarter, according to the National Association of Realtors. A third of all sales were foreclosures or “short sales,” in which lenders take a loss on a property.
Financing is also becoming tougher, a quarterly survey of banks by the Federal Reserve showed. Compared with the April survey, more of the loan officers polled reported they tightened standards on prime mortgage loans and on non-traditional loans.
The five largest U.S. homebuilders reported a combined $1.08 billion in losses in their most recent quarters.
Builders are pessimistic as losses mount. The National Association of Home Builders/Wells Fargo’s sentiment index yesterday showed optimism held at a record low in August for a second month.
Housing starts fell 11 percent in July to an annual rate of 965,000, the Commerce Department said today in Washington. The Labor Department reported the producer price index jumped 9.8 percent from a year before.
“There’s no doubt we’re in a period of stagflation now,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York who formerly worked at both the Federal Reserve Bank of New York and the Fed Board in Washington.
Compared with July 2007, work began on 30 percent fewer homes. Building permits, a sign of future construction, also fell in July, the Commerce Department reported. They were down 18 percent to a 937,000 annual pace.
Starts were projected to fall to a 960,000 annual pace, according to the median forecast of 77 economists polled by Bloomberg News. The median estimate for permits was 970,000.
`Pull Back’
“A recovery will not happen this year,” said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. “Not only are mortgage rates creeping up, but financing is becoming more difficult for a lot of people. Builders will continue to pull back.”
Construction of single-family homes fell 2.9 percent to a 641,000 rate, the fewest since January 1991, today’s report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 24 percent from the prior month to an annual rate of 324,000.
“The news ahead for housing remains bad,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in a Bloomberg Radio interview. “There’s a corrective process we have to get through here.”
Northeast Sales
The decrease in starts was led by a 30 percent decline in the Northeast. Construction fell 8.2 percent in both the South and West. Starts in the West slumped to a 26-year low. The Midwest showed a 10 percent gain.
The magnitude of the July drop in the Northeast reflected, in part, a payback from an unexpected surge the prior month. Starts and permits jumped in June as builders hurried to break ground ahead of new regulations in New York City’s building code that took effect July 1.
Underneath the gyrations, demand is weakening. Sales of existing homes fell to a 10-year low in the second quarter, according to the National Association of Realtors. A third of all sales were foreclosures or “short sales,” in which lenders take a loss on a property.
Financing is also becoming tougher, a quarterly survey of banks by the Federal Reserve showed. Compared with the April survey, more of the loan officers polled reported they tightened standards on prime mortgage loans and on non-traditional loans.
The five largest U.S. homebuilders reported a combined $1.08 billion in losses in their most recent quarters.
Builders are pessimistic as losses mount. The National Association of Home Builders/Wells Fargo’s sentiment index yesterday showed optimism held at a record low in August for a second month.
Friday, August 15, 2008
Sour Housing News...Worst in 10 years!
Existing-home sales resumed falling in June and the median price also dropped as inventories crept higher. Home resales slid to a 4.86 million annual rate, a 2.6% decrease from May's unrevised 4.99 million annual pace.
The median home price was $215,100 in June, down 6.1% from $229,000 in June 2007. The median price in May this year was $207,900.
High inventories have exerted downward pressure on prices. Falling prices have kept would-be buyers from signing off on property as they wait for a better deal.
Lenders have tightened their standards on home loans, contributing to the credit crunch that is restraining the U.S. economy. Those tighter standards have priced marginal buyers out of the market and made purchasing more difficult and costly for prime borrowers.
Aside from prices sliding under the weight of bloated inventories and tighter loan standards, a weakening job market isn't helping the housing market. The key non-farm payrolls number in the government's monthly report on employment has gone down six times in a row; businesses worried about the bottom line clipped 438,000 payroll jobs in the first half of 2008, the latest Labor Department data show.
The June resales level of 4.86 million reported by NAR was below Wall Street expectations of a 4.95 million sales rate for previously owned homes. It was the lowest pace recorded since the first quarter of 1998, the NAR said.
The average 30-year mortgage rate was 6.32% in June, up from 6.04% in May, according to Freddie Mac.
Inventories of homes rose 0.2% at the end of June to 4.49 million available for sale, which represented a 11.1 month supply at the current sales pace. There was a 10.8 monthly supply at the end of May.
Sales fell 6.6% in the Northeast, 3.4% in the Midwest, and 3.1% in the South, Sales rose 1.0% in the West.
The median home price was $215,100 in June, down 6.1% from $229,000 in June 2007. The median price in May this year was $207,900.
High inventories have exerted downward pressure on prices. Falling prices have kept would-be buyers from signing off on property as they wait for a better deal.
Lenders have tightened their standards on home loans, contributing to the credit crunch that is restraining the U.S. economy. Those tighter standards have priced marginal buyers out of the market and made purchasing more difficult and costly for prime borrowers.
Aside from prices sliding under the weight of bloated inventories and tighter loan standards, a weakening job market isn't helping the housing market. The key non-farm payrolls number in the government's monthly report on employment has gone down six times in a row; businesses worried about the bottom line clipped 438,000 payroll jobs in the first half of 2008, the latest Labor Department data show.
The June resales level of 4.86 million reported by NAR was below Wall Street expectations of a 4.95 million sales rate for previously owned homes. It was the lowest pace recorded since the first quarter of 1998, the NAR said.
The average 30-year mortgage rate was 6.32% in June, up from 6.04% in May, according to Freddie Mac.
Inventories of homes rose 0.2% at the end of June to 4.49 million available for sale, which represented a 11.1 month supply at the current sales pace. There was a 10.8 monthly supply at the end of May.
Sales fell 6.6% in the Northeast, 3.4% in the Midwest, and 3.1% in the South, Sales rose 1.0% in the West.
Wednesday, August 13, 2008
Massive Blow To US Home Owners
Nationally, if you’ve purchased your home in the past five years, there’s a one-in-three chance that you’re “underwater” on your mortgage.
That’s the study of U.S. home values conducted by Seattle’s Zillow.com, which indicated that the median U.S. home value has plummeted to a level not seen since the fourth quarter of 2004.
In the U.S., 29.1 percent of homeowners who purchased a home since 2003 owe more money on their home than what it’s worth, which is called being “underwater” on the mortgage. Some U.S. real estate markets are faring much worse. Nearly every buyer (95 percent) in the Stockton, Calif., market, for example, who bought a home in 2006 owes more money on their mortgage than what the home is worth. Zillow said home values in Stockton fell 38.2 percent this quarter from a year earlier.
In the Seattle-Tacoma-Bellevue market, it’s not as bleak. According to Zillow research, home values have appreciated 8 percent since 2003, although in the past year, home values fell 7.3 percent to a current home value of $355,945. According to Zillow, of the homeowners who bought in 2003, only 0.3 percent have negative home equity. But those who bought in 2007 aren’t faring so well, Zillow reports, with 27.9 percent of those buyers with negative home equity.
That’s the study of U.S. home values conducted by Seattle’s Zillow.com, which indicated that the median U.S. home value has plummeted to a level not seen since the fourth quarter of 2004.
In the U.S., 29.1 percent of homeowners who purchased a home since 2003 owe more money on their home than what it’s worth, which is called being “underwater” on the mortgage. Some U.S. real estate markets are faring much worse. Nearly every buyer (95 percent) in the Stockton, Calif., market, for example, who bought a home in 2006 owes more money on their mortgage than what the home is worth. Zillow said home values in Stockton fell 38.2 percent this quarter from a year earlier.
In the Seattle-Tacoma-Bellevue market, it’s not as bleak. According to Zillow research, home values have appreciated 8 percent since 2003, although in the past year, home values fell 7.3 percent to a current home value of $355,945. According to Zillow, of the homeowners who bought in 2003, only 0.3 percent have negative home equity. But those who bought in 2007 aren’t faring so well, Zillow reports, with 27.9 percent of those buyers with negative home equity.
Monday, August 11, 2008
Are We There Yet? (Housing Crash Half Time Called)
U.S. house prices will fall by as much as 20 percent nationally and the current mortgage finance crisis is about half-way through, the chief of major mortgage financier Freddie Mac said Wednesday.
“Previously, we said house prices would fall at least 15 percent nationally, peak to trough. Today’s challenging economic environment suggests that the housing market is far from stabilizing,” Richard Syron, the chairman and CEO of Freddie Mac, told investors in a conference call held to discuss the company’s earnings.
“As a result, we now believe that national home prices will fall 18 to 20 percent peak to trough. … The long and short of it is that we now think that we are half-way through the overall peak-to-trough decline.”
“Previously, we said house prices would fall at least 15 percent nationally, peak to trough. Today’s challenging economic environment suggests that the housing market is far from stabilizing,” Richard Syron, the chairman and CEO of Freddie Mac, told investors in a conference call held to discuss the company’s earnings.
“As a result, we now believe that national home prices will fall 18 to 20 percent peak to trough. … The long and short of it is that we now think that we are half-way through the overall peak-to-trough decline.”
Friday, August 8, 2008
Foreclosure Scammers Alive and Well...Do you know what they look like?
You've seen the headlines that say....
We can save you credit!
We'll pay cash for your home!
Let us buy your house and rent it back to you!
We help people just like you!
We'll save your home from the banks by selling it or even paying you for it!
When they really should say....
We buy people's houses! Sell your house below market value and we'll make a killing!!!
These advertisers are absolute scavengers and real bottom-feeders. Their goal is to profit from the calamity of others. If they were truly compassionate, they would provide their services free of charge or at least something comparable to that. While capitalism and free enterprise are the cram of our economical crop, to prey on others' hardships in inexcusable. Let's take a gander at some of the examples listed above.
1) We can save your credit (for a small fee, of course)
This proclamation is heavily loaded. If your credit is in need of saving. It's probably pretty far gone. What they're actually promising to do is to take your money and your home. You pay them to buy your home and they assure you that you're sparing yourselves from the horrors of foreclosure and the hits to your credit. Possibly, yes. If you're not already tangled up in the process of foreclosure, you will be avoiding it; nevertheless, that's not necessarily the point here. They will only buy your home if you have equity because with equity, they cash out and you're left with nothing. At the end of the day, you paid them to take your home away from you.
2) We'll pay cash for your home (if you sign that sucker over to us)
This has the same outcome as number 1, except this time, they pay you. Keep in mind here that you're still losing out on your equity and they're not. For a few thousand dollars in cash, I've seen an elderly woman sell her house because she was frightened into thinking that she would end up a homeless old lady. With the equity she had in here house, she could have purchased a smaller, older one for cash.
3) Let us buy your home and rent it back to you
Wow-sounds great, doesn't it? They buy your house for pennies on the dollar and all you have to do is sign a lease to make monthly payments on it. The real story here is that these guys purchase your home and finance it. Your monthly payments are then made on the financing of your own home. Typically, these guys will flip the house knowing they have a guaranteed renter-you, the former homeowner.
4) We help people just like you
What they're really saying is that "we con people just like you everyday". They know what they're doing. The best advice in these situations is don't trust anyone who contacts you first. Build trust with those who approach. Be wary of e-mails, phone calls, mail and door-to-door solicitors. Remember, why would they seek you out? They are vultures and you're the prey.
5) We'll save your home from the banks by selling it or even paying for it
This one is a real gem. As real estate agents, these scavengers are real pros. At their behest, you sign a contract which lists your home for a period of time. The agent then turns around and buys your home at a discounted price. The key here is that they never really attempt to sell the house they use the intentional lack of interest in your property as proof that it can't go for the asking price. The only option is to sell your house to your agent at a discounted price. With a buyer already lined up, they flip the house. Remember to always use a local and trusted real estate agent, preferably someone whom you're referred to.
Bottom Line
Look after yourselves and protect what is best for you, not someone interested in your home!
Facing Foreclosure? Before you do anything give me a call. I don't charge any fees up front. I am a licensed Real Estate Broker in the State of Oregon and I am here to help you if I can.....
We can save you credit!
We'll pay cash for your home!
Let us buy your house and rent it back to you!
We help people just like you!
We'll save your home from the banks by selling it or even paying you for it!
When they really should say....
We buy people's houses! Sell your house below market value and we'll make a killing!!!
These advertisers are absolute scavengers and real bottom-feeders. Their goal is to profit from the calamity of others. If they were truly compassionate, they would provide their services free of charge or at least something comparable to that. While capitalism and free enterprise are the cram of our economical crop, to prey on others' hardships in inexcusable. Let's take a gander at some of the examples listed above.
1) We can save your credit (for a small fee, of course)
This proclamation is heavily loaded. If your credit is in need of saving. It's probably pretty far gone. What they're actually promising to do is to take your money and your home. You pay them to buy your home and they assure you that you're sparing yourselves from the horrors of foreclosure and the hits to your credit. Possibly, yes. If you're not already tangled up in the process of foreclosure, you will be avoiding it; nevertheless, that's not necessarily the point here. They will only buy your home if you have equity because with equity, they cash out and you're left with nothing. At the end of the day, you paid them to take your home away from you.
2) We'll pay cash for your home (if you sign that sucker over to us)
This has the same outcome as number 1, except this time, they pay you. Keep in mind here that you're still losing out on your equity and they're not. For a few thousand dollars in cash, I've seen an elderly woman sell her house because she was frightened into thinking that she would end up a homeless old lady. With the equity she had in here house, she could have purchased a smaller, older one for cash.
3) Let us buy your home and rent it back to you
Wow-sounds great, doesn't it? They buy your house for pennies on the dollar and all you have to do is sign a lease to make monthly payments on it. The real story here is that these guys purchase your home and finance it. Your monthly payments are then made on the financing of your own home. Typically, these guys will flip the house knowing they have a guaranteed renter-you, the former homeowner.
4) We help people just like you
What they're really saying is that "we con people just like you everyday". They know what they're doing. The best advice in these situations is don't trust anyone who contacts you first. Build trust with those who approach. Be wary of e-mails, phone calls, mail and door-to-door solicitors. Remember, why would they seek you out? They are vultures and you're the prey.
5) We'll save your home from the banks by selling it or even paying for it
This one is a real gem. As real estate agents, these scavengers are real pros. At their behest, you sign a contract which lists your home for a period of time. The agent then turns around and buys your home at a discounted price. The key here is that they never really attempt to sell the house they use the intentional lack of interest in your property as proof that it can't go for the asking price. The only option is to sell your house to your agent at a discounted price. With a buyer already lined up, they flip the house. Remember to always use a local and trusted real estate agent, preferably someone whom you're referred to.
Bottom Line
Look after yourselves and protect what is best for you, not someone interested in your home!
Facing Foreclosure? Before you do anything give me a call. I don't charge any fees up front. I am a licensed Real Estate Broker in the State of Oregon and I am here to help you if I can.....
Thursday, August 7, 2008
When Greenspan Speaks....You Better Listen!
Like it or not Greenspan has a habit of being right… “Former Federal Reserve Chairman Alan Greenspan said the U.S. is ‘nowhere near the bottom’ of the housing slump and is ‘right on the brink” of a recession.’More, from CNBC.com: “… he also warned that ‘Fannie and Freddie are a major accident waiting to happen.’
His comments came in an interview on July 31st with CNBC. I’ll look for more quotes on housing from the interview and add them to this post.
His comments came in an interview on July 31st with CNBC. I’ll look for more quotes on housing from the interview and add them to this post.
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